Using a discount broker to buy a personal pension

Bumbling_Amateur

A couple of IFAs I've seen recently have suggested I might want to put a lump sum of £60k into a Skandia personal pension. For carrying through this advice the IFAs want to charge me around £2.5k which will come from my initial investment. As Skandia only accept IFA approved applications I found a discount broker who was mentioned on this site who, it seems to me, will charge me a grand total of £35. It seems a no brainer which has started alarm bells ringing. Can anyone offer any advice.

One other thing - if I get a personal pension with Skandia through the discount broker can I then buy and sell funds within the pension without recourse to an IFA?

dunstonh

Can anyone offer any advice.

Yes. The IFAs that you have seen.

One other thing - if I get a personal pension with Skandia through the discount broker can I then buy and sell funds within the pension without recourse to an IFA?

I dont believe that the discount brokers (your fee suggest Cavendish) offer the excellent Skandia (ex Selestia) contract on execution only basis.

It seems a no brainer which has started alarm bells ringing.

If you dont want advice and only want access to basic pension plans with more limited investment options and can build your own portfolio within those (and dont want automatic rebalancing etc) then go DIY. Yes it will be cheaper. The contracts wont be as good or the investment options but they will be cheaper.

liftmyspirits

Bumbling_Amateur wrote: »

A couple of IFAs I've seen recently have suggested I might want to put a lump sum of £60k into a Skandia personal pension. For carrying through this advice the IFAs want to charge me around £2.5k which will come from my initial investment. As Skandia only accept IFA approved applications I found a discount broker who was mentioned on this site who, it seems to me, will charge me a grand total of £35. It seems a no brainer which has started alarm bells ringing. Can anyone offer any advice.

One other thing - if I get a personal pension with Skandia through the discount broker can I then buy and sell funds within the pension without recourse to an IFA?

I too have looked at this execution only arrangement for a single payment premium with Cavendish and Skandia (either for Stakeholder or Personal Pension). Skandia assured me that once my scheme is set up I will be able to manage my funds directly (online). The Cavendish rep assured me that subsequent single premiums or regular payments to Skandia would be made with the commission rebated, providing that the Cavendish IFA reference number is quoted to Skandia each time a payment is made.

Whilst MSE says it's straight forward and cheap to buy pensions in this way, I'm a little uneasy about how the 'mechanisms' work in practice, if you're not an IFA.

dunstonh

Cavendish only offer the older Skandia contract. They do not offer the cheaper and better version. Cavendish dont explicitly say which version they offer but from their text on the website we can eliminate the best Skandia contract as that has 1900 funds, no initial charges and it uses unit trusts not pension funds. Cavendish say the version they offer has 300 which means its either the PP5 or the PP6 version. The key features document looks like the PP6 version. I expect Skandia to be withdrawing the PP5 and PP6 contracts for new business sometime soon and sticking with their fund supermarket contract as that is where all the money is being spent.

Bumbling_Amateur

dunstonh wrote: »

Yes. The IFAs that you have seen.



I dont believe that the discount brokers (your fee suggest Cavendish) offer the excellent Skandia (ex Selestia) contract on execution only basis.


If you dont want advice and only want access to basic pension plans with more limited investment options and can build your own portfolio within those (and dont want automatic rebalancing etc) then go DIY. Yes it will be cheaper. The contracts wont be as good or the investment options but they will be cheaper.

Well my IFAs have suggested the PP6 which has a few hundred funds to choose from. I haven't researched them really yet so don't know if they are a good selection. You don't think so?

Come to think of it what is the difference between a personal pension and a SIPP if you chose to invest in exactly the same way in each?

lifymyspirits I don't find the Skandia charging policy very clear on their personal pensions. I mean one fund I was using as a comparison between SIPP and PP has a 5% initial charge which may or may not be taken from my pot (incidentally the HL SIPP refunds this initial charge).

Like you I'm worried about the mechanics of it and would like to hear from someone who's gone through with it. My IFA has given me the impression that it's a buying and selling free for all with no initial charges or dealing fees, or transaction fees or whatever it's called!

Could it really be that 'good' at all or could it only be that good through a proper IFA charging thousands of pounds a year rather than a £35 Cavendish rubber stamp?

dunstonh

IIRC, the PP6 has no initial charges and is a mono charged personal pension.

Bumbling_Amateur

dunstonh wrote: »

IIRC, the PP6 has no initial charges and is a mono charged personal pension.

What do you mean by mono charged? The PP6 has an AMC as well as fund charges to pay AFAIK.

dunstonh

mono charge means there is just one type of charge. In the cast of the PP6 it has annual charges.

Multi-charge covers plans that have multiple types of charges within the plan. e.g. initial charge and annual charge.

Perfect_Choice

Be aware that the Skandia PP5 and PP6 funds have different AMC charges which should be considered.

Whilst the PP5 has a 5% initial charge, the Skandia AMC is 0.75%. For the PP6 the AMC is 1.75% (if your pension value is below £50K) or 1.25% (if above £50K). Something to consider at least if looking for a long term investment.

I obtained this information from Skandia in April 2008 as I was considering moving a £50K Standard Life pension pot to Skandia at the time where I have a paid up £37K PP5 plan in place from my previous employer.

I was thinking of setting up a PP6 plan and move both the SL and PP6 into one pot, but decided to not proceed when I found this information out and I would have also lost a 0.5% loyalty bonus on the SL plan as well so a double hit for me but another story not relevant to this thread.

I had to find this information out myself as the IFA I used had not provided me with any comparison information like this.

dunstonh

This is why I think the PP5 and the PP6 contracts are obsolete and the Skadia fund supermarket pension is better.

TH1878

Perfect_Choice wrote: »

Be aware that the Skandia PP5 and PP6 funds have different AMC charges which should be considered.

Whilst the PP5 has a 5% initial charge, the Skandia AMC is 0.75%. For the PP6 the AMC is 1.75% (if your pension value is below £50K) or 1.25% (if above £50K). Something to consider at least if looking for a long term investment.

I obtained this information from Skandia in April 2008 as I was considering moving a £50K Standard Life pension pot to Skandia at the time where I have a paid up £37K PP5 plan in place from my previous employer.

I was thinking of setting up a PP6 plan and move both the SL and PP6 into one pot, but decided to not proceed when I found this information out and I would have also lost a 0.5% loyalty bonus on the SL plan as well so a double hit for me but another story not relevant to this thread.

I had to find this information out myself as the IFA I used had not provided me with any comparison information like this.

The 1.75% on the PP6 plan is only when doing it through an IFA assuming the IFA takes 3% + 0.5% renewal commission. The base AMC is 0.75% for funds under £50,000 and 0.25% for funds over £50,000.

The extra 1% is accounted for in the following way:

• 0.5% is the renewal commission charge
• For every 0.6% of initial commission the IFA takes (max 3%) it raises the AMC by 0.1%. Therefore: 3/0.6 = 5. 5*0.1 = 0.5%

If you're doing it through a discount broker, these charges would not apply. However, I personally wouldn't use a discount broker unless I was absolutely sure about my stock selection as that can far outweigh the benefits of cheaper charges. That's a different argument though....