Warning re Stakeholders/Personal Pension vs SIPPS

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
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  • dunstonhdunstonh Forumite
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    Set up fee 100
    Transfer in fee 85
    Dealing costs for 15 shares 225
    Stamp duty 150
    Dealing costs for 2 trusts 30
    Stamp duty 20

    Sub total 610
    VAT 106
    Total 716
    which is 1.4%, lower than the 1.5% cost of stakeholder.

    No its not.

    To set the stakeholder up would cost nothing. To have it on the same discount terms you have quoted the SIPP on, it would be 0.4%-0.6% per annum.

    You havent quoted the annual management charges on the funds you will selected on the SIPP. You keep focusing on the wrapper and you have a cheap wrapper. What are the annual management charges on those funds?

    With the SIPP, the bigger your fund gets, the lower the charges, with a percentage charged pension, it's the opposite


    You are right that SIPPs do favour larger funds. However, in percentage terms, the better stakeholders/personal pensions give fund based discounts on the charge. You do not get fund based discounts on the annual managment charges of the funds within the SIPP.

    So, for you next post lets compare like for like. The SIPP has charges the stakeholder pension has none. The stakeholder has annual managment charges on the funds which must not exceed 1% (except the first 10 years where 1.5% is allowed). Thats the extent of the charges.

    Here is the list of funds available in house with sippdeal http://www.sippdeal.co.uk/download_files/sdl/sippdealFL.pdf . Oh look, virtually all the funds have a small initial charge and all have an annual management charge. Where was that listed in your charges?
    This one is for the cautious investor, so the asset allocation is much like it is for an investment bond,

    As I have said before, Investment bonds are the same as any other tax wrapper now and you get access to the same funds that in UTs/OEICS. There is no requirement to pick a bog standard cautious managed fund just as there is no requirement to pick the equivalent fund with an ISA or pension.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdInvestorEdInvestor
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    You havent quoted the annual management charges on the funds you will selected on the SIPP. You keep focusing on the wrapper and you have a cheap wrapper. What are the annual management charges on those funds?

    Not sure what funds you are talking about.Using SIPPs enables you to avoid funds, which are riven with high charges.

    That's part of the attraction. :)

    Even low-cost tracker funds are cheaper in SIPPs, because you can use quoted Exchange Traded Funds (and pay no stamp duty either.).

    That would possibly be the way to go for anyone who wanted equity market exposure without buying indiviudual shares.But the dividend is significantly lower (about 2.75% compared with a possible 5.5% for an HYP) and there is a small charge, of about 0.4% IIRC.Still much lower than a tracker in a stakeholder at as much as 1.5%.

    Cheap ETFs are also available for corporate bonds for those who want some exposure to this asset class, again much lower charges than buying a conventional corporate bond fund.

    BTW Dunstonh, you haven't mentioned the "hidden charges" in pension funds and unit trusts - the ones the FSA doesn't require the providers to disclose, on top of the AMC. They show up in the "Total Expense Ratio". Usually add between 0.5% and 1% to the total costs. Some IFAs I've met genuinely don't know about these charges, because they're kept prtty quiet - so I won't complain if you're one of them.Basically they are the dealing costs/stamp duty etc charges,plus "soft commissions" and such, which are transparent in the SIPP but not in funds.

    The charges total is creeping up quite seriously now with the new 1.5% stakeholder cap: IMHO they are really unaffordable these days when we can only expect low returns, due to low inflation and low interest rates.

    FTSE100 tracker to buy in a SIPP: annual charge 0.35%
    Trying to keep it simple...;)
  • dunstonhdunstonh Forumite
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    Not sure what funds you are talking about.Using SIPPs enables you to avoid funds, which are riven with high charges.


    I posted SIPPdeals fund list. The charges are all there to be seen.
    BTW Dunstonh, you haven't mentioned the "hidden charges" in pension funds and unit trusts - the ones the FSA doesn't require the providers to disclose, on top of the AMC. They show up in the "Total Expense Ratio". Usually add between 0.5% and 1% to the total costs. Some IFAs I've met genuinely don't know about these charges, because they're kept prtty quiet - so I won't complain if you're one of them.Basically they are the dealing costs/stamp duty etc charges,plus "soft commissions" and such, which are transparent in the SIPP but not in funds.

    I havent mentioned TERs because they apply to both UT funds and pension funds. We are looking at comparisons here and that is the same with both.

    Certainly the SIPP can contain investments which are more transparent in that respect but the majority of investors will no doubt be picking unit trust/OEIC funds and not be avoiding them.
    The charges total is creeping up quite seriously now with the new 1.5% stakeholder cap: IMHO they are really unaffordable these days when we can only expect low returns, due to low inflation and low interest rates.

    You seem to be misunderstanding the charge increase. Not one provider has increased the annual management charges on pensions to take advantage of that extra 1.5%. Some have introduced funds into the stakeholder range that were not there before because they couldnt afford them to be there. The 1.5 over 10 years allows them to include them. For younger savers, they will actually bet a lot better off as they will still be in those external managed funds when the charge reverts back to 1.0%. NU and L&G are relaunching their stakeholder product in next few weeks and both will have 1.0% funds and upto 1.5% funds available. It doesnt mean you have to pick the funds that charge more. The ability to be with funds that normally have higher charges but have them at 1% after 10 years and possibly less with fund discounts and provider discounts is a positive thing. You make it should like a negative thing. Indeed, compare you low cost sipp provider to a low cost stakeholder provider and those funds would be 0.4% after 10 years not 1.5% that you keep mentioning.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • cheerfulcatcheerfulcat Forumite
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    dunstonh wrote:
    Here you are not comparing like for like. You are discussing holding single shares and not funds.

    Yes. Whiteflag said
    At low levels of investment they are expensive. There are numerous posts site saying they are cheap however nearly every post ignores the fact the SIPP is just a wrapper and there are ongoing costs on what you hold in it

    I was showing my small SIPP is perfectly cost-effective.You and whiteflag both make the mistake of assuming that people who advocate investing within a SIPP wrapper are suggesting that one holds funds. This is incorrect. Vocal SIPP fans generally hold their own portfolios of individual shares, IME.


    I would disagree with on the tracker front as that would be cheaper inside a stakeholder.

    My current stakeholder ( FTSE All Share tracker ) charges 0.8%. In my SIPP the identical fund would cost 0.27%!
    The issue we are really trying to get ed to see is:
    1 - SIPPs are for more confident investors
    2 - Are not always cheaper than the alternatives available
    3 - He should include fund management charges on SIPPs when comparing against alternatives. i.e. mentioning the 1% on SHPs but saying funds in SIPPs have no AMCs.

    1 - It isn't so much confidence as correct information that investors require.

    2 - I don't have enough information to argue that one, though I have yet to see a situation where a transaction which involves an intermediary is cheaper than one which doesn't...

    3 - I don't think that Ed said that funds in SIPPs have no AMC; you are once again assuming that everyone holds funds.

    Cheerfulcat
  • EdInvestorEdInvestor
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    Certainly the SIPP can contain investments which are more transparent in that respect but the majority of investors will no doubt be picking unit trust/OEIC funds..

    I'd have thought the majority of SIPP investors would be doing the exact opposite. A major point of SIPPs is that you can invest in the underlying assets (shares, property,bonds,cash) without paying extra for all the expensive and elaborate ( not to mention confusing) packaging that goes with the funds.

    Other people enjoy high salaries and perks because of that packaging, not me.

    I'll just take the free carrier bag with the shares in it, please :)
    Trying to keep it simple...;)
  • dunstonhdunstonh Forumite
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    I was showing my small SIPP is perfectly cost-effective.You and whiteflag both make the mistake of assuming that people who advocate investing within a SIPP wrapper are suggesting that one holds funds. This is incorrect. Vocal SIPP fans generally hold their own portfolios of individual shares, IME.

    No mistake or assumption. This thread was created because of the almost automatic "do a sipp" or "do drawdown" reponse that is given to people who do not have a clue about investments. You may say that vocal sipp fans hold their own portfolios but in the majority of cases, people select from the fund range that the provider has arranged in-house (like a fund supermarket). Eds own discussions have pointed towards standard life, scottish widows and fidelity funds. Hence our focus on funds.
    1 - It isn't so much confidence as correct information that investors require.


    It is both. You have the simple stakeholder contract and you have the complicated SIPP contract. It may be better, it may be worse. It is more complicated. That will switch a lot of people off. Serious investors wont be put off by that. Indeed, it will be just what they are looking for.
    2 - I don't have enough information to argue that one, though I have yet to see a situation where a transaction which involves an intermediary is cheaper than one which doesn't...

    It happens in a number of areas, pensions included.
    3 - I don't think that Ed said that funds in SIPPs have no AMC; you are once again assuming that everyone holds funds.

    He has quoted Standard Life, Scottish Widows and Fidelity funds previously.
    I'd have thought the majority of SIPP investors would be doing the exact opposite. A major point of SIPPs is that you can invest in the underlying assets (shares, property,bonds,cash) without paying extra for all the expensive and elaborate ( not to mention confusing) packaging that goes with the funds.

    The majority of people invest, either in part or whole, in the funds offered. The SIPP may offer the ability to put all sorts of things into it but it is the funds where most of it ends up.

    Lets put this thread back in context. It was created because only the positive points on SIPPS were being put across and not the negatives. Also, there was no like for like comparisons being made. It was no frills, budget options vs full charged, full featured alternatives. That would easily make the SIPP look better. Low cost stakeholder or personal pensions could be better. A number of the "do a SIPP" responses were made on threads where it was clear the person posting didnt understand investments. That is not whom the SIPP is suitable for. Ed may post his opinion on what is a correct portfolio but it is only his opinion and it only suits his risk profile. We know nothing about the risk profile of others reading the threads and they may read what is posted, without commenting, and act upon it.

    I am not anti SIPP. Certainly not at all. This is not a serious investors website. Most of the pension threads are started by those who know little or nothing about pensions. Yet one of the first responses they get is "do a SIPP". That is clearly inappropriate.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • PalPal Forumite
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    Stickied for a while.
  • My SIPP charges me £17 per year, which on my current pension pot equates to 0.038%... Nowhere neay 1%... :confused:

    And no,no charges for regular monthly contributions.

    And yes there is a dealing charge if I buy and sell shares - So say 4 transactions per year, plus the SIPP fee equates to 0.171% per annum or 1/6th of 1%.

    And no there was no big chunk taken out of any contributions either regular or lump sum

    SIPPS are a good pensions vehicle for those that are already experienced investors, or those with say average intelligence to become experienced.

    Now if your a bit....... :D
  • PalPal Forumite
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    The comparison is not relevant though. A SIPP is a relatively cheap way to invest in individual stocks chosen by the investor within a pension policy, but it is also the ONLY way to do it.

    If you want to invest in funds (which most people do) you have more choices, and SIPPs are rarely the cheapest for fund investment as the annual and underlying fund charges are on top of the SIPP charges.

    Obviously if you can find a SIPP that is cheaper than all stakeholders or personal pensions for the funds that you want to invest in then it is worth going for. And if you want to invest in individual stocks then you have no choice but to go for a SIPP.
  • EdInvestorEdInvestor
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    If you want to invest in funds (which most people do)....


    Do they? How do you know?
    Trying to keep it simple...;)
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