Protected Rights - SIPPS

EdInvestor

Ah. Not a like for like comparison then.

wotsthat

Ed, I'm a fan of SIPP's but surely you wouldn't advocate transferring a pension from a life company into the same funds with a SIPP provider? You seem to be implying that SIPP's are cheaper in all cases - a 1% charge in collective funds via a stakeholder seems quite cheap.

If the SIPP companies are trying to encourage people to transfer pensions and reinvest in the same funds then the FSA should be looking at this as there are no advantages in terms of charges. The SIPP providers are marketing themselves rather negatively by trying to make a point of difference between themselves and pension companies and using negative sentiment about pensions to draw in customers when in actual fact they are one and the same thing.

The real advantage of SIPP's is that shares can be held directly. With minimum trading and the right provider the savings in charges are enormous; for example, a fund of £50,000 in a stakeholder is going to attract charges of 1% minimum i.e. £500 every year. If I transferred that fund to Sippdeal today it would be free to set up, £50 for the transfer, and £150 to buy a portfolio of 5 shares. That's s £200 this year and, as there's no annual fee, there are no charges ever again. There are charges at retirement but these are peanuts.

People will worry about investment skill but if you look at a typical equity fund run by a pension company you can see that they are mainly investing in a spread of the largest FTSE 100 companies anyway - is that skill and is it worth the charge?

Another advantage is that if the shares underperform there's no-one to blame but myself which means I'll make the effort to understand what I'm investing in. I'm fed up of the whingers using the 'pensions crisis' etc. as an excuse not to save at all.

One thing's for sure; moaning about Tony Blair, Gordon Brown and rip off Britain isn't going to pay the electric bill when I've retired.

dunstonh

If the SIPP companies are trying to encourage people to transfer pensions and reinvest in the same funds then the FSA should be looking at this as there are no advantages in terms of charges.

They have already issued warnings to advisers on this front and said they will take action against advisers who recommend SIPPs when stakeholder or personal pensions would have been better. However, that covers advisers only. Going DIY doesnt have that same protection.

The SIPP providers are marketing themselves rather negatively by trying to make a point of difference between themselves and pension companies and using negative sentiment about pensions to draw in customers when in actual fact they are one and the same thing.

Thats how I see this. Andy Bells message is picking up on all the bad things about legacy plans. Not post 2001 plans when the whole thing was changed.

The real advantage of SIPP's is that shares can be held directly. With minimum trading and the right provider the savings in charges are enormous; for example, a fund of £50,000 in a stakeholder is going to attract charges of 1% minimum i.e. £500 every year. If I transferred that fund to Sippdeal today it would be free to set up, £50 for the transfer, and £150 to buy a portfolio of 5 shares. That's s £200 this year and, as there's no annual fee, there are no charges ever again. There are charges at retirement but these are peanuts.

You have highlighted one of the key advantages.

However, reports state that the majority of SIPPs still invest into funds. It is those people that need to careful. If we compare like for like charging (i.e. discount SHP/PPP vs discount SIPP or full commission SHP/PPP vs full commission SIPP - so no commission bias one way or another) then the stakeholder will beat the SIPP every time with a limited fund range. PPPs will beat the SIPP most times. (a discount SHP would have a charge around 0.5%p.a. on a 50k fund - a PPP with 3% commission per contribution to the adviser could have a 0.7% annual charge even with external funds used)

Ed, we have seen you knock insurance companies a lot. Some of that is justified. However, with companies like SIPPdeal already making the FSA warning lists, they are not perfect either. Insurance companies do tend to be quite good at low risk investments. Fixed interest, property etc. A low risk investor could find the insurance company SHP/PPP to be by far the best option and have lower charges. The complete opposite of Andy Bells comments. Of course, his company wouldnt get the business in those cases.

This isnt a SIPP vs SHP/PPP thing. Its about spotting the bias in those comments and rebalancing the debate to show the pros and cons of all the options and highlighting areas where the different options can offer best value for money.

EdInvestor

Ed, I'm a fan of SIPP's but surely you wouldn't advocate transferring a pension from a life company into the same funds with a SIPP provider? You seem to be implying that SIPP's are cheaper in all cases - a 1% charge in collective funds via a stakeholder seems quite cheap.

I don't think I've ever implied SIPPs are cheaper in all cases, that would be silly. It is possible that a PP investing in the same funds would be cheaper at some SIPPs than at some life companies - and more expensive at others.There is little point in anyone investing in a stakeholder these days as the funds are mostly just junk ( property usually excepted if it is available) and there is certainly no point in investing in stakeholder funds in a SIPP.

Quite agree on the share issue of course. Another key advantage is the seamless transition into income drawdown at retirment, with no need to sell investments or incur andy risks or costs due to transfers.

If you want to invest in top quality funds making regular savings, the H-L SIPP will be worth a look as it doesn't charge dealing fees and rebates both the initial charges and part of the AMC: a PP at a lifeco may charge higher fees than that, if it can offer the same choice of funds, which it probably won't.

The Sippdeal unfair contract terms issue related to advance warning to customers of changes to T&Cs and has been adjusted (it had never been used).

Ed, we have seen you knock insurance companies a lot. Some of that is justified....

As millions who have seen their endowments decimated and their pensions cut in half (see all the newspaper stories this week) will agree....

This isnt a SIPP vs SHP/PPP thing.

No, I'd have thought it's a DIY vs advisor issue myself. Andy Bell is a leading provider in the DIY SIPP area, so you can understand why DH wouldn't recommend Sippdeal as he wouldn't earn any commission from doing so.

dunstonh

As millions who have seen their endowments decimated and their pensions cut in half (see all the newspaper stories this week) will agree....

And what about those that have pensions and investments with the insurance companies that have performed well? The top selling SIPP is issued by an insurance company. It would be foolish to rule out an insurance company product due to one investment fund out of the hundreds available.

Andy Bell is a leading provider in the DIY SIPP area, so you can understand why DH wouldn't recommend Sippdeal as he wouldn't earn any commission from doing so.

That comment says more about you than me. Your anti financial services bias is evident in many of your posts and you let that cloud your judgement. When you have such a chip on your shoulder, you really shouldnt be posting "advice" to people who may be foolish enough to think you actually know what you are talking about.

EdInvestor

None of us post "advice" on this website as your signature states.All information is for discussion only and readers should Do their own Research.

As you'll be well aware, millions of people, far and away the majority, were sold the same products from many insurance companies by many advisors for many years - generic pensions invested either in With profits funds or balanced managed funds.

That's what people are talking about.This is why you keep havin to explain that a pension is just a wrapper and you can stock it wilth all many of funds.

Only a very small group invested in the kind of upmarket performance funds you are talking about - not least because they weren't available in conventional pensions in those days. Most people are in the bog standard WP and managed funds.Endowments are the same.

You're not wrong that I'm biassed against companies and advisors that take up to 40% of the value of people's funds in charges (not uncommon in the past) and then deliver the kind of dire performance that we've been reading about this week. :mad:

dunstonh

As you'll be well aware, millions of people, far and away the majority, were sold the same products from many insurance companies by many advisors for many years - generic pensions invested either in With profits funds or balanced managed funds.

Funds that had been around since the 1850s and done very very well up until the late 1990s. 150 years of solid performance.

Only a very small group invested in the kind of upmarket performance funds you are talking about - not least because they weren't available in conventional pensions in those days. Most people are in the bog standard WP and managed funds.Endowments are the same.

Modern plans are very much better than the older ones but there is no reason for anyone to still be in obsolete plans/funds. They can get out and move on. Leaving your money in there and whinging isnt the answer.

Trying to blame the insurance companies isnt the answer. They got caught out by a number of events, some in their control whilst others were not. With Profits had successfully navigated two World Wars but failed when Gordon Brown raided pension funds, the FSA decided that it wanted far stronger solvency forcing insurance companies to be selling equities when they should have been buying.

Some did see the end of conventional with profits coming and unitised with profits came in but the issues came to a head too quick for unitised with profits to make a difference. Had the crash not happened as early on as it did, then we wouldnt be thinking of unitised with profits as we do. However, most didnt see the end of with profits. Just as you have people going into mortgaged buy to lets now thinking they are going to make loads. When they lose money, people will be saying what a bad idea it was to do that because they have hindsight on their side. Its always easy to look back and say what a bad idea that was.

You're not wrong that I'm biassed against companies and advisors that take up to 40% of the value of people's funds in charges (not uncommon in the past) and then deliver the kind of dire performance that we've been reading about this week. :mad:

You cannot resist posting comments that are a spin on the truth. advisers taking 40% of peoples funds is an outright lie.

EdInvestor

advisers taking 40% of peoples funds is an outright lie.

They do need a bit of help from the companies to get that much, as I say.

With profits died a death many years ago in other countries (Australia America Canada) and was on the way out right through the 1990s.

Remember all those demutualisations? That was the step-by-step death of With profits.Of course advisors used the "windfall fever" to flog WP pensions to people, instead of recognising that those companies were demutualising because they had run out of capital and were in trouble.

Most of those old mutuals are now themselves zombies, or their WP funds are. Equitable Life didn't help, with its outrageous lies and misselling one has to admit.