FSA rules could limit SIPP charge cuts-Defaqto

SIPP fees have fallen by up to 11% over the last few years as competition drives prices down - but new FSA rules could limit further reductions, says Defaqto.

According to the latest report by the independent research company, the average set-up and annual administration fee for SIPPs have fallen for most fund sizes.

Over the last three years, the combined fee for a £50,000 investment has decreased 11.1% from £675.41 to £600.11.

Increased competition is driving the downward movement in charges, says Defaqto, with customers with larger investments gaining most.

"It is noticeable a number of providers base their set-up fee on a percentage of the investment and they may feel some pressure to taper the percentage charged for larger investments," says report author David Abbis.

The average individual fund size of a SIPP is just under £200,000, with the average annual administration fee at that level falling.

But Abbis cautions should the FSA introduce new capital adequacy rules for providers future gains for customers could be curtailed.

"In the light of the rumours the FSA may require SIPP providers to increase their cash provisions to meet future expenses, it is unlikely that many further reductions in annual fees will be possible," he says.