MSE News: Warning over charges that 'wipe millions off pension pots'

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  • dunstonh
    dunstonh Posts: 116,596 Forumite
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    Because if HL are getting money from the funds they presumably won't need to charge so much directly to customers. I suppose the funds' costs will be lower - but do they pay everyone these "distribution/marketing" refunds?

    Bet you that the end result will be much the same. 1.5% old way, Total of 1.5% new way but you know who gets what.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
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    dunstonh wrote: »
    Bet you that the end result will be much the same. 1.5% old way, Total of 1.5% new way but you know who gets what.

    Which is a shame given that other countries enjoy teeny fractions of a percent.

    Hopefully visibility will lead to competition and lower fees.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • jem16
    jem16 Posts: 19,404 Forumite
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    gadgetmind wrote: »
    Which is a shame given that other countries enjoy teeny fractions of a percent.

    Can you elaborate on this please?
  • dunstonh
    dunstonh Posts: 116,596 Forumite
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    gadgetmind wrote: »
    Which is a shame given that other countries enjoy teeny fractions of a percent.

    Hopefully visibility will lead to competition and lower fees.

    Other countries dont have teeny fractions. When you hear about other countries you hear about the fund only. You dont hear about the charges for the packager (where there is one) or the cost of advice (where there is a cost of advice).

    The comparisons are a bit like comparing the price of a car using the on the road price vs the price without all the things needed to put it on the road.

    The UK has historically had packaged solutions where everything was built into the one price. Some providers have moved away from that and they will all have moved away from that by the end of 2012. Packaged solutions always end up more expensive when comparing them to unpackaged solutions. Plus, the UK pricing models have historically had heavy cross subsidy. The larger investors cross subsidising the smaller ones. There will be no allowance for cross subsidy post RDR.

    You can get funds as cheap as you can abroad on much the same basis if you want.

    However, if you want a platform, you will pay for it. If you want advice, you will pay for it. If you want services, you will pay for them. So, don't think they are going to give them away for free in future.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    Yes, Skandia currently sells only via IFAs. Their choice of business model. It'll be interesting to see if that changes. I think they want some of the money that HL is making.

    Lower total fund count but both Skandia and Fidelity seem to have those of most interest to me. The Skandia SIPP probably beats HL in features and range.

    Fidelity and Skandia don't need to mention refunding trail commission on their pensions because they do it by reducing the fund annual charge by the commission saved, so you never pay it in the first place.

    Not sure what Fidelity version you were looking at, note that the pricing may differ between IFA and non-IFA products.

    For ISAs they do need to say something about how they handle it. Skandia apparently rebates to the IFA who if on fee basis would then have some way of returning it to you. Not particularly convenient, the HL loyalty bonus account is a neater way of doing that for those looking after themselves, but maybe OK for most of Skandia's current customers, where it would be the IFA getting the money for ongoing servicing.
    peterg1965 wrote: »
    What charges am I actually paying in my SIPP then? I pay a discounted initial fee for my OEIC funds and an ongoing cost (TER?) and according to the above statement from HL I have no AMC payable to them if all my SIPP is in funds. Am I being naive in understanding the cost to me?
    Not naive, just not knowing how things work. HL is being paid about 0.8% commission out of the 1.5% annual charge of a typical fund. You can dodge 0.5% or more of that by buying somewhere else that either doesn't charge or rebates the 0.5% of it that's the trail commission intended to pay an IFA for ongoing advice.

    Avoiding it is why it can make sense to pay an IFA a fee to get rid of that ongoing 0.5% cost by using a platform with lower base cost than HL's platform.
    zagfles wrote: »
    There's some controversy at the moment about additional refunds paid by funds to the likes of HL, for "distribution/marketing" rather than "advice", the FSA are due to make a ruling on whether this will be allowed. Hopefully it will, which should reduce any direct charge HL have to charge and hopefully result in lower costs overall.
    Given that HL currently takes around 0.8% from the funds in the pension and charges full retail annual charges I think you're being unduly optimistic. It hasn't discounted yet in the pension and I don't think it will happen. At least not at HL unless strong competition gives them no choice. If they were interested in sharing the benefits they'd be discounting the AMC already instead of taking the IFA commission amount as extra platform profit for them.
    zagfles wrote: »
    As I understand it some/most of that 0.3% is bulk buying/handling discounts, as it must be far cheaper in admin for funds to deal with large nominee accounts like HL than directly with customers. So fund AMCs are unlikely to go down buy 0.8%, I'd imagine 0.5% (advice fee) is more likely.
    The FT has carried at least one story about fund management companies being unhappy with the average transaction sizes at HL.
    zagfles wrote: »
    So if fund AMCs don't go down by this additional 0.3%, if HL are allowed to keep this then overall I'd guess the charges will be lower.
    HL already do get pricing that has that 0.3% removed. They choose to keep if for themselves. That's not unreasonable since they are providing the platform that it's supposed to pay for. Keeping the IFA portion when they aren't providing IFA services is the more dubious part. That and lack of disclosure.
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
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    jem16 wrote: »
    Can you elaborate on this please?

    No problem, have a read of this.

    http://www.telegraph.co.uk/finance/personalfinance/pensions/7921524/Charges-and-fees-cutting-50-per-cent-from-British-savers-pension-pots.html

    The UK pensions industry needs a massive overhaul of the "I wouldn't start from here" variety.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • jem16
    jem16 Posts: 19,404 Forumite
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    gadgetmind wrote: »

    I had a feeling you were going to quote from the flawed Dutch artcile. Dunstonh has already covered that as has numerous threads on here already so I won't repeat it.
  • dunstonh
    dunstonh Posts: 116,596 Forumite
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    Yes, Skandia currently sells only via IFAs. Their choice of business model. It'll be interesting to see if that changes. I think they want some of the money that HL is making.

    Or perhaps HL will want some of the money that Skandia are making? Skandia's platform is over twice the size of HL!
    No problem, have a read of this.

    http://www.telegraph.co.uk/finance/p...sion-pots.html

    The UK pensions industry needs a massive overhaul of the "I wouldn't start from here" variety.

    As Jem says, that was already discussed and shown to be flawed when the it was released. Again, comparing just one bit of the equation, not the whole package. Plus, you cant compare institutional with retail. Institutional will always win.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
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    jem16 wrote: »
    Dunstonh has already covered that as has numerous threads on here already so I won't repeat it.

    I have a lot of respect for dunstonh, and he gives a lot of valuable advice to people for free, which means I do pay more attention to his comments that others in his sector. However, when is someone who lives off fees and margin ever going to say that said fees and margins are anything other than fairly priced?

    As I said earlier, I do think fees (up-front and ongoing) are heading in the right direction for consumers, but they still have a long way to go to catch up with the low fees paid elsewhere.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
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    dunstonh wrote: »
    Lets compare the Vanguard tracker funds in the UK at 0.1% against those and the UK is cheaper.

    I'm a big fan of the Vanguard trackers, but they aren't exactly made easy to access (is Alliance Trust the best/only way?) and I'd guess that a vanishingly tiny percentage of IFAs would ever mention them even assuming that they'd heard of them.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
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