SIPP, Hargreaves Lansdown and Funds 2006 (dunstonh)

dunstonh

Post RDR, won't Skandia have to transfer all its clients automatically onto the new compliant platform?

Can't really say what they are going to do. They have allowed free of charge internal transfers from old Skandia Life pensions to the Skandia platform. So, even if it does require a manual move, its not a big deal. However, I suspect that people will be able to move between the two platforms (assuming FSA dont outlaw bundled) very easily.

Did I read somewhere that Skandia was in trouble a while back?

I doubt it

optimist_2

I thought the whole idea was that the new platform was post RDR compliant and therefore unbundled, or are the two different?

With regard to transferring generally, I am just concerned that I might be restricted in moving away in the future if it doesn't happen to fit into the FSA transfer parameters, if I cannot go direct.

This is the Skandia link, in 2005 prior to takeover by Old Mutual
http://www.telegraph.co.uk/finance/2921026/UK-writedown-plunges-Skandia-into-red.html

dunstonh

I thought the whole idea was that the new platform was post RDR compliant and therefore unbundled, or are the two different?

The FSA still has many areas of the RDR that are not cast in stone. Crazy when you consider that we are 18 months away and they have been talking about it for over 5 years.

At this moment in time, neither unbundled or bundled is uncompliant with the RDR. Come June/July that may change when the FSA publish its decision.

With regard to transferring generally, I am just concerned that I might be restricted in moving away in the future if it doesn't happen to fit into the FSA transfer parameters, if I cannot go direct.

its more likely that it will be an option to select within the platform without the need to change anything. Traditional pension products are a product cast in stone. They are hard to adapt. Platforms adapt and can change. They dont need to leave you behind on legacy options. In theory, a platform could move every client from bundled to unbundled with around 30 days notice. They could offer both versions and allow you to move between the two at a press of a button.

This is the Skandia link, in 2005 prior to takeover by Old Mutual
http://www.telegraph.co.uk/finance/2...-into-red.html

Not a concern as the Skandia platform is it is currently called was previously called Selestia and has always been owned by Old Mutual. When Old Mutual bought Skandia, they felt the Skandia name was more well known to the high net worth market (which it is) and they rebranded under that name. The old Skandia platform was moved onto the Selestia one.

Bankhall are no longer owned by Skandia. They are now Sesame Bankhall and the parent company is Friends Provident and is currently profitable.

Today, Skandia is loss making. About £30 million last year IIRC. However, that is partly as they are buying business and there is an expectation that there are too many platforms and some will fail, close or merge. At the moment you have a race to get assets on platform to become big enough to survive. Skandia are the biggest platform in the UK.

I fully expect the £68 investor charge with Skandia to be up around £200 within 5 years. However, the influx of cheaper institutional funds, ETFs and other non commission/rebate paying investments will offset that. If bundled is banned then expect that to be accelerated.

optimist_2

If the investor charge will be £200 within five years, then isn't there an argument that you might as well pay for these additional features now on another platform/SIPP?

Apart from that, I am stuck on two points.

1) I am still concerned about the flexibility of moving away from Skandia (to AXAElevate for example) if I have to go down the advised route. However, from a point you made earlier in the thread, if I choose to move away to a platform/SIPP with higher charges, this would be allowable as long as it gave me a wider investment choice, and there is nothing to consider like GARs, for example.

2) I don't know yet whether I will need ETFs and Investment Trusts in my portfolio. As far as risk profile is concerned, I am probably somewhere between cautious and balanced. Does this have any bearing?

dunstonh

f the investor charge will be £200 within five years, then isn't there an argument that you might as well pay for these additional features now on another platform/SIPP?

The argument may be that you transfer later if that happens and enjoy the lower cost now. However, its looking increasingly likely that rebates will be banned (still unknown but rumours and inference is more that they will be banned). So, all platforms are going to have to head that way with an explicit charging method if they do.

1) I am still concerned about the flexibility of moving away from Skandia (to AXAElevate for example) if I have to go down the advised route. However, from a point you made earlier in the thread, if I choose to move away to a platform/SIPP with higher charges, this would be allowable as long as it gave me a wider investment choice, and there is nothing to consider like GARs, for example.

Transferring out is a doddle. Ultimately, you can decide who you move it to. The only issues are with in situ investments. Most transfers currently are cash transfers (investments sold to cash, cheque for transfer value sent to new pension provider, who then buys investments). In situ transfers should become more common over the coming years.

2) I don't know yet whether I will need ETFs and Investment Trusts in my portfolio. As far as risk profile is concerned, I am probably somewhere between cautious and balanced. Does this have any bearing?

On the Skandia platform, the Blackrock class D trackers negate the benefit of many ETFs. So, it really depends on what you are after. Elevate has the Vanguard trackers at 0.1% (although their platform charge is percentage based. So, if you got their 0.4% charge and used 0.1% trackers you would pay 0.5%). The main benefit of Elevate over bundled platforms is accessibility to investments that dont pay rebates to platforms. However, if they all go that way, they are all going to have some platform charge. Hence why it is difficult at the moment to say what option is best, or going to be best.

optimist_2

Thanks. What about Investment Trusts? What is the point of these, and how do they add to your portfolio?

So Institutional Funds have a lower TER than Retail Funds, which are therefore more profitable for the investor. To make up for this, there is a higher platform charge. I assume this is used to pay the fund companies etc instead of the rebate. Isn't this essentially what Alliance Trust do, limited charges on funds, but a higher platform charge instead?

AxaElevate has a bundled and unbundled version - would you be allowed to transfer free from bundled to unbundled post RDR? Would you be able to operate the nominated trail on the AXA platform, and how does the Initial Charge work?

optimist_2

I don't think I got that quite right! Funds on unbundled platforms include both retail and institutional funds. Institutional funds do not pay a hidden rebate to the platform, so the AMR and TER are lower. Good for the investor, but bad for the platform, so the platform charge goes up to compensate. If rebates are banned, all platforms will have to be totally unbundled with all funds institutional. At the moment, generally speaking, the benefits of rebating on bundled platforms (Skandia) outweigh the benefits of unbundled platforms (Elevate) with their higher platform charges, making bundled cheaper. How's that?

dunstonh

Funds on unbundled platforms include both retail and institutional funds.

A better way of putting it is that they "can" include institutional (and retail). Some are further ahead than others on this front.

Institutional funds do not pay a hidden rebate to the platform, so the AMR and TER are lower.

Yes (although not all funds have an institutional one).

Good for the investor, but bad for the platform, so the platform charge goes up to compensate.

yes.

If rebates are banned, all platforms will have to be totally unbundled with all funds institutional.

We dont know what will happen with funds and this has yet to be decided. Institutional makes sense. However, they may come out with multiple classes, each with a different TER to allow them to choose which platforms get the best priced version. That would be messy but is a strong possibility. This is why you are seeing platforms "buying" business by offering incentives or running at a loss at this time to try and get as much on platform as possible.

At the moment, generally speaking, the benefits of rebating on bundled platforms (Skandia) outweigh the benefits of unbundled platforms (Elevate) with their higher platform charges, making bundled cheaper. How's that?

At the moment that is the case. However unbundled platforms have been getting cheaper by the year. The bundled platforms have a headstart and have more funds on them. The unbundled platforms are still paid the rebates but return them to you. As they get more money on their platforms, the rebates get better. Unbundled platforms have also been targeting high net worth clients. So, their pricing gets better with larger amounts. If the trend continues (and we ignore FSA meddling), the break even point will occur within a few years.

Unbundled platforms are transparent and not reliant on commission. That makes them the honest and open option. However, at the moment the bundled platforms with their hidden commissions are generally cheaper.

optimist_2

Thanks. So as you said, it would be best to opt for Skandia at the moment. This is cheapest presently, and is also the biggest investment platform, therefore more likely to have the best deal on funds post RDR. It also has a post RDR compliant product on the way.

On Investment Trusts, I think I read somewhere that these are direct investments, as compared to Unit Trusts, which are pooled. Is that right?

Iancfp

Investment Trusts are a pool of investments but you access them buy buying them on the market where they are traded as shares.

This brings in a whole new dimension of risk (and possibly reward) and ITs can trade to a discount or premium to the actual value of their assets.

e.g. A UK IT has asset value of 1.51 per share but markets look a bit poor so market value is !.45 per share. This can make IT shares more volatile than UTs but gives the option of being able to buy at a discount and make money when it closes