SIPP, Hargreaves Lansdown and Funds

Santiago1_2

This is a very long thread which I have only now come across and perhaps this has been answered before: should the average investor assume that the HL SIPP is a good (cheap) proposition for someone aiming to invest small monthly amounts in index tracking funds?

sabretoothtigger

I think they let you do that quite cheaply yea

purch

someone aiming to invest small monthly amounts in index tracking funds?

If you only want to Invest in trackers then a SIPP is certainly not the wrapper you should be choosing.

Santiago1_2

purch wrote: »

If you only want to Invest in trackers then a SIPP is certainly not the wrapper you should be choosing.

What would you recommend and why?

Jody50

Hi Santiago,
I am an IFA so anything i say here is generic information not advice.
SIPP are devices designed to be the bespoke end onf the pension chain.
They are either for folk with loads of money in their pensions and i mean 250K or more so they can do sophisticated investments while they grow their pile.
Because of this somebody somewhere is earning more than the bog standard pension vehicle so stay clear unless you want ot pay more than you need to.

A good personal pension using cut price tracker or passive mangment funds is just as good for accumulating a fund.
At retirment you can migrate ot any device which gives you the options you want for drawing the funds.
Becasue the FSa brought in new rules in 2006 n one can do you for exit charges anymore with new plans.

Hope that helps.

Santiago1_2

Hi Jody,

As far as I can tell, the HL SIPP is very cheap and does allow for small monthly contributions to be made. So I am not sure what your first paragraph exactly means.

Please tell me what other options are available for a pension with tracker/index funds

jamesd

sabelu, Santiago1 it can be fairly inexpensive but it's possible to do better, or much worse. Whether that's doable depends on how much money you're putting in and whether you're interested in paying another IFA firm a fee to get lower ongoing costs. There are some fairly inexpensive trackers available via HL, like the HSBC range at 0.27% annual charge for the FTSE All Share Index tracker but trackers are available elsewhere at prices as low as 0.1% a year. This doesn't make much difference for small amounts and HL is very convenient to use. With say £10,000 invested the 0.1% annual charge is just £10 a year and the 0.27% one £27 a year so it takes a while before that difference starts to matter much compared to convenience and ease of use.

I don't agree with Jody50 that a SIPP is necessarily for pension pots starting at £250,000 but rather with her point that the use of a broader range of investments is what makes SIPPs interesting. But you do have to actually use the improved range and there are non-SIPP personal pensions that offer similar ranges of fund investments. Where a SIPP starts to become more interesting is if it offers funds not available elsewhere, where you want to use investments that can't be held in a regular personal pension, like ETFs, individual shares, covered warrants and investment trusts, all of which can be held in a SIPP like the one from HL but aren't generally available in non-SIPP pensions.

If you're just getting started and want convenience and ease of use there are far, far worse options available than Hargreaves Lansdown, so don't let this sort of discussion prevent you from getting started with them. I did and I'm happy enough, though conscious that my total funds invested are now sufficient that the savings from going elsewhere are starting to look more interesting.

Santiago1_2

Thank you, James. I am considering an amount not exceeding £100/month to start with. If you could be more specific on what options are potentially available at a lower cost, I would be grateful.

purch

What would you recommend and why?

A boring bog standard PP cos it'll be cheaper :eek:

The purpose of a SIPP is to invest in securities that cannot be held in any other wrapper.

Santiago1_2

I am not very knowledgeable about pensions (I guess it shows). Would a PP really be cheaper if the intention is to invest in index trackers only? How do I go about getting a PP?