Fund choices....

whambamboo · 4 December 2006 at 12:01PM

EdInvestor wrote:

But the main attraction of traackers is their low charges, typically 0.5%.In a pension that attraction is immediately cancelled out because the pension annual charge is typically 1-1.5%. Often the provider pockets the entire dividend yield - almost 3%.

IMHO trackers if wanted should be in ISAs, or held direct.These days you can often get access to good quality external managed funds in a pension for not that much more than you would pay outside, even at a discount broker. These are a better bet IMHO.

Could you clarify this?

Here are Legal and General's funds:

https://www60.landg.com/ifaportal/ifaportal/fundInfo/ifaPortfolioPlusSippFactsheets.jsp

The UK Equity Index fund for instance charges:
http://customer.morningstareurope.com/uk/lgp/pdf/snapshotpdf.aspx?id=F0GBR06PQL

0.2% AMC, which is tough to beat surely?

It appears from http://www.legalandgeneral.com/companypensions/employers/employers_4d.shtml that they charge an AMC on the pension itself, but that's not linked to his choice of investment - he has to pay it whatever fund he chooses because he has no choice but to use L&G to get the free money from his employer. Once he's paid the 1%/1.5%/whatever AMC, the funds look cheap. Or are there hidden charges on the fund itself beyond the 0.2% AMC?

whambamboo · 4 December 2006 at 12:04PM

EdInvestor wrote:

There are loads of these funds about - they are very similar to trackers, holding more or less the same shares,but usually with different weightings.This can reduce the risk ( UK trackers are heavily overweight banks and oil/mining companies), but you are not getting the benefit of any real expertise.

After all anyone can go out and buy a portfolio of shares featuring the top 20 on the FTSE, 100 quid in each, why would you pay anyone a fee for doing something so straightforward?

Well clearly such a service does have some value, as most people in this country are not interested in buying the top 20 shares on the FTSE, and managing them. That's why you get posts on here about share certificates from 1973 being left to heirs.

It's absurd to suggest that the management service is worthless. Managing things yourself is only free if you do not value your time. Whether or not the price is fair is another question entirely, but it's clearly not as cheap and easy to do it yourself as you suggest.

Fund choices....

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