Cheapest Sipp: build yourself a low cost DIY pension article

BigMac1_2

Hi Bigadaj,

Absolutely. I agree totally.

For me though, being forced to cut an annuity meant that whichever way I cut the deal, I would have to live until I was 92+ before I used up my pension pot, let alone the interest it would accrue in that thirty odd years.

If I took a straight payment (not allowing for a pension for TBH,) then if I died in aa year, all of the rest would be swallowed up.

If I died before I took out the annuity, she could have the entire pot LESS 55% tax! Or take out the pension annuity in her own name.

At least if I can take the entire pot then I can control it, enjoy the interest being gained and there should still be a pot left if either of us pop our clogs.

On doubt as Snowman says, we will see lots of pensioners blowing the pile around that time - probably worth investing in a caravan or motor home company! :rotfl:

For me though, this is exactly what I wanted to do - just a shame it wasn't next month!:beer:

BobQ

bigadaj wrote: »

I suppose this makes idealistic sense for the Tories but makes me wonder what the underlying reasons might be.

The ability to access pension money more easily might be seen through a boost to spending, so another short term uplift to the economy, making things look better and recovery happening faster.

We are now just over a year from an election so makes a lot of sense for the Tories to do this now for the numbers to look far better over the next few quarters.

Well if you were drawing £10K a year as a pension having taken an annuity it would be a factor in you claiming any means tested benefit and would be used to fund your care home fees. But if you had access to £250K in your pension fund that you could just drawdown, you get no benefits and pay for all of your care home fees.

bigadaj

BigMac1 wrote: »

Hi Bigadaj,

Absolutely. I agree totally.

For me though, being forced to cut an annuity meant that whichever way I cut the deal, I would have to live until I was 92+ before I used up my pension pot, let alone the interest it would accrue in that thirty odd years.

If I took a straight payment (not allowing for a pension for TBH,) then if I died in aa year, all of the rest would be swallowed up.

If I died before I took out the annuity, she could have the entire pot LESS 55% tax! Or take out the pension annuity in her own name.

At least if I can take the entire pot then I can control it, enjoy the interest being gained and there should still be a pot left if either of us pop our clogs.

On doubt as Snowman says, we will see lots of pensioners blowing the pile around that time - probably worth investing in a caravan or motor home company! :rotfl:

For me though, this is exactly what I wanted to do - just a shame it wasn't next month!:beer:

The current system can be better than you describe.

Annuity is an option but so is capped drawdown, so you could take out a limited income but retain the capital. This could be set up so that your husband or wife could continue to take that income on your death, or vice versa, with no tax to pay. Once the second person dies then he's it could be inherited with a 55% tax charge.

I don't see much wrong with the old capped drawdown system, yes there were costs and argument about the exact level of income that could be drawn in terms of the gad limit but the principle was fine.

BigMac1_2

Hi Bigadaj,

I've never heard of a "capped drawdown" Seems there is more to this than meets the eye. However, it doesn't seem to be any better than me having direct control over the pot.

Regards,

geoff_ss

Could I ask MSE to amend its Top Cheap SIPPs comparison table. The annual charge from Alliance Trust is £186 not £155 as shown. AL publish £155 + VAT which seems deceptive for a SIPP, which I thought was mainly designed to be a personal, not a business product.

Could I suggest a 6th column on the table to show the cost of transferring SIPP provider. Alliance Trust just took £186 annual service charge (it was only £125, 3 years earlier). If I object, I'd have to pay another £186 (ie £372) to get them to unlock the handcuffs & let me move to a company that uses normal, real-world, cost of living increases.

stphnstevey

Myself and my wife have H&L SIPP and looking for a cheaper alternative

We only invest in funds


My current SIPP has about 30 different funds, but I want to move away from this and invest in maybe 3 funds and trackers with the lowest cost.


Would each fund purchase be considered a deal? Or would each contribution be considered a deal? eg 1 contribution split between 3 funds, 3 deals or 1?

There is approximately one or two bulk pension contributions a year from my company and I think I would now split those between about 3 funds. I also make one personal contribution a year again splitting between about 3 funds.


My wife no longer makes contributions to her pension


I've heard that the charges by H&L for transferring my SIPP to someone else is quite high - any ideas how much?
Also, would I need to factor in transfer in cost from the new provider?


iWeb and Interactive Investor seem quite cheap, but have initial setup costs that initially outweigh the costs from H&L. Should I just grin and bare that, write it off and look at just the running costs?

guitarman001

I'm thinking of starting a SIPP... I have an ISA with HL right now. To be fair, their interface is excellent. You're ok if you deal in ETFs, ITs, shares etc... But for me I will definitely be wanting some funds... and 0.45% uncapped per annum adds up tremendously when looking at pension lifetime savings. Surely they are destroying themselves here?

Which platforms would you recommend?

malc_b

I too am with HL and find myself looking at a large fee increase. Mostly I invest in trackers with some in managed funds for diversity. However, I'm dubious about the long term performance of managed funds (see Warren Buffet's bet or Motley Fool's article) most is in trackers hence I'm hit by the HL price increases.

I'm currently doing a spreadsheet on the costs but for HL but what I note is that HL has no dealing charges for unit trusts and OEICs so IMO as someone who backs a tracker long term I'm subsidising all those deals which on other providers are ~£10 (or £5 if many).

I would say that Martin's article on SIPPs could do with expanding to cover post retirement charges. I'm over 55 so I don't want to switch to a provider which is cheaper in my investment phase only to find I'm hit with higher charges in retirement phase.

I've only just woke up to HL charges after I got hit with them. HL letter from Jan 2014 when the announced changes said "Do I need to do anything... No" and "most customers will see lower charges". Both of which are at best spinning the truth when the fact of the matter is many customers do need to do something (like move!) and many will see huge cost increases. Reading the letter you are lead to believe that nothing significant is changing, either your costs will go down or they won't (no mention is made of costs increasing!). At the very least customers might like to switch to paper free to save that cost. So I too have a current complaint with HL.

(BTW I know they mentioned the paper fee again but by then I was out of the country for a while so not getting post. When I got back it was too late to avoid the paper fee.)

BTW2 I've yet to find an alternative provider that is NOT cheaper than HL for me. For HL to be cheaper you'd need to have a very small SIPP, for example for a flat rate fee of say £150 then HL 0.45% breaks even at £33k.

malc_b

stphnstevey wrote: »

Myself and my wife have H&L SIPP and looking for a cheaper alternative

We only invest in funds


My current SIPP has about 30 different funds, but I want to move away from this and invest in maybe 3 funds and trackers with the lowest cost.


Would each fund purchase be considered a deal? Or would each contribution be considered a deal? eg 1 contribution split between 3 funds, 3 deals or 1?

There is approximately one or two bulk pension contributions a year from my company and I think I would now split those between about 3 funds. I also make one personal contribution a year again splitting between about 3 funds.


My wife no longer makes contributions to her pension


I've heard that the charges by H&L for transferring my SIPP to someone else is quite high - any ideas how much?
Also, would I need to factor in transfer in cost from the new provider?


iWeb and Interactive Investor seem quite cheap, but have initial setup costs that initially outweigh the costs from H&L. Should I just grin and bare that, write it off and look at just the running costs?

HL charge £25/holding to transfer, £25 for cash, £25 to close the account, so with 30 funds I make that 32*£25 or £800. I'm assuming that you have some cash, zeroing the cash balance would be a saving. Reducing the number of funds would be a good idea too, especially since HL do fund trades for zero where as other charge.

The other point to consider is transfer out fees. The cheapest for investing now might not be the best when you retire. For example HL, ATS charge £75+VAT for each GAD calculation where as II charges £160+VAT

malc_b

Is it just me or can none of the providers produce clear information? FOr SIPPs I'm thinking of mainly. ATS is maybe the best as it gives worked examples but not enough IMO. iWeb is just hopeless and doesn't even say what death benefits calculation cost except the open ended "time/cost basis".

BTW, here is my understanding, feel free to correct me, or learn from it maybe (see here).

Flexible drawdown - need to show £12k of other income (annuities I guess) then can take what you want when you want. One off charge for this usually.

Capped drawdown - worked out from gilt rate (GAD calculation). See HMRC link above for excel file and instructions. Worked out every 3 yrs <75 and every yr >75. Often a GAD calc cost (not for ATS that I could find).

Providers seem to charge for SIPP, and when retired add another annual charge, and a charge for starting drawdown, and a charge for each GAD. Some charge all of those, some not, AFAIK.