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    • dgordon
    • By dgordon 10th Oct 17, 3:03 PM
    • 2Posts
    • 0Thanks
    dgordon
    Draw down charges
    • #1
    • 10th Oct 17, 3:03 PM
    Draw down charges 10th Oct 17 at 3:03 PM
    Hi, My 1st thread here.

    I have been looking at many draw down plans and have noticed that the charges are quite high and various - charge for starting plan, annual charges and periodic draw down charges. these could be costing up to 5% or worse if a IFA is involved to manage the fund.

    So the funds would have to perform well above 5% growth if drawing down is to keep a healthy pot for a above average lifetime.

    I'm starting to think maybe a annuity might be just as good option (especially if you have medical conditions)
    Food for thought
    Thanks
Page 1
    • bostonerimus
    • By bostonerimus 10th Oct 17, 3:56 PM
    • 1,234 Posts
    • 686 Thanks
    bostonerimus
    • #2
    • 10th Oct 17, 3:56 PM
    • #2
    • 10th Oct 17, 3:56 PM
    That sounds a bit high for ongoing costs, but you have made a good observation. Ongoing charges are an enormous drag on income drawdown. They can easily take 25% of your annual income. So before you look at annuities (which are bad value for money right now) try to minimize your drawdown costs.
    Misanthrope in search of similar for mutual loathing
    • dunstonh
    • By dunstonh 10th Oct 17, 4:03 PM
    • 89,941 Posts
    • 56,643 Thanks
    dunstonh
    • #3
    • 10th Oct 17, 4:03 PM
    • #3
    • 10th Oct 17, 4:03 PM
    I have been looking at many draw down plans and have noticed that the charges are quite high and various - charge for starting plan, annual charges and periodic draw down charges. these could be costing up to 5% or worse if a IFA is involved to manage the fund.
    Why worse if an IFA is involved?

    Most plans IFAs have access to have little or no drawdown charge.

    ALso, your figures suggest you are not looking at the charges correctly as none are as high as that on an ongoing basis. And initial charges are virtually non-existent nowadays.

    I'm starting to think maybe a annuity might be just as good option (especially if you have medical conditions)
    Food for thought
    Food for thought..... Maybe get your research done correctly first before making a decision that is cast in stone once made.
    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 an Independent Financial Adviser local to you.
    • Linton
    • By Linton 10th Oct 17, 5:14 PM
    • 8,636 Posts
    • 8,611 Thanks
    Linton
    • #4
    • 10th Oct 17, 5:14 PM
    • #4
    • 10th Oct 17, 5:14 PM
    It depends on the size of your pension pot and drawdown. On a couple of platforms I use (his and hers SIPPs) there are annual published charges of £100 for regular drawdown payments, which is fine for say £10K/year but rather steep for £1K/year. On one of the platforms the £100 is waived for pots of more than £100K. And I dont think we have ever been charged the £100 for the other platform although it does not seem to offer a large pot waiver - which is why I am not saying who they are!
    • zagfles
    • By zagfles 10th Oct 17, 7:20 PM
    • 12,497 Posts
    • 10,496 Thanks
    zagfles
    • #5
    • 10th Oct 17, 7:20 PM
    • #5
    • 10th Oct 17, 7:20 PM
    Where are you getting those fees from?? HL for instance have no drawdown fees, you just pay the normal platform and fund charges, typically around 1% total for managed funds or less if you use trackers. Other platforms have lower fees but charge for drawdown, but nowhere near 5% unless you only drawdown a tiny amount.
    • BLB53
    • By BLB53 10th Oct 17, 8:03 PM
    • 1,179 Posts
    • 968 Thanks
    BLB53
    • #6
    • 10th Oct 17, 8:03 PM
    • #6
    • 10th Oct 17, 8:03 PM
    I presume you are including the costs of the IFA in the 5%..even so, its seems high.

    I have my drawdown with AJ Bell and my total costs including fund charges are ~0.5% on a DIY basis so double check everything before you go down the annuity route which is probably the worst solution in the current climate.
    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.
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