SIPP, Hargreaves Lansdown and Funds

dunstonh

IFAs hate SIPP, dont know why? Is it something to do with their commission.

IFAs do not hate SIPPs. They are just pointless and expensive for most people. I'm fee based so don't try and lay that accusation at me.

I took advice from an IFA, he did my risk profile and recommended scottish widows. Most of the funds he recommended had 1.5% to 2.4% annual charge. Then he showed me he gets £2300 for this work. I wanted to do £10000 lumpsum and £500 everymonth. I felt the fees were rip off!! how can scottish widows afford to pay him that much for recommending me?

£10k lump sum and £500pm will see the commission payments on an HL SIPP be far higher than the Scot Wid policy within a relatively short period.

EdInvestor

dunstonh wrote: »

£10k lump sum and £500pm will see the commission payments on an HL SIPP be far higher than the Scot Wid policy within a relatively short period.

Evidence please. H-L charges no setup fee, no annual fee for the SIPP and no transaction charges for fund contributions.Average annual fee for funds is 1.5% (compared with the quote from SW of 1.5-2.4% for comparables). So H-L will in fact likely be cheaper.

Of course H-L is not designed to be used with an expensive IFA in tow - hence all the info on the website to help investors move towards doing their own decision-making as far as fund choice is concerned (not hard).

live-life-debt-free

I have £6500 in a stakeholder and wondered of this was worth putting in a SIPP as I would like to self invest this...I have other pension funds that I am happy with but and have been offer fee based advice but want to do this DIY...any thoughts

dunstonh

Evidence please. H-L charges no setup fee, no annual fee for the SIPP and no transaction charges for fund contributions.Average annual fee for funds is 1.5% (compared with the quote from SW of 1.5-2.4% for comparables). So H-L will in fact likely be cheaper.

Evidence will be that HL will have a reduction in yield around the 1.7% mark. A sector allocated spread to the same level on the SW PPP would have a reduction in yield to around 1.5% assuming maximum commission.

You have assumed all the funds are 1.5-2.4%. However, SW funds start at 1% and range upwards with external funds (again assuming typical maximums). There has been no mention of reduction in yield and that is the only way to compare.

Also, the poster was comparing commissions. Not comparing charges. HL are making at least 0.5% p.a. on the fund value and doing nothing for it. So, its only common sense that at 0.5% a year, they are going to pass a flat rate figure at some point.

EdInvestor

Evidence will be that HL will have a reduction in yield around the 1.7% mark. A sector allocated spread to the same level on the SW PPP would have a reduction in yield to around 1.5% assuming maximum commission.

You claim this but please provide some actual evidence, eg a link.By the way the "comparables" offered by the insurance companies are "mirror funds" of the real unit trusts.Often the returns are not the same, as the insurance company will cream off some profit for itself.

In the SIPP you get the real unit trust and all the profits will come to you.

EdInvestor

live-life-debt-free wrote: »

I have £6500 in a stakeholder and wondered of this was worth putting in a SIPP as I would like to self invest this...I have other pension funds that I am happy with but and have been offer fee based advice but want to do this DIY...any thoughts

Worth it if you want to invest in shares, ETFs or ITs.Otherwise not worth bothering IMHO.

jamesd

EdInvestor wrote: »

You claim this but please provide some actual evidence, eg a link.

That's an excellent idea. EdInvestor please provide a link to the reduction in yield figures for the long term most popular ten funds in the UK if held at Hargreaves Lansdown in their SIPP.

Dunstonh, would you be kind enough to quote them for one of the SW policies at nil commission and default commission for comparison, so we can compile a post to either refute or support EdInvestor's claims in the future?

dunstonh

EdInvestor please provide a link to the reduction in yield figures for the long term most popular ten funds in the UK if held at Hargreaves Lansdown in their SIPP.

If she cant, then work on the basis that the reduction in yield is 0.1-0.2% more than the annual managment charge. With mono charged contracts (where the AMC is the only charge) the RIY is typcially 0.1-0.2% more than the AMC.

So, HL should come out around 1.6-1.7%.

Scot Wid are not the cheapest provider. They dont operate fund based discounts. However, they have a good fund range which is one of the main reasons they are picked. So, if absolute cheapest (at the expense of investments) was what you are after you wouldnt use them. SW are better priced for single contributions and not regulars. However, you asked for SW, so here you go.

Using internal only funds (e.g. stakeholder)
Commision 1.1%
nil commisison 0.6%

cheapest provider on commission was 0.7% and nil commission was 0.5% (it would have been possible to get cheaper but its Sunday and i didnt want to go too heavy into it). However, 0.3% would have been possible on nil commission if I had used a younger age and higher contributions (due to fund based discounts). It should be noted that internal funds tend to have the TER=AMC.

Using sector allocated spread including external funds

Commision 1.5%
nil commisison 1.0%

That included funds from JPM, Fidelity, Newton, Baille Gifford, Jupiter and Inv Perp.

So, if you were going DIY you would work on the nil commission figures as that is what you would get from Cavendish.

EdInvestor

jamesd wrote: »

That's an excellent idea. EdInvestor please provide a link to the reduction in yield figures for the long term most popular ten funds in the UK if held at Hargreaves Lansdown in their SIPP.

Err, I didn't make the claim.It's up to DH to substantiate the figures using the same funds.Not internal funds or stakeholder funds. And let's see the range of charges, given that many IFAs will charge the max possible not the minimum. Unless a SIPP is opened via an IFA AFAIK a RIY figure is not normally supplied.

dunstonh

given that many IFAs will charge the max possible not the minimum.

The commission used in my example was product maximum and nil commmission. Nothing inbetween, which is where most IFAs will fall.