SIPP Advice

DamianLucas79

Hi,
Currently a base rate tax payer (but will be moving into the next bracket in the next year), have a final salary pension with my employer, a cash ISA with rainy day money, a stocks and shares ISA that tracks the FTSE Allshare and a bond fund. Total is about 3k, basically mid term savings.

I also have a stakeholder with L&G that I haven't paid into for a few years since joining the final salary. Current value is 10k, invested in a variety of l&g funds, reasonable range but paying 1% for what is mainly tracker funds is a bit expensive, plus I find it very hard to work out the value as in whether I am up or down, I normally have to refer back to paper statements and work it all out which is very annoying). Interested to make the best use of this pension (it also has some protected rights in it), thinking of setting up a SIPP via Halifax (its the sippdeal product). You have to pay a qtrly fee (£18.75), but the advantage is you can deal for just £1.50, so it means I can play around with the values without costing a fortune, and div reinvestment is cheaper.

Haven't completed the transfer yet, my weighted holdings look like this at the moment:
UK:
iShares FTSE 100 (ISF) 30%
iShares FTSE 250 (MIDD) 10%
iShares FTSE UK Dividend Plus (IUKD) 5%

Europe:
iShares MSCI Europe ex-UK (IEUX) 15%

USA:
iShares S&P 500 (IUSA) 5%

Far East Inc Japan:
iShares MSCI Ac Far East Ex-Japan (IFFF) 10%
iShares MSCI Japan (IJPN) 13%

Physical Metals:
ETFS Physical Gold (PHAU / PHGP) 2%

Alternate:
iShares S&P Global Clean Energy (INRG) 3%

Bonds:
iShares £ Corporate Bond (SLXX) 5%
iShares ? Corporate Bond (IBCX) 1%
iShares FTSE UK All Stocks Gilt (IGLT) 1%

First years dealing's costs are £18 (£1.50per ETF)

After fund costs this will return ~4% yield, so more than covers the quarterly charges. Cost wise its looking at around 0.5% which is taken out of the income so dealt with by the reduced yield. Other than this there are no other SIPP related costs (apart from dealing).

I am not a fan of funds, simply because their are too many and trying to pick a range (for me) seems too awkward and prone to hit and miss, bear in mind that I don't want to have to chop and change this around a huge amount (although with the cheap dealing fees it is an option).

If/when I leave my current role if my new employer doesn't offer a decent pension scheme of some sort then I would start actively making payments into the SIPP.

Would be very interested to hear comments and opinions, negative and positive

Thanks!

dunstonh

I am not a fan of funds, simply because their are too many and trying to pick a range (for me) seems too awkward and prone to hit and miss,

Surely there are more direct investments than there is funds.

Right, at the moment, you can pay around £40 a year in annual managment charges on a stakeholder or PPP. Internal funds tend to have the TER=AMC.

You want to move into a SIPP that has a quarterly charge of 18.75 (£75 a year) plus dealing costs of £1.85 to save money?

It looks more expensive to me.

DamianLucas79

ETF's make more sense to me, you invest in a specific index, country, commodity or whatever and you know exactly what your investment is going to do (ie follow whatever index it tracks +/- tracking error). Whereas the funds, the range is so vast and even with the help of the h-l wealth 150 it still doesn't seem any clearer. I feel like I would end up not really knowing what my investment strategy is. Obviously if there's a better way then I want to know

The L&G is currently cost about £92 a year. It is taken monthly and its about £7.50 or so.

So, yes the SIPP fees are £75 a year and the ETF costs (taken from income) are going to be about £40-50, so about £33 more a year then the L&G. Plus any dealing fees at £1.50 per deal (but remember to start with I will be doing very little/no investing). I have a wider range of options available to me compared to the L&G, and can hold ETF's for market areas I cannot get via the L&G. Also the external funds on offer, bring me back to my previous problem, where I end up feeling like I dont know what im investing in.

The other (cheaper for non trading) option, would be to go direct with sippdeal, as then there is no annual account fee, so my costs drop to just £40-£50 (taken from income). However, the trading fee is then £9.99 - £14.95 per ETF, so to setup my portfolio is going to cost ~£160, compared to £18 via Halifax. This is OK for the beginnging when I make no contributions as its a one off hit, but then if/when I leave my employer and want to use the SIPP, I would like to make monthly contributions (to take advantage of pound cost averaging), instead I will have to make annual payments to minimise the dealing charges as will be £9.99 to £14.95 instead of £1.50. It obviously also makes it slightly more expensive if I wanted to rebalance the SIPP.

EDIT: Also re dividends, with halifax they are auto re-invested for a 1% fee. With sippdeal direct, they will have to be held in cash and then invested with a usual lump sum, as I won't be making lump sums I will have to wait till this builds up before re-investing, so a bit of a waste whilst they build up.

What do you think?

dunstonh

The L&G is currently cost about £92 a year. It is taken monthly and its about £7.50 or so.

Your current one may be but a modern replacement was what I was on about.

Whereas the funds, the range is so vast and even with the help of the h-l wealth 150 it still doesn't seem any clearer.

HLs 150 list isnt any use. Its a just a list of currently top selling funds.

DamianLucas79

When you say a more modern replacement, my L&G is a standard stakeholder with a 1% charge, what other options are there ?

This is the problem I have with the funds, the H-L SIPP is excellent for funds, no dealing fees, and no annual charges (for most funds), but I just find the choice bewildering and I'm not comfortable that I can pick a decent spread

EdInvestor

You may find this site helpful in developing familiarity with unit trusts:

https://www.citywire.co.uk/Funds/Home.aspx.

However since you are on the ETF trail I would suggest you look at investment trusts, which are cheaper than unit trusts and cover the same areas. There are far fewer of them so they are easier to understand. You buy and sell them like ETFs and shares.

https://www.trustnet.com has a goof section on ITs.

DamianLucas79

Thank you both for your comments, EdInvestor that citywire site is exactly what I need to investigate fund performances, I will create a comparison fund based SIPP with H-L and see what the cost differences look like. I'll post back with my findings, as would appreciate further comments

dunstonh

When you say a more modern replacement, my L&G is a standard stakeholder with a 1% charge, what other options are there ?

You have a full cost stakeholder at 1%. Even an IFA taking full commission is cheaper. Let alone one arranged on discount. You sound like you want to DIY and you can get a PPP with a Reduction in yield of around 0.5% with that value.

If you are looking at funds, then HL do not offer any discounts on the AMCs. A decent personal pension can be cheaper than HL. Although it will be funds.

Academic

EdInvestor wrote: »

.......has a goof section on ITs.

Ed,

I realise this was a typo but it did make me laugh .

DamianLucas79

So, after much deliberation and research, I have selected a number of funds using the league tables, I haven't blindly picked the top 1 in each sector, more checked how close they track their chosen benchmark (no point paying expensive fee's for a closet tracker), fund manager, results over the last year and 3years etc.

%Portfolio - Fund Name (AMC %)

UK:
20% - Neptune UK Equity Fund A Acc (1.73%)
15% - Invesco Perpetual High Income Acc (1.68%)

Europe:
15% - Neptune European Opportunities A Acc (1.76%)

USA:
10% - Neptune US Opportunities A Acc (1.82%)

Far East Inc Japan:
15% - Jupiter Japan Income Acc (1.77%)
10% - Fidelity Inst South East Asia Ac (1.77%)

Bonds:
15% - M&G Strategic Corporate Bond A Acc (1.41%)

The overall costs of these funds are obviously higher than my current capped 1% at L&G, however I am making an effort here at beating general index performance. This would be being put in the H-L SIPP, so no other costs.

Opinions/comments greatly appreciated.