SIPP advice please

Dr_Feelgood

Hi all

Would appreciate any advice/recommendations please; I'm 60 next year, unmarried & unemployed.

I have a personal pension fund with Standard Life, current value £80k of which £24k is protected rights. I'd like to take the 25% tax free but do not want to buy an annuity with the balance so presumably should set up a SIPP with eventual income drawdown.

I already have a smallish annuity income.

The SL scheme is currently split over 6 equity funds (2 Global, 1 FarEast, 1 European & 2 UK) which have grown on average 20% in nearly 3 years, the FarEast fund by 42%.

SL charges vary between 1.91% & 3.05% on these & want 1% to transfer to a SIPP basis, all of which I find excessive.

H-L appear to offer an SIPP at far more reasonable rates, would a transfer to them be sensible? I'm not overly keen on speaking to an IFA due to very negative recent experience.

dunstonh

H-L appear to offer an SIPP at far more reasonable rates, would a transfer to them be sensible? I'm not overly keen on speaking to an IFA due to very negative recent experience.

HL are IFAs and keep the IFA commission that is paid on the funds on their SIPP. So, if you don't want to use any other of the 30,000 IFAs out there because of the actions of 1, then why are you considering using HL?

I'd like to take the 25% tax free but do not want to buy an annuity with the balance so presumably should set up a SIPP with eventual income drawdown.

A SIPP, personal pension or drawdown plan are the typical options here.

zagfles

dunstonh wrote: »

HL are IFAs and keep the IFA commission that is paid on the funds on their SIPP. So, if you don't want to use any other of the 30,000 IFAs out there because of the actions of 1, then why are you considering using HL?

HL refund the initial charge on most funds they offer, and typical AMCs on them are lower than those quoted by the OP.

dunstonh

HL refund the initial charge on most funds they offer, and typical AMCs on them are lower than those quoted by the OP.

Most pensions have no initial charges nowadays. Just the advice charge, and often that is very low or even nothing. However, HL keep the full trail commission of up to 0.5% p.a. Also, the OP quoted the TERs with the Std Life plan. You shouldnt mix those up with the AMCs on HLs fund options. You need to compare pension AMC to unit trust/OEIC TER.

Std Life isnt a good contract in my opinion but you dont go to HL if you want to avoid an IFA and not pay an IFA.

zagfles

dunstonh wrote: »

Most pensions have no initial charges nowadays. Just the advice charge, and often that is very low or even nothing. However, HL keep the full trail commission of up to 0.5% p.a. Also, the OP quoted the TERs with the Std Life plan. You shouldnt mix those up with the AMCs on HLs fund options. You need to compare pension AMC to unit trust/OEIC TER.

Std Life isnt a good contract in my opinion but you dont go to HL if you want to avoid an IFA and not pay an IFA.

The TERs are typically only 0.1% or so higher than the AMC. Anyway I thought personal pensions could deduct some charges which aren't included in their quoted AMC. Is this true?

dunstonh

zagfles wrote: »

The TERs are typically only 0.1% or so higher than the AMC. Anyway I thought personal pensions could deduct some charges which aren't included in their quoted AMC. Is this true?

pension funds use the TER. The TER isnt a 100% list of costs but that applies to most funds in the same way.

As long as you compare the TER on OEICs/UTs to the AMC on pensions then its as close to like for like as you can get. The wrong thing would be to compare the AMC on OEICS/UTs to the AMC on pension funds.

So, for example, if you using one of the poor quality HL Multimanager funds then you shouldn't use the "low" AMC of 1% but the TER of 1.83% (in case of the balanced version). You then compare that to a comparable (and usually better) balanced managed fund on a personal pension running at around 0.4% with the fund value the OP has. (note that the TER is not only 0.1% higher but 0.83% higher. Many funds can be as much as double - HSBC world portfolio funds are disgracefully high on TER).

If the OP is going portfolio building then the decision may be different but if he is using portfolio funds instead then going SIPP could be very costly.

As I said, the Std Life option isnt very good. However, if the OP is concerned about costs then it can be done cheaper than Std Life and cheaper than HL depending on what he is looking for with the investments.

zagfles

dunstonh wrote: »

pension funds use the TER. The TER isnt a 100% list of costs but that applies to most funds in the same way.

As long as you compare the TER on OEICs/UTs to the AMC on pensions then its as close to like for like as you can get. The wrong thing would be to compare the AMC on OEICS/UTs to the AMC on pension funds.

So, for example, if you using one of the poor quality HL Multimanager funds then you shouldn't use the "low" AMC of 1% but the TER of 1.83% (in case of the balanced version). You then compare that to a comparable (and usually better) balanced managed fund on a personal pension running at around 0.4% with the fund value the OP has. (note that the TER is not only 0.1% higher but 0.83% higher. Many funds can be as much as double - HSBC world portfolio funds are disgracefully high on TER).

If the OP is going portfolio building then the decision may be different but if he is using portfolio funds instead then going SIPP could be very costly.

As I said, the Std Life option isnt very good. However, if the OP is concerned about costs then it can be done cheaper than Std Life and cheaper than HL depending on what he is looking for with the investments.

The TERs on the funds I have are no more than 0.15% above the AMC.

But I thought pension funds were able to "hide" charges more easily than UT/OEICs? Is this not true? I have an AVC from an old employer in the Friends Provident Managed NGP pension fund - this claims to have a zero charge! How is this possible, how do they manage this fund at no cost?

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=LMF70&univ=P

dunstonh

But I thought pension funds were able to "hide" charges more easily than UT/OEICs? Is this not true? I have an AVC from an old employer in the Friends Provident Managed NGP pension fund - this claims to have a zero charge! How is this possible, how do they manage this fund at no cost?

Some pensions have the charge is set at contract level (rather than fund level) depending on the terms agreed with the distribution. It is then handled by cancellation of units IIRC. This is not uncommon with group/occupational money purchase schemes where the charges are usually negotiated rather than being retail. You could have one employer offering that fund at 0.3% and another at 1% or even 1.5%.

However, in this case it is more likely that FP havent supplied the data on the fund charge to Financial Express. I have a few clients on the NGP contract and I know what the AMC is yet financial express says its zero. That is not uncommon where no data has been supplied.

zagfles

dunstonh wrote: »

Some pensions have the charge is set at contract level (rather than fund level) depending on the terms agreed with the distribution. It is then handled by cancellation of units IIRC. This is not uncommon with group/occupational money purchase schemes where the charges are usually negotiated rather than being retail. You could have one employer offering that fund at 0.3% and another at 1% or even 1.5%.

Yes you're right - thanks for that - having checked my statement they do cancel units. They say an AMC of 0.5% on my statements, and my units are 0.5% less than previous year. Something I need to account for when comparing performance with the funds in my SIPP!

However, in this case it is more likely that FP havent supplied the data on the fund charge to Financial Express. I have a few clients on the NGP contract and I know what the AMC is yet financial express says its zero. That is not uncommon where no data has been supplied.

So there's an additional charge as well as the units cancellation charge??

dunstonh

So there's an additional charge as well as the units cancellation charge??

No. its just a quirk of the fund data providers that you have to be aware of when a box says zero. Zero could be because no data was supplied rather than actually meaning zero. In your case, you are paying 0.5% but rather than being deducted within the fund, it is being taken by cancellation of units. There is no other charge to be aware of in respect of this

There are a number of quirks with these things that you cannot fully rely on them as being 100% accurate when they involve 3rd party sources.

Dr_Feelgood

dunstonh wrote: »

Most pensions have no initial charges nowadays. Just the advice charge, and often that is very low or even nothing. However, HL keep the full trail commission of up to 0.5% p.a. Also, the OP quoted the TERs with the Std Life plan. You shouldnt mix those up with the AMCs on HLs fund options. You need to compare pension AMC to unit trust/OEIC TER.

Std Life isnt a good contract in my opinion but you dont go to HL if you want to avoid an IFA and not pay an IFA.

TERs/AMCs/OEIC, excuse my ignorance but these are not familiar terms (to me,anyway)

So why is SL not a good contract please?