Cheapest Sipp: build yourself a low cost DIY pension article

mmrk

Hi everyone,
I have been auto-enrolled in NEST for two years now (Retirement 2055 fund, switched to Higher Risk during the Corona crash) and was pondering whether to increase my contributions to 16% of my gross salary or open a SIPP to contribute the increase there. My company will only contribute to NEST and does not offer salary sacrifice.

This prompted me to look at costs and I was shocked to see what a 1.8% contribution charge adds up to, at least initially. If I increase my contribution, a lot more of it will be wasted... I know that the total cost p.a. falls under 0.something when the pension pot grows big enough but my financial math isn't strong enough yet to compute the crossover point. Still, it strikes me as a waste.

Is there anything I'm missing here? I saw a few posts in this thread disparaging NEST, is there anything new to add to them?

My situation is that I'm a 32 year old immigrant and want to save 35+ years for retirement and probably stay invested until my death. I don't know for how long I will stay in the U.K., so I'm maintaining an ETF portfolio in an ISA which I can just take with me at any time. To play the other side, I also want some money to go into a U.K. pension scheme because you never know. I'm sceptical of actively managed funds and prefer a 75% global equities ETF, 25% bonds ETF or savings account approach, with the occasional rebalancing. The Vanguard SIPP looks like a good fit. Something like 75% FTSE All-World plus 25% Global Aggregate Bonds.

As an aside: NEST makes it hard to track the performance of your money. I had to resort to manually copy-pasting stuff into spreadsheets and entering them into a portfolio manager. Ugh. Also, the Retirement 2055 fund is not listed on fund data sites, so I had to use the Retirement 2040 fund, although it uses slightly different prices. Double ugh. It did prompt me to learn about finance math, so that's... something?

Paul_Herring

My company will only contribute to NEST and does not offer salary sacrifice.

There's no tax difference, then, between contributing extra to company scheme, or contributing to your own scheme. (SS would have saved you NI.)

So, if you're after putting in a pension fund, you're down to cost differences, and available funds, between (from what you've mentioned) NEST and Vanguard at this point.

mmrk

Thanks for your feedback!

I just found out that Vanguard wants 100 GBP per fund minimum. Very annoying, this actually makes me think twice, because I don't want to lock up too much money that I can't take with me if I move back. Still need to figure out the tax situation of U.K. pension schemes should I indeed move back.

I also found a calculator for estimating returns and costs and I found that over 35 years, assuming a 5% p.a. growth and today's charges, the NEST pension and e.g. a LifeStrategy 80 investment in a Vanguard SIPP work out to more or less the same idealized return and cost, no matter if I do full NEST, full Vanguard or split between them. Left out the tax relief numbers, but maybe they don't change the result. Huh!

I suppose this means that any benefit from going partly non-NEST must come from fund performance and whether I believe I can do better than the NEST Higher Risk fund.

Swipe

mmrk said:

Thanks for your feedback!

I just found out that Vanguard wants 100 GBP per fund minimum.

 You don't need to commit to a regular payment of £100/month. You could either pay in £500 to open it or you could sign up to £100/month and then stop the regular payment and just pay in what ever you like by debit card.

Contiuk

Hi Everyone. 
I am new to DIY pension. I have been looking into opening a SIPP and transferring my current pot. 
After a very long online research, I found that Close Brothers has the lowest fee for dealing in the UK market. Which is 0.25% fee on investments. NO fee for holding cash. And £8.95 per deal. I actually spoke few minutes ago with them on the phone and they said that THERE IS NO DEALING FEE at the moment, and it has been for the last 2 years???

Has anybody been with them? Are they trustworthy?

My other concern is that they do not offer international dealing. Does  anybody know the cheapest SIPP for international stocks?

Many thanks in advance. 

wiggers

Have you tried the comparison site here?
http://www.comparefundplatforms.com/

ernie-money

iWeb?

I've just read through the guide and searched this thread and am surprised to find so few mentions of iWeb. When i compare the charges, it seems cheaper for my circumstances to set up a new SIPP with them rather than AJ Bell (although AJ Bell is the scheme administrator of iWeb) - is there a reason not to use them, or am I missing something? Thanks in advance!

Michael_Nottingham

Yes iWeb are very cheap. But their admin is very poor had issues with every transfer, and they even setting an isa up incorrectly. However once set up although basic the website is functional. And part of Halifax / Lloyds. 

chrisst170

ernie-money said:

iWeb?

I've just read through the guide and searched this thread and am surprised to find so few mentions of iWeb. When i compare the charges, it seems cheaper for my circumstances to set up a new SIPP with them rather than AJ Bell (although AJ Bell is the scheme administrator of iWeb) - is there a reason not to use them, or am I missing something? Thanks in advance!

I've used them for about 6 years now. Their website looks like it is from the 90s, but I've never had a problem with my ISA with them.

ernie-money

Michael_Nottingham said:

Yes iWeb are very cheap. But their admin is very poor had issues with every transfer, and they even setting an isa up incorrectly. However once set up although basic the website is functional. And part of Halifax / Lloyds. 

I can probably deal with poor admin if it saves me money. I won't do masses of trading, so I will just bank on having a few issues - thanks for the heads up