Aviva PP AMCs - tiered or not?

Fatenbread

I'm looking at the Aviva personal pension through Cavendish. The Cavendish website states that AMC's are 0.7% for funds < £20k, 0.45% for funds between £20k and £50k, and 0.4% for funds > £50k.

Does anyone know whether these fees are tiered or not (ie if I have a pension fund of £25k, do I get charged 0.45% of the total as an AMC, or is it still 0.7% for the first £20k)?

This looks like the cheapest fund by quite a margin if it is 0.45% on the full fund. Or am I missing something?

I am aware that many of the funds offered have additional AMC's, but there are plenty that do not have additional charges that would support a balanced investment strategy, and none of the funds in the listing have a bid/ask spread (which seems to me to be a good way of adding a c.10% up front charge to a fund...).

thanks

PS All this pension stuff is twisting my melon. I can't think of another area of financial services (or any other industry) that seems to be designed to wilfully bamboozle its customers...

dunstonh

I'm looking at the Aviva personal pension through Cavendish.

what is your reason? The new plan is not bad and its better than the previous version but if you are focusing on charges, then its not the cheapest and others that Cavendish retail on their limited panel should come out cheaper. There are also providers not on their limited panel who can be even cheaper still.

I have yet to use the new Aviva pension as it hasnt once come out top for lowest costs. Its up there normally at the right end but not high enough.

Does anyone know whether these fees are tiered or not (ie if I have a pension fund of £25k, do I get charged 0.45% of the total as an AMC, or is it still 0.7% for the first £20k)?

It reads as if its discounted on the values between those tiers but the information provided by Aviva says: 0.7% reducing to 0.45% when the fund exceeds £20,000. So, that would suggest it reduces on the whole amount.

This looks like the cheapest fund by quite a margin if it is 0.45% on the full fund. Or am I missing something?

I just did a dummy quote on my software to find out about the fund discount information and under the figures I put in the Aviva PPP come out 13th place on charges (out of 51 plans that met criteria).

PS All this pension stuff is twisting my melon. I can't think of another area of financial services (or any other industry) that seems to be designed to wilfully bamboozle its customers...

Pensions are no different to ISAs or any other investment. The same things apply. Its just a different tax wrapper with a different maturity process. Apart from that there is little in it. If you understand investments you should understand the pension wrapper. Of course, if you decide to review it down to micromanagement on who is exactly the best one for your needs, then it becomes more complicated but that goes for any retail product you buy.

Fatenbread

My reason is that having evaluated all of my other (low cost and direct) options, I can't find anything else that has cheaper annual charges.

The other products I have looked at have all had drawbacks that make them uneconomic for the size of my fund (£20k lump sum + £750 a month), for the following reasons:

The SIPPs (Hargreaves Lansdown, Fidelity platform, Sippdeal) I looked at all had either high fixed annual charges, or uneconomic dealing fees for monthly contributions.

The Skandia CRA (which would have been my preferred choice) is not available through Cavendish and I can't find a fee-only IFA who will take setting this up as execution only (I haven't tried very hard to be fair, but the 2 or 3 that I have spoken to are not very keen on this option, which is fair enough given the paltry fee it would generate).

Having looked at the various stakeholders and PPs available through Cavendish, Aviva appears to be the cheapest in terms of AMCs for funds of my size (assuming the discounts are non-tiered, as discussed above). I have compared all of the stakeholders and PPs on Cavenish before making this determination. They have a range of funds that is comparable to the other providers accessible through Cavendish and enough of those funds have 0% additional AMCs in order to get a suitably balanced portfolio at the providers' minimum AMC. Additionally there is no bid/ask spread on these funds (as far as I can see from the limited info available through Aviva's website), which is (as far as I can see) effectively an additional cost of the fund when it comes to switching providers / retiring.

The closest other proivider was AEGON Scottish Equitable, but that was 0.05% higher for funds of £20k - £50k.

Are there other discount brokerages operating on the Cavendish model that get higher discounts on the AMC's? The only low-cost brokers I see discussed are Cavendish and HL.

Finally, I understand the pension wrapper and the investment process, it is the opacity of the charging that I find so frustrating. It makes the mobile phone networks look like a model of perfect competition.

dunstonh

My reason is that having evaluated all of my other (low cost and direct) options, I can't find anything else that has cheaper annual charges.

You need to look harder as the Aviva contract is not going to be best priced for your figures.

The SIPPs (Hargreaves Lansdown, Fidelity platform, Sippdeal) I looked at all had either high fixed annual charges, or uneconomic dealing fees for monthly contributions.

Full SIPPs are likely to be more expensive but the pretend SIPP with HL is likely to be up there with the cheapest if you limit yourself to HSBC trackers. Think of HL as being a fund supermarket pension rather than a SIPP.

The Skandia CRA (which would have been my preferred choice) is not available through Cavendish

Its strange that. Cavendish do offer the obsolete and expensive Skandia Life PPP but not the CRA which is their main pension product now. Its possible that its because the CRA is an online contract that requires work from the adviser/agent and Cavendish dont want to do it.

Finally, I understand the pension wrapper and the investment process, it is the opacity of the charging that I find so frustrating. It makes the mobile phone networks look like a model of perfect competition.

mono charged pensions are a doddle. They just have the AMC. However, multi-charge pensions have a variety of charging methods but they can be cheaper. Problem has always been with multi-charge plans that you have multiple charges and it does make them very complicated to compare without using illustrations or software. Indeed, its virtually impossible. When I look at your figures and think who would come out best, I cant tell you who because its impossible to say. I know which providers will be up there but the order of them changes depending on details. I know the Aviva contract will be up there but for me it has yet to appear top. That said, different IFA firms get different deal pricing (i.e. a lower AMC than published retail).. Past experience has shown that Cavendish, whilst cheap to set up, don't appear to get any deal pricing. So, its possible that comes into play when I see who comes out top on my inputs.

Why dont you ask Cavendish to provide an illustration on Aviva, Scottish Life and Scottish Equitable (FAF version) using the same figures to see what the projections come out to?

Fatenbread

Thanks again for your help.

dunstonh wrote: »

You need to look harder as the Aviva contract is not going to be best priced for your figures.

OK, but where is the best place to look? (I understand that this is social discourse and not your professional advice).

dunstonh wrote: »

Full SIPPs are likely to be more expensive but the pretend SIPP with HL is likely to be up there with the cheapest if you limit yourself to HSBC trackers. Think of HL as being a fund supermarket pension rather than a SIPP.

I'll have another look at this. Is there a list of the funds that do not attract H-L's additioonal 0.5% AMC?

dunstonh wrote: »

Its strange that. Cavendish do offer the obsolete and expensive Skandia Life PPP but not the CRA which is their main pension product now. Its possible that its because the CRA is an online contract that requires work from the adviser/agent and Cavendish dont want to do it.

Cavendish told me "We only arrange personal pensions and cannot deal with collective accounts or company group schemes."

dunstonh wrote: »

mono charged pensions are a doddle. They just have the AMC. However, multi-charge pensions have a variety of charging methods but they can be cheaper. Problem has always been with multi-charge plans that you have multiple charges and it does make them very complicated to compare without using illustrations or software. Indeed, its virtually impossible. When I look at your figures and think who would come out best, I cant tell you who because its impossible to say. I know which providers will be up there but the order of them changes depending on details. I know the Aviva contract will be up there but for me it has yet to appear top. That said, different IFA firms get different deal pricing (i.e. a lower AMC than published retail).. Past experience has shown that Cavendish, whilst cheap to set up, don't appear to get any deal pricing. So, its possible that comes into play when I see who comes out top on my inputs.

This is what I mean. The fees are different depending on who is asking, and these differences are not clear. The commission rates are opaque and in a lot of cases the apparently low percentages work out as extortionate fees for the IFA (no offense), especially trail commission coming back years after the initial advice was given. Multi-charge pension charges relatively clear where the funds are charging in addition to the wrapper provider, but there is further opacity where there is a bid/ask spread or where the default fund offered by a provider is a fund of funds, which must have layers of charges eating away at returns. If you are not on the ball, this industry is just waiting to bend you over.

dunstonh wrote: »

Why dont you ask Cavendish to provide an illustration on Aviva, Scottish Life and Scottish Equitable (FAF version) using the same figures to see what the projections come out to?

Will do.

dunstonh

Cavendish told me "We only arrange personal pensions and cannot deal with collective accounts or company group schemes."

Skandia CRA is registered as a personal pension. It is not a company group scheme or collective (as in multiple members). The only reason it uses collective in the title is that it uses collective investments i.e. Unit trust/OEICs and not mirrored pension funds.

I'll have another look at this. Is there a list of the funds that do not attract H-L's additioonal 0.5% AMC?

I believe they dont on HSBC. However, do note that is only a temporary measure. The FSA proposals will mean that platforms will have to stop being paid by the fund house and collect charges explicitly from the consumer post 2012. This will likely see the cost of managed funds come down but the costs of tracker funds go up (net cost when you factor in platform charge and fund charge). It is still under consultation and some of the platforms are arguing against it as it will lead to many having to increase their charges over current levels.

OK, but where is the best place to look? (I understand that this is social discourse and not your professional advice).

Ironically, I was just doing a pension transfer and regular and on that one Aviva (AMC Version only not the standard version which was lower) have just come out top, with Scot Eq second and FP third when using internal insurance company funds (£707k, £706k, £702k). However, Skandia CRA was top overall at £723k using the blackrock tracker funds (Which are cheaper and better than the HSBC tracker funds).

This is what I mean. The fees are different depending on who is asking, and these differences are not clear. The commission rates are opaque and in a lot of cases the apparently low percentages work out as extortionate fees for the IFA (no offense), especially trail commission coming back years after the initial advice was given. Multi-charge pension charges relatively clear where the funds are charging in addition to the wrapper provider, but there is further opacity where there is a bid/ask spread or where the default fund offered by a provider is a fund of funds, which must have layers of charges eating away at returns. If you are not on the ball, this industry is just waiting to bend you over.

That doesnt really differ to any retail industry though. Economies of scale and the retailer margins and the decision to retail certain products but not others occur in every shop.

For example, i can get better terms than Cavendish but I have absolutely no interest in "retailing" the products in the way they do. Currys may sell a range of amplifiers and speakers but you will only get a limited choice. You may get a few cheaper ones on their online site but if you want a wider range you need to go to a specialist. You will also have online sites that sell certain models cheaper than them. I think every retail product has quirks like this and the main reason is that every product has different features and options and target markets and retailers have their own target markets as well. That doesnt make it wrong.

Back on the figures of the case I just did, Standard Life came out 19th. Yet I have seen them come out top on smaller fund values. Their target market and therefore pricing isnt on the larger fund values (and smaller market) but the smaller fund values (but volume market).