Stakeholder pension fees

central
central Posts: 202 Forumite
First Anniversary Combo Breaker
edited 23 April 2017 at 9:53AM in Pensions, annuities & retirement planning
I would welcome some advice please.
I have been investing in stakeholder pensions for my children for the last 14 years ages now 26 and 27, identical plans, plan value now £91K each
They are in a L&G Stakeholder plan

Legal & General Pension Japan Equity Index Fund 15%
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=VAUSA05RR5&tab=13&InvestmentType=SA

Legal & General Pension UK Smaller Companies Fund 15%
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=VAUSA05RRF&tab=13&InvestmentType=SA

Legal & General Pension US Equity Index Fund 30%
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=VAUSA05RRG&tab=13&InvestmentType=SA

Legal & General Pension UK Equity Index Fund 40%
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=VAUSA05RRD&tab=13&InvestmentType=SA

I'm happy with the way things are going, to my eye the funds are performing well.

The L&G fees are
£0 to £25,000 1.0%
£25,001 to £50,000 0.9%
£50,001 and over 0.8%

My question is really advice as to whether I should leave things be or transfer in to SIPPs and try to find similar ? better performing funds, or would the individual fund charges + the provider charges likely outweigh the benefits?

I understand it's an impossible question but I wanted to try to make sure I am not missing anything obvious. Thanks.
«1

Comments

  • zagfles
    zagfles Posts: 20,323 Forumite
    First Anniversary Name Dropper First Post Chutzpah Haggler
    You could probably get similar tracker funds cheaper in a SIPP, for instance see HL:

    http://www.hl.co.uk/funds/index-tracker-funds/view-index-tracker-funds?companyid=191&sectorid=&investment=

    Add the 0.45% platform charge.

    You'd also likely have a much wider choice of funds.

    Or other providers might be cheaper for higher values, some platforms have fixed annual charges for SIPPs but lower percentage charge.

    Google "snowman's spreadsheet" for a useful tool for comparing platform charges.
  • central
    central Posts: 202 Forumite
    First Anniversary Combo Breaker
    Thanks.. snowman's spreadsheet is a good tool.
    I think the four funds I have are managed funds, for example https://www.trustnet.com/Factsheets/FundFactsheetPDF.aspx?fundCode=LHF88&univ=P&typeCode=FLGYKI

    1 HSBC Holdings PLC (UK Reg) 5.9
    2 BP 4.3
    3 Royal Dutch Shell B 3.9
    4 British American Tobacco 3.8
    5 Royal Dutch Shell A 3.5
    6 GlaxoSmithKline 3.4
    7 AstraZeneca 2.5
    8 Diageo 2.4
    9 Vodafone Group 2.4
    10 Prudential

    When I chose these funds it was a bit finger in the air, but as I say, they seem to be going ok.
  • dunstonh
    dunstonh Posts: 116,358 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    My question is really advice as to whether I should leave things be or transfer in to SIPPs and try to find similar ?

    Stakeholder pensions are now a niche option. Mainly aimed at small values (under £20k) and small contributions.

    Nowadays, its mainly personal pensions that offer the best value although some SIPPs can come into play. At 91k, you could have those charges and use the same funds by using a PPP.
    better performing funds, or would the individual fund charges + the provider charges likely outweigh the benefits?

    The lack of structure in the fund selection is a bigger issue. No point worrying about 0.x% a year difference in charges when the fund selection has issues that could be 10-20 times more than the difference in charges.

    Random fund selections leaving out whole sectors tends to result in lower returns over the long term than a structured portfolio or a multi-asset fund. For example, where is Asia, Emerging Markets, Europe etc.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • zagfles
    zagfles Posts: 20,323 Forumite
    First Anniversary Name Dropper First Post Chutzpah Haggler
    central wrote: »
    Thanks.. snowman's spreadsheet is a good tool.
    I think the four funds I have are managed funds, for example https://www.trustnet.com/Factsheets/FundFactsheetPDF.aspx?fundCode=LHF88&univ=P&typeCode=FLGYKI

    1 HSBC Holdings PLC (UK Reg) 5.9
    2 BP 4.3
    3 Royal Dutch Shell B 3.9
    4 British American Tobacco 3.8
    5 Royal Dutch Shell A 3.5
    6 GlaxoSmithKline 3.4
    7 AstraZeneca 2.5
    8 Diageo 2.4
    9 Vodafone Group 2.4
    10 Prudential

    When I chose these funds it was a bit finger in the air, but as I say, they seem to be going ok.
    It's not actively managed, it's an index tracker. These funds have lower charges, usually in the range 0.1% - 0.3%. Actively managed fund usually have charges around 0.7% or so.
  • zagfles
    zagfles Posts: 20,323 Forumite
    First Anniversary Name Dropper First Post Chutzpah Haggler
    dunstonh wrote: »
    Random fund selections leaving out whole sectors tends to result in lower returns over the long term than a structured portfolio or a multi-asset fund.
    Random fund selections are equally likely to result in higher returns, depending how the sectors left out fare compared to the rest. Volatility and risk may be higher though.
  • dunstonh
    dunstonh Posts: 116,358 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    zagfles wrote: »
    Random fund selections are equally likely to result in higher returns, depending how the sectors left out fare compared to the rest. Volatility and risk may be higher though.

    It wont be equally likely as the sectors that have been included and those left out have different expectations on returns. It is certainly possible that a random spread could do better in short term periods. However, over the long term, expectation is that it would under-perform. You cannot rely on luck forever.

    Nothing is predictable but if you are missing out areas like Asia and emerging markets whilst being 100% equity based, then you are pretty much going to underperform a structured portfolio to the same risk level. Even missing out areas like Europe where returns are likely to be similar to UK or US is not helpful as every year the best performing area will be different to the years before. So, the rebalancing opportunities are missed.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • zagfles
    zagfles Posts: 20,323 Forumite
    First Anniversary Name Dropper First Post Chutzpah Haggler
    dunstonh wrote: »
    It wont be equally likely as the sectors that have been included and those left out have different expectations on returns. It is certainly possible that a random spread could do better in short term periods. However, over the long term, expectation is that it would under-perform. You cannot rely on luck forever.
    In which case you'd expect multi-asset funds to usually beat single sector funds over the long term. Not sure they do.
    Nothing is predictable but if you are missing out areas like Asia and emerging markets whilst being 100% equity based, then you are pretty much going to underperform a structured portfolio to the same risk level. Even missing out areas like Europe where returns are likely to be similar to UK or US is not helpful as every year the best performing area will be different to the years before. So, the rebalancing opportunities are missed.
    Indeed. Don't get me wrong, a balanced portfolio is a good idea, but mainly to reduce risk and volatility rather than to increase performance.

    OP - if this concerns you, there's loads of helpful articles on creating a balanced portfolio - just google those words! People often post their suggested portfolio either here or on the savings & investment board for comment. The S&I board is probably better, here is better for pension specific stuff rather than investment strategies.
  • central
    central Posts: 202 Forumite
    First Anniversary Combo Breaker
    edited 23 April 2017 at 7:44PM
    Thanks very much for the help
    I do have some Asia 10% of the fund is Japan. I do get diversification helps smoothing in the short term.
    I think I am correct in thinking then if I went for 7 or 8 funds in a vehicle like HL the charges won't be more than 0.8%.
    Dunstonh or Zagfles do you have a suggestion of 7 or 8 funds as a starting suggestion I could backtest? I think my most recent 5y return is 91%
    If I'm going to be incremental, I am thinking move 5% of the UK index and US index fund + invest 5% in the future into an emerging market fund?

    I'm very grateful for you helping me
  • zagfles
    zagfles Posts: 20,323 Forumite
    First Anniversary Name Dropper First Post Chutzpah Haggler
    central wrote: »
    Thanks very much for the help
    I do have some Asia 10% of the fund is Japan. I do get diversification helps smoothing in the short term.
    I think I am correct in thinking then if I went for 7 or 8 funds in a vehicle like HL the charges won't be more than 0.8%.
    Trackers, likely yes, actively managed funds, no.
    Dunstonh or Zagfles do you have a suggestion of 7 or 8 funds as a starting suggestion I could backtest? I think my most recent 5y return is 91%
    No because it would depend on loads of stuff like your (& kids) attitude to risk. HL and other providers have suggested portfolios eg see http://www.hl.co.uk/funds/help-choosing-funds or for trackers http://www.hl.co.uk/funds/index-tracker-funds/tracker-portfolios but have a look at others, and have a read of sites such as monevator http://monevator.com/investing-for-beginners-why-do-we-invest/

    When you come up with something post it on the S&I board for them to rip it apart ;) Or rather give you constructive feedback.
  • dunstonh
    dunstonh Posts: 116,358 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    In which case you'd expect multi-asset funds to usually beat single sector funds over the long term. Not sure they do.

    The key bit being relative to asset class(i.e. 100% equity vs 100% equity)
    I do have some Asia 10% of the fund is Japan.

    Although it would normally be complimented by an asia pacific ex Japan fund.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 343.2K Banking & Borrowing
  • 250.1K Reduce Debt & Boost Income
  • 449.7K Spending & Discounts
  • 235.3K Work, Benefits & Business
  • 608K Mortgages, Homes & Bills
  • 173.1K Life & Family
  • 247.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards