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  • FIRST POST
    • Mutton Geoff
    • By Mutton Geoff 6th Sep 17, 9:25 AM
    • 862Posts
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    Mutton Geoff
    Lowest platform costs for drawdown scheme?
    • #1
    • 6th Sep 17, 9:25 AM
    Lowest platform costs for drawdown scheme? 6th Sep 17 at 9:25 AM
    Does anyone have any links to recent reviews of platform costs for a SIPP/Drawdown scheme.

    I'm looking to move my pension pot to a SIPP, buy two "lifestyle" funds, eg one Vanguard Lifestrategy and one Blackrock Consensus in equal portions. Hold for around three to four years before starting drawdown.

    AMC is the most important initially since I won't be dealing. When I start drawdown, that could either be monthly or quarterly. I assume each drawdown payment is a "trade" of the fund so max 12 trades a year.

    Looking at usual suspects, HL, III, TD (owned by III now) but only finding out of date articles online.

    Pension pot is c £1m.
    Compensations/Refunds from Banks & Institutions - £4,165 | Stooz Profits - £7,636 | Quidco - £3,963

    All with a big thank you to Martin and MSE.com from Mutton Geoff!
Page 1
    • dunstonh
    • By dunstonh 6th Sep 17, 10:01 AM
    • 89,446 Posts
    • 54,907 Thanks
    dunstonh
    • #2
    • 6th Sep 17, 10:01 AM
    • #2
    • 6th Sep 17, 10:01 AM
    I'm looking to move my pension pot to a SIPP, buy two "lifestyle" funds, eg one Vanguard Lifestrategy and one Blackrock Consensus in equal portions. Hold for around three to four years before starting drawdown.
    Lifestyle funds are in decline. Most providers have started pulling them as they are not longer considered the most appropriate option for most people (they were aimed at people planning to use annuity. With drawdown now being the main option, the risk reduction is no longer necessary). So, why do you want one?

    I assume each drawdown payment is a "trade" of the fund so max 12 trades a year.
    Trading costs is only an issue if you use a provider that charges for them.

    Pension pot is c £1m.
    And you want to use just two multi-asset funds? That is unusual. You tend to find larger investors run bespoke portfolios.

    Are you going to be suffering a lifetime allowance charge?
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • zagfles
    • By zagfles 6th Sep 17, 10:11 AM
    • 12,238 Posts
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    zagfles
    • #3
    • 6th Sep 17, 10:11 AM
    • #3
    • 6th Sep 17, 10:11 AM
    Download Snowman's spreadsheet:

    http://forums.moneysavingexpert.com/showthread.php?t=5583030
    • Mutton Geoff
    • By Mutton Geoff 6th Sep 17, 10:20 AM
    • 862 Posts
    • 898 Thanks
    Mutton Geoff
    • #4
    • 6th Sep 17, 10:20 AM
    • #4
    • 6th Sep 17, 10:20 AM
    Lifestyle funds are in decline ...
    So, why do you want one?
    Originally posted by dunstonh

    Because, as far as I can see, the investments within them closely mimic what pension fund investors are already doing.


    And you want to use just two multi-asset funds? That is unusual. You tend to find larger investors run bespoke portfolios.
    Originally posted by dunstonh

    And therein lies the problem of costs. I already have a "bespoke" portfolio running but with high fees. I do not want to be a trader and I want to start reducing risk as I approach drawdown although this pot can afford to be slightly more risky than normal since I also have the benefit of a defined benefit scheme. That, and the state pension, will more than cover my needs.


    My "bespoke" portfolio contains ten funds and comparing them to the lifestyle funds mentioned, they look pretty similar in % of asset class/geo location etc.


    Are you going to be suffering a lifetime allowance charge?
    Originally posted by dunstonh

    Yes, I have IP2016 but my benefits already exceed that. I am already talking to an IFA about options and being introduced to a tax advisor (my own accountant not specialising in pensions).


    The IFA will be discussing alternatives to my plan but I thought I would post in this forum since it's clear, especially from posters like yourself and James, that there is a lot of highly intelligent thinking going on and I want to tap into that knowledge to help me make the right decision.


    Platform costs are one part of that decision making.


    Just downloaded Snowman's spreadsheet. Thank you.
    Compensations/Refunds from Banks & Institutions - £4,165 | Stooz Profits - £7,636 | Quidco - £3,963

    All with a big thank you to Martin and MSE.com from Mutton Geoff!
    • EdSwippet
    • By EdSwippet 6th Sep 17, 10:32 AM
    • 544 Posts
    • 509 Thanks
    EdSwippet
    • #5
    • 6th Sep 17, 10:32 AM
    • #5
    • 6th Sep 17, 10:32 AM
    I'm looking to move my pension pot to a SIPP, buy two "lifestyle" funds, eg one Vanguard Lifestrategy and one Blackrock Consensus in equal portions. Hold for around three to four years before starting drawdown.
    Lifestyle funds are in decline. Most providers have started pulling them as they are not longer considered the most appropriate option for most people (they were aimed at people planning to use annuity. With drawdown now being the main option, the risk reduction is no longer necessary). So, why do you want one?
    Originally posted by dunstonh
    OP seems to be confusing Lifestyle and Lifestrategy funds. The former are indeed out of style. The latter are fine, though.
    • BLB53
    • By BLB53 6th Sep 17, 10:43 AM
    • 1,106 Posts
    • 890 Thanks
    BLB53
    • #6
    • 6th Sep 17, 10:43 AM
    • #6
    • 6th Sep 17, 10:43 AM
    Does anyone have any links to recent reviews of platform costs for a SIPP/Drawdown scheme.
    I would think with the large sums involved it would be better to select a fixed fee option rather than percentage so the likes of Halifax would be worth a look. Rather than go for monthly drawdown, you could use flexi-drawdown to take out the required lump sum each year and deposit in your bank/building society and withdraw from that.

    Here's a link from DIY Investor which may help

    http://diyinvestoruk.blogspot.co.uk/2016/08/selecting-your-diy-pension-platform.html

    ...and also Monevator

    http://monevator.com/compare-uk-cheapest-online-brokers/
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • Mutton Geoff
    • By Mutton Geoff 6th Sep 17, 11:06 AM
    • 862 Posts
    • 898 Thanks
    Mutton Geoff
    • #7
    • 6th Sep 17, 11:06 AM
    • #7
    • 6th Sep 17, 11:06 AM
    OP seems to be confusing Lifestyle and Lifestrategy funds. The former are indeed out of style. The latter are fine, though.
    Originally posted by EdSwippet
    Possibly incorrect terminology but I did specify the two funds of interest - "Vanguard Lifestrategy and Blackrock Consensus in equal portions" so my intention is clear. I will have to read up on the difference between lifestyle and lifestrategy to ensure I use the correct terminology. Thank you.
    Compensations/Refunds from Banks & Institutions - £4,165 | Stooz Profits - £7,636 | Quidco - £3,963

    All with a big thank you to Martin and MSE.com from Mutton Geoff!
    • dunstonh
    • By dunstonh 6th Sep 17, 11:47 AM
    • 89,446 Posts
    • 54,907 Thanks
    dunstonh
    • #8
    • 6th Sep 17, 11:47 AM
    • #8
    • 6th Sep 17, 11:47 AM
    My "bespoke" portfolio contains ten funds and comparing them to the lifestyle funds mentioned, they look pretty similar in % of asset class/geo location etc.
    That is normal. All bespoke portfolios are built to a strategy and one of the most common strategies is asset/sector allocation. (i.e. UK equity, US equity, Japan equity etc). So, depending on fund size, you would have at least one fund in each sector. However, the key decisions are in the weightings and the funds used in each sector.

    Cost is important but is not the primary consideration. If you focus on charges as the primary consideration, you may be reducing your investment returns by a level that is greater than the charges. i.e. saving 0.2% on charges may make you feel you have achieved something to save money but if it costs you 4% on returns, then it's a false economy. Equally, paying more does not mean you will get more. For example, we run active, passive and hybrid models. The hybrid beats the passive and active most of the time. Active is the most expensive, passive it the cheapest. Hybrid is a mixture and is in between.

    Also, platforms are not all equal. Platforms are a value added service. Some have simple charges (which may just be an annual charge which covers virtually all services) and others have a long menu of charges for virtually everything they do.

    The functionality of the platform varies. For example, does the platform require paper forms signed when you do drawdown events or can it all be keyed online without a signature? Do, they use CHAPS or BACs for lump sums? Do they have a quick turnaround on tasks or do they take longer than an insurance company contract?

    You want to avoid paying peanuts and getting a service that frustrates you and delays things and causes issued down the road.

    I had a client on a cheap platfrom with paper form requirements in most areas. They were out in Spain when their son had a major issue and they needed money quickly. Had they been with a platform that didn't need wet signatures, we could have had the money in their account quickly. However, they had to wait much longer and the costs of that wait and the inconvenience were greater than the platform cost difference.

    You should aim to pay the least for the functionality you want and the service you are after. You dont want to pay for things you are not likely to use but you dont want to pay for something that doesn't do what you want it to.
    Last edited by dunstonh; 06-09-2017 at 1:26 PM.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • OldMusicGuy
    • By OldMusicGuy 6th Sep 17, 12:17 PM
    • 103 Posts
    • 157 Thanks
    OldMusicGuy
    • #9
    • 6th Sep 17, 12:17 PM
    • #9
    • 6th Sep 17, 12:17 PM
    I am approaching retirement (less than 6 months away) and I have quite a large portfolio. It is currently in 3 funds, a Blackrock Consensus Fund, a Vanguard LifeStrategy Fund and a dividend income-focused fund. Previously I had a bespoke portfolio of 12 funds. For me, the bespoke portfolio suffered from "diworsification", too many funds with too many charges. So I decided to take control and move to a simpler allocation, partly to reduce costs. I am also holding 30% of the fund in cash as I haven't fully decided how I will approach drawdown and decumulation in retirement yet and want to make sure I am insulated from any short term shocks. The invested money is there for at least 10 to 15 years.

    FWIW if I had left all my funds in the default Blackrock fund that my company DC scheme uses I would have got a better return than my bespoke portfolio with far lower costs. Sometimes it doesn't pay to overthink things.

    As far as platform is concerned, I am on HL because that's what my company uses. It's a great platform but I may shift to a lower cost one when I retire.
    • bostonerimus
    • By bostonerimus 6th Sep 17, 12:46 PM
    • 847 Posts
    • 425 Thanks
    bostonerimus
    Does anyone have any links to recent reviews of platform costs for a SIPP/Drawdown scheme.

    I'm looking to move my pension pot to a SIPP, buy two "lifestyle" funds, eg one Vanguard Lifestrategy and one Blackrock Consensus in equal portions. Hold for around three to four years before starting drawdown.

    AMC is the most important initially since I won't be dealing. When I start drawdown, that could either be monthly or quarterly. I assume each drawdown payment is a "trade" of the fund so max 12 trades a year.

    Looking at usual suspects, HL, III, TD (owned by III now) but only finding out of date articles online.

    Pension pot is c £1m.
    Originally posted by Mutton Geoff
    I like your thinking. Keep the portfolio relatively simple, costs down and use total return in drawdown. Many people will keep a cash buffer that they regularly top up with a drawdown...quarterly feels like a good frequency. In the US I take a similar approach (although I'm still reinvesting dividends) using Vanguard US equity, International and US bond tracker funds and keep my fees around 0.1%. The UK isn't quite there yet, but things are slowly getting better.

    Tax planning is going to be very important at your pension pot levels. That will require a long term strategy. I'm in a similar situation to you having a large pension pot that could attract a lot of tax. To mitigate that I'm making small withdrawals that I don't actually need so that I can pay a lower rate of tax on them and put them into a tax free account. I plan to do that for the next 15 years. I'm also going to defer my state old age pensions so that I can take larger withdrawals from my pension accounts. I imagine there are similar strategies in the UK. I'm also looking into trusts as part of my estate planning.

    I am sure an IFA would not be too enthusiastic about such an approach because they will believe that a bespoke portfolio will be better for you. Of course it will definitely be better for them. I'm sure you know that some bespoke portfolios will beat your simple approach and some won't and that you are ok with that.
    Last edited by bostonerimus; 06-09-2017 at 1:14 PM.
    Misanthrope in search of similar for mutual loathing
    • dunstonh
    • By dunstonh 6th Sep 17, 1:31 PM
    • 89,446 Posts
    • 54,907 Thanks
    dunstonh
    I had a bespoke portfolio of 12 funds. For me, the bespoke portfolio suffered from "diworsification", too many funds with too many charges.
    8-15 funds is typical. So, 12 is right on the mark for a decent level of diversification without going into overkill. There are 10 main sectors (some may include 1 or 2 more). So, a fund in each is going to see you in the ballpark of 12 just to get basic diversification.

    If you think 12 funds is overkill, then why are you holding over 20 funds in your portfolio?
    So I decided to take control and move to a simpler allocation, partly to reduce costs.
    You have not taken control. You have passed it to three fund houses and are running three different strategies using at least double the number of funds
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • OldMusicGuy
    • By OldMusicGuy 6th Sep 17, 1:59 PM
    • 103 Posts
    • 157 Thanks
    OldMusicGuy
    If you think 12 funds is overkill, then why are you holding over 20 funds in your portfolio?
    Originally posted by dunstonh
    I didn't say it was overkill, I said it suffered from diworsification. When some funds were doing well, others weren't when overall markets were pretty positive. All were activley managed funds.

    You have not taken control. You have passed it to three fund houses and are running three different strategies using at least double the number of funds
    Originally posted by dunstonh
    I take your point that I am not in control of the actual investments but then neither was I with the previous funds. Maybe I should have said I decided to take responsibility for the fund choices rather than "take control". I've got a mix of equity focused investments, a more conservative VLS fund and dividend focused income fund (which is not a low cost fund). That suits me given where I am now.

    I don't want to sound too critical of the FA I used. Part of the issue is that I am conservative by nature and the fund choices he made based on my instructions were on the cautious side which is likely a part of the reason the portfolio didn't look to be doing that well. But rather than pay more money to try a different allocation I decided to take more responsibility myself. I'm happy with where I am right now but will obviously be reviewing the situation over time.
    • dunstonh
    • By dunstonh 6th Sep 17, 2:33 PM
    • 89,446 Posts
    • 54,907 Thanks
    dunstonh
    I didn't say it was overkill, I said it suffered from diworsification. When some funds were doing well, others weren't when overall markets were pretty positive. All were activley managed funds.
    That will still be the case with the funds you have now. They will have underlying funds that are doing badly when others are doing well as different areas perform in different ways at different times.

    For example, in our hybrid portfolio we have 10 funds and one fund that is quartile 4 and another that is quartile 3 with the rest in quartile 1&2. The one that is quartile 4 is a Vanguard fund that has returned -3.47% over the last 12 months. Whereas the top fund is an active fund returning 32.12% The portfolio is no worse by having that poor performing vanguard fund in it because it is needed. It may be the best fund in the next 12 months and its low volatility brings the overall volatility level of the portfolio down. So, its naff now but there will be a period when its not.

    That same Vanguard fund is used in VLS.

    "All active" portfolios are not that great any more. Indeed, our all active spread (which is rarely used nowadays) is underperforming VLS40 but the hybrid spread is outperforming VLS40 (over 1, 3, 5 yr and launch). I prefer the hybrid approach of using best of both and not restricting myself to just passive or just active. As technology improves, information improves and charges change, you need to adapt and not stand still.

    investing is about opinion and there are not many right or wrongs. The most important thing is making sure you have the right risk level. Most other things are just opinion. So, if you are happy with the risk and there is nothing wrong with having multiple multi-asset funds, then it doesnt matter what others have or think. It just makes good discussion.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • EdSwippet
    • By EdSwippet 6th Sep 17, 2:34 PM
    • 544 Posts
    • 509 Thanks
    EdSwippet
    I'm looking to move my pension pot to a SIPP, buy two "lifestyle" funds, eg one Vanguard Lifestrategy and one Blackrock Consensus in equal portions. Hold for around three to four years before starting drawdown.
    Originally posted by Mutton Geoff
    I am in a similar situation, so I'll be interested as well in any responses you get. As of now I have SIPPs with Interactive Investor and Alliance Trust, and a GPP from a previous employer with Friends Life. In total they come to around the LTA. I'm expecting to crystallise all of them within the next year or two as growth alone starts to take them towards LTA excess charges.

    Once crystallised, the annual flat-fee costs of both SIPPs doubles, from around £160 to around £320, so one obvious thing to do is to combine these into one. There doesn't seem to be a clear winner across the two, though. I could also move both to a different provider such as Halifax or iWeb, but again no clear benefit to that either. The same funds are available in all SIPPs; a globally diversified range of vanilla HSBC and Vanguard trackers.

    For Friends Life, they claim to offer flexi-drawdown. Their docs are very sketchy on this, but if it's a reality there is no additional charge with them for crystallising. I hold Blackrock trackers in here, so again I'm happy with the fund offering.

    Once crystallised, I'm not sure if I will be able to subsequently move pensions around in the same relatively easy way that I have been able to before entering drawdown. And while funds can be moved in specie across SIPPs -- at least, before crystallising -- to eliminate time-out-of-the-markets issues, this isn't the case for transfers into or out of the GPP.

    I am unclear then on whether it is best to coalesce all three pensions into one place before crystallising so that I can stage the crystallisation events to optimise timing -- in particular, so that my funds balance doesn't suddenly shoot through the LTA overnight after another Brexit-like bump. Or after crystallising (if possible). Or something else. It really shouldn't be this involved, but once you creep up on it the LTA is a planning nightmare.

    AMC is the most important initially since I won't be dealing. When I start drawdown, that could either be monthly or quarterly. I assume each drawdown payment is a "trade" of the fund so max 12 trades a year.
    Originally posted by Mutton Geoff
    One annual drawdown activity might also suffice. I see monthly as a bit of a 'crutch' for people who want a seamless transition from a salary, nice if available but not worth paying extra for.

    Looking at usual suspects, HL, III, TD (owned by III now) but only finding out of date articles online.
    Originally posted by Mutton Geoff
    As already mentioned, for a £1mm pension a flat-fee provider is going to be the best route for fund holdings. The saving over the 0.45-0.25% HL platform fee for funds is large -- costs are perhaps £200-£300 for flat-fee versus perhaps £3,000 for HL. I have accounts with Interactive Investor and Alliance Trust and both are fine holding pens for tracker funds. But not yet in drawdown, so unfortunately this isn't the 'review' you are seeking. Also an account with iWeb (Halifax), again perfectly fine.

    Pension pot is c £1m.
    Originally posted by Mutton Geoff
    As well as IP2016, I presume you have also looked into FP2016? Only available if you have made no pension contributions since April 2016; your IFA should already have mentioned this. No problems holding both protections if applicable.
    • bostonerimus
    • By bostonerimus 6th Sep 17, 2:46 PM
    • 847 Posts
    • 425 Thanks
    bostonerimus

    I take your point that I am not in control of the actual investments but then neither was I with the previous funds. Maybe I should have said I decided to take responsibility for the fund choices rather than "take control".
    Originally posted by OldMusicGuy
    I like the way you put that. With or without a financial adviser you must take responsibility. Nobody is going to be as concerned about your money as you.
    Misanthrope in search of similar for mutual loathing
    • coyrls
    • By coyrls 6th Sep 17, 4:14 PM
    • 848 Posts
    • 856 Thanks
    coyrls
    Once crystallised, the annual flat-fee costs of both SIPPs doubles, from around £160 to around £320, so one obvious thing to do is to combine these into one.
    Originally posted by EdSwippet
    The Alliance Trust Savings flat fee doesn't increase when you crystallise, it only increases once you start to take an income from the crystallised funds (not including the PCLS). In fact I took one payment last tax year and they didn't increase the fee. Their wording is not really clear but I think they didn't increase it because I'm not taking a "regular" income. They say the fee is increased:

    Once you start taking an income (that means once you move into Income Drawdown or if you ask us to pay you an Uncrystallised Funds Lump Sum Payment’ (UFPLS) on anything other than a one-off or very occasional basis)
    • OldMusicGuy
    • By OldMusicGuy 6th Sep 17, 5:22 PM
    • 103 Posts
    • 157 Thanks
    OldMusicGuy
    "All active" portfolios are not that great any more. Indeed, our all active spread (which is rarely used nowadays) is underperforming VLS40 but the hybrid spread is outperforming VLS40 (over 1, 3, 5 yr and launch). I prefer the hybrid approach of using best of both and not restricting myself to just passive or just active. As technology improves, information improves and charges change, you need to adapt and not stand still.
    Originally posted by dunstonh
    In my own simplistic manner I had come to a similar conclusion. I've shifted to passive multi-fund funds but stayed actively-managed for dividend income (because I think that's something that analysts can identify through research).
    • Mutton Geoff
    • By Mutton Geoff 7th Sep 17, 11:02 PM
    • 862 Posts
    • 898 Thanks
    Mutton Geoff
    As well as IP2016, I presume you have also looked into FP2016? Only available if you have made no pension contributions since April 2016; your IFA should already have mentioned this. No problems holding both protections if applicable.
    Originally posted by EdSwippet

    I am still in a DB scheme that is too attractive to take FP and stop contributing but that matures within the next 12 months (although I can continue to work beyond if I wish).
    Compensations/Refunds from Banks & Institutions - £4,165 | Stooz Profits - £7,636 | Quidco - £3,963

    All with a big thank you to Martin and MSE.com from Mutton Geoff!
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