SIPP, Hargreaves Lansdown and Funds

moneytroll

DH
"I am seeing a client on Tuesday to put a transfer in to the same pension on no initial commission and standard 0.5% trail."

That bit is again a little confusing as you don't say what the actual annual TER (total expense ratio) will be for the customer eventually. On it's own, 0.5% sounds very cheap, but putting it in context with the rest of the charges/deductions, you probably end up with more or less the same TER as HL's sipp!* (which has one "disadvantage", which is that the costs are so transparent!)
*pls remember that TER is THE ONLY really meaningful figure for the investor and products like PPs etc use their liberty of not disclosing them, as far as I can tell from various documentations

It seems that those products (Sipp/hybrids/etc) are designed specifically to get DH and Ed firing away at each other (which is always thrilling to read of course)

dunstonh

Except that self-select ISAs do have cash accounts and jolly useful they are, too, especially when you have the cash available to fund the account but do not, for whatever reason, wish to invest right away.

Self select ISAs are closer to full SIPPs if you want to compare them. Hybrid SIPPs (we still are not sure of the proper generic name for this. Collective retirement accounts is another reference due to the ability to invest into collectives) are comparable with funds.

I think that the main attraction of the HL-style SIPP is that there is a much wider choice of investments compared with PPPs and "hybrid" SIPPs - I am starting to suspect that the charges, when investing in funds, might not differ that much ( it's very hard to tell...).

There is little difference in fund range between most of the fund supermarkets. I dont see that being an issue. The annual managment charges on the funds are going to be little or no different between any of them. However, the hybrid does allow nil trail to be selected which reduces the annual management charge.

That bit is again a little confusing as you don't say what the actual annual TER (total expense ratio) will be for the customer eventually. On it's own, 0.5% sounds very cheap, but putting it in context with the rest of the charges/deductions, you probably end up with more or less the same TER as HL's sipp!* (which has one "disadvantage", which is that the costs are so transparent!)
*pls remember that TER is THE ONLY really meaningful figure for the investor and products like PPs etc use their liberty of not disclosing them, as far as I can tell from various documentations

Pick a fund, any fund and there will be an initial charge on it regardless of where you buy it. Lets pick a 5% initial charge as an example. That usually includes 3-4% being paid to the selling company. Now that selling company can choose how much of that they wish to keep for themselves. So, if a company chooses to keep no initial commission, then that 3 or 4% offsets the initial charge and reduces it down by 3 or 4%.

The annual management charge gets played round with less than the intial charge and tends to be identical across the board. So, if the amc was 1.50% with a fund and the TER added 0.2%, it would be the same if you invested with the fund manager directly, fidelity FNW, HL, Skandia, cofunds or selestia. In that annual managment charge, the servicing company is paid 0.5% (it can be lower with some funds or not even exist). This one I am investing on Tuesday, I inted to keep the 0.5% for servicing but take no initial commission. My own one will have the 0.5% rebated off the annual managment charge.

Its quite possible to get the hybrid SIPP cheaper than HL and still get it on advice basis and serviced by an IFA.

It seems that those products (Sipp/hybrids/etc) are designed specifically to get DH and Ed firing away at each other (which is always thrilling to read of course)

Im quite happy to look at the pros and cons of every product and provider. Unfortunatly, others are less so and think that do-it-yourself SIPPs with HL are the answer for everybody .

Whilst the HL SIPP is ideal for people with smaller values and wish to utilise the full SIPP advantages and DIY, it could be more expensive than the hybrid with larger values. All I have to do is take 0.3% fund based instead of 0.5% and the annual management charge on all funds is 0.2% lower than HL. On a £500k fund I still earn £1500 a year out of it and the client saves £1000 compared to HL. (or 0.2% less TER is you want to look at it that way).

cheerfulcat

I

m quite happy to look at the pros and cons of every product and provider. Unfortunatly, others are less so and think that do-it-yourself SIPPs with HL are the answer for everybody .

The attraction of SIPPs is the investment possibilities available therein; there is more to life than funds! A SIPP can hold individual shares, gilts and corporate bonds; investment trusts, ETFs, covered warrants, TEPs, futures and options and property ( bricks and mortar, not funds ). A SIPP is by its nature "DIY" and I am sad to see the financial industry trying to muscle in ( not, needless to say dh, a pop at you or IFAs in general, just the providers ).

EdInvestor

I see it as being a replacement for personal pension rather than a replacement for SIPP.

Quite so.Use of the Sipp name is just a marketing ploy as far as I can see, as these hybrids don't have mainstream Sipp features.

The only reason I have mentioned the H-L Sipp is because it is the cheapest for people who wish to be make regular contributions and invest in (the same) funds,ie to use a Sipp in the same way as a PP.The H-L Sipp doesn't charge a fee to invest the regular conts, unlike other low-cost Sipps, which are designed for people who want to use the Sipp's mainstream features, not use it like a PP (why bother? :rolleyes:).

It may perhaps be a bit of a plaudit to H-L that the industry has been forced to invent an entirely new concept ( the hybrid Sipp) to combat its "funds in Sipp" product, but using a Sipp in this hybrid way is frankly a bit pointless IMHO - that's not what it's designed for and you won't make much (if any) saving in charges.Nor will you learn anything, it seems.

At least the H-L one contains the mainstream Sipp features,( eg a cash account, share dealing etc) so any investor who wants to start simple and progress to more sophisticated ways of investing later can do so.With these hybrids it sounds like you would need to transfer yet again.

dunstonh

With these hybrids it sounds like you would need to transfer yet again.

The full SIPP is in house so it wouldnt be little more than a quick form to switch over. No transfer penalties as there are no second level charges.

It may perhaps be a bit of a plaudit to H-L that the industry has been forced to invent an entirely new concept ( the hybrid Sipp) to combat its "funds in Sipp" product, but using a Sipp in this hybrid way is frankly a bit pointless IMHO - that's not what it's designed for and you won't make much (if any) saving in charges.Nor will you learn anything, it seems.

With the majority of people investing in funds only in a SIPP, the hybrid option positioned exactly the same way as buying ISAs makes total sense. Why should those interested only in funds have to pay the second level of charges that exists on full SIPPs, including HLs offering. This product isnt a threat to SIPPs. It is a threat to insured personal pensions.

Any advisor out there can make the hybrid SIPP option cheaper than HL's offering if they want to so there are savings to be made if bought through the right channels. However, you need to remember that the hybrid option is not competing against HL. Its an advice level product designed to be used for experienced investors who like utilising funds.

I cannot see why you are so negative towards a product that is so similar in charging to one that you promote all too often on these forums. Perhaps its because you dont like the idea that advisors can now undercut the execution only platforms on charges

EdInvestor

Why should those interested only in funds have to pay the second level of charges that exists on full SIPPs, including HLs offering. This product isnt a threat to SIPPs. It is a threat to insured personal pensions.

I've already agreed with this. :rolleyes: The people you are talking about don't really want a Sipp, they just want to be able to invest their pension money in the best funds ( which are not usually the funds flogged by the pension companies.)I'm only negative about the use of the Sipp name, not about giving people what they want, about time too

Perhaps its because you dont like the idea that advisors can now undercut the execution-only platforms on charges

Anything that brings charges down gets my vote.Perhaps we ought to give H-L some credit for that?

BTW are the hybrids regulated, since they can take protected rights? If so what are they described as?

dunstonh

The term hybrid SIPP is not official. It has no official classification yet generically. It comes under personal pension rules but allows investments not in insured funds like other personal pensions but in collectives which were only previously available in SIPPs. It really sits between the two.

Hybrids are fully regulated under personal pension rules.

EdInvestor

Perhaps it's a "Personal Pension Plus" then?

So we have the SIPP (which enables genuine self- investment in shares,gilts, ITs etc)

...the PPP (which replaces/upgrades the PP+ external funds) and enables access to the total fund universe

...and the Stakeholder basic ( which gives you lowish charges, freedom from penalties and access to generic type in-house funds,depending on the provider)

Reasonable description?

pjala

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I am using Selestia.
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Selestia are only open to IFA's though? Is there a similar company open directly to clients, or are the best ones only open to insiders in the financial community?
Thanks.

dunstonh

Selestia are the only hybrid at this time that allow direct investment into unit trust funds on the personal pension wrapper. They are only available to transact business through those that hold FSA authorisation. That means you need an adviser or discount broker to place the business with them. It can be done on execution only basis and Selestia can easily be cheaper than Hargreaves Lansdown and the other cheap SIPP providers that get mentioned on here. Mainly due to the fact that they keep the 0.5% fund based trail but with Selestia, the adviser can choose to forfeit some/all of that. Plus they have no bid/offer spread or charge on fund switching. On execution only basis, the agreement could be that the adviser gets 0.2% of the fund based trail with the other 0.3% reducing the annual management charge.