Aegon 1st year up front fees

bigdog69

Hi,

I've recently been shown an Aegon flexible pension plan where you pay all the admin charges out of your 1st year contributions, and as a result the AMC charges are only 0.35- 0.5%.
So if you pay in £200 per month they take £1200 out of your first year contributionsk, then the AMC is 0.5% for 20-50k, 0.4% for 50-150k and 0.35% for 150k+.

I know they'll be a more active manager for me and I'm paying for some advise, but can't work out whether this is better than a SIPP (virtually free at H-L) or my company one where salary sacrifice means I'll also save the National Insurance.

Has anyone else been shown this sort of product? Any IFAs recommending it?
Is this a standard structure these days? (I was told it was in preparation of FSA RDR 2012 rules)


Many thanks

dunstonh

I know they'll be a more active manager for me

You haven't actually mentioned anything about the investments. So, we cant say if they will be more active or not.

but can't work out whether this is better than a SIPP (virtually free at H-L)

How do you work out HL as being virtually free? In reality, a typical TER of a managed fund at HL is around 1.75%. The Aegon FPP using internal funds is going to be around 0.5%.

Has anyone else been shown this sort of product?

its a very common and popular pension. It is regularly at the top end on low cost

Any IFAs recommending it?

lots

Is this a standard structure these days? (I was told it was in preparation of FSA RDR 2012 rules)

It is RDR compliant and typical of RDR compliant pensions. Although the product itself has offered this option for about 6 years. (RDR is actually not a big deal for many IFAs as we already work that way).

bigdog69

*You haven't actually mentioned anything about the investments. So, we cant say if they will be more active or not.

- more active in providing advise rather than a SIPP with no advise. I'm in my 30s so investments would be a fairly typical mix of funds.

*How do you work out HL as being virtually free? In reality, a typical TER of a managed fund at HL is around 1.75%. The Aegon FPP using internal funds is going to be around 0.5%.

- free on the admin/AMC side of things before fund specific charges.
If you don't want to just use the internal Aegon funds there would be additional charges (eg Jupiter China fund - from what I can see is 1.05% additional fee vs 0.5% annual charge, whereas H-L same fund is 1.5%). Aegon factsheets showing 1.0% disclosable yearly charge/expenses for the sample i looked at.


*its a very common and popular pension. It is regularly at the top end on low cost

- low cost after you've paid the £1200 in admin fees in the first year?
it's this bit that is concerning me - seems an awful lot

dunstonh

- free on the admin/AMC side of things before fund specific charges.

HL take 0.5% commission on the funds. Its not free.

If you don't want to just use the internal Aegon funds there would be additional charges (eg Jupiter China fund - from what I can see is 1.05% additional fee vs 0.5% annual charge, whereas H-L same fund is 1.5%). Aegon factsheets showing 1.0% disclosable yearly charge/expenses for the sample i looked at.

No its not. You are not comparing like for like. Pension funds use the TER as the AMC. For unit trust/OEIC funds you should not compare against their AMC but compare against their TER. Jupiter China in UT form has a 1.80% TER.

- low cost after you've paid the £1200 in admin fees in the first year?

Yes. because you are getting rid of the charges straight away.

it's this bit that is concerning me - seems an awful lot

£1200 isnt much at all. Plus, you are getting tax relief on the fee by doing it this way. So, it makes more sense than paying it by cheque.

bigdog69

H-L website says Annual Charge is 0% on cash and over 2,000 funds.

yes there is a charge of 0.5% on all other funds, but if i stick within the free range surely there is no management charge?

dunstonh

but if i stick within the free range surely there is no management charge?

Do you really wont to compromise your investments by sticking with only with a couple of no additional charge funds? Just to save around 0.2% a year?

bigdog69

I do appreciate that aspect of fund choice, however the question was whether it is possible to run a fee free SIPP via H-L.
And the answer appears to be yes.

So if you pay in £200 per month for 30 years, comparing the Aegon and the 0.5% version of H-L, yes the fees are lower in the final years at Aegon, but you've got a smaller pot as you paid £1200 less in to the fund in the first year which then gets 30 years of growth on it.