SIPPs - is there anything really wrong with HL?

Moose1960

Warning - long first post!

Afternoon all

Only recently signed up - so go easy guys! - but I've been lurking & browsing for a while.

I'm looking to take my retirement planning away from my IFA and into my own hands. As a forty-something accountant I don't consider myself financially naive, but I could be accused of being "investment naive".

Anyhow, I'm looking to set up a SIPP to add to/supplement my other current arrangements, initially planning £10k annual lump sum contributions and hopefully more if finances allow. Research/Google searches etc constantly throw up Hargreaves Lansdown as a top (often "the" top) provider. Indeed, even the article on SIPPS on this site says the following:

"Quite deliberately I'm not going to look at the costs for more complex Sipps, as then the likliehood is the Sipp cost is secondary to the functionality anyway. My aim is to compare Sipps which allow you to invest in a wide range of shares and funds but ignoring direct investment in commercial properties.

The lowest charge Sipp provider




Hargreaves Lansdown (with its Vantage Sipp) is one of four providers (the others being Fidelity FundsNetwork, James Hay and Killik) that don't charge a set-up fee. However its other charges make it the clear winner.

• Low or no annual management charges. It doesn't charge an annual management fee on the large number of investments where it can earn an annual renewal commission, and charges an annual fee of nearly 0.6% capped at a maximum of £235 for all others.
• Sharedealing fees. It has dealing charges for buying and selling individual shares online ranging from £9.95 to £29.95 (See table of charges). "

However, browsing this forum suggests that this is not an opinion that is shared universally and HL certainly has its detractors among those more experienced than me. One comment (I can't remember from whom) somewhat scathingly said that "HL has managed to convince people that its SIPP is cheap".

So there's the conundrum - who to believe? Is HL a good first step into "self-investing" for a quick learning novice? If not, why, and what would be a better option?

And is the MSE article from which I've quoted above out of date?

Thanks in advance for any responses.

purch

Hargreaves Lansdown (with its Vantage Sipp) is one of four providers (the others being Fidelity FundsNetwork, James Hay and Killik) that don't charge a set-up fee. However its other charges make it the clear winner.

You will find that this "advice" is totally out of date.

Aegis

Moose1960 wrote: »

Warning - long first post!

Afternoon all

Only recently signed up - so go easy guys! - but I've been lurking & browsing for a while.

I'm looking to take my retirement planning away from my IFA and into my own hands. As a forty-something accountant I don't consider myself financially naive, but I could be accused of being "investment naive".

Anyhow, I'm looking to set up a SIPP to add to/supplement my other current arrangements, initially planning £10k annual lump sum contributions and hopefully more if finances allow. Research/Google searches etc constantly throw up Hargreaves Lansdown as a top (often "the" top) provider. Indeed, even the article on SIPPS on this site says the following:

"Quite deliberately I'm not going to look at the costs for more complex Sipps, as then the likliehood is the Sipp cost is secondary to the functionality anyway. My aim is to compare Sipps which allow you to invest in a wide range of shares and funds but ignoring direct investment in commercial properties.

The lowest charge Sipp provider




Hargreaves Lansdown (with its Vantage Sipp) is one of four providers (the others being Fidelity FundsNetwork, James Hay and Killik) that don't charge a set-up fee. However its other charges make it the clear winner.

• Low or no annual management charges. It doesn't charge an annual management fee on the large number of investments where it can earn an annual renewal commission, and charges an annual fee of nearly 0.6% capped at a maximum of £235 for all others.
• Sharedealing fees. It has dealing charges for buying and selling individual shares online ranging from £9.95 to £29.95 (See table of charges). "

However, browsing this forum suggests that this is not an opinion that is shared universally and HL certainly has its detractors among those more experienced than me. One comment (I can't remember from whom) somewhat scathingly said that "HL has managed to convince people that its SIPP is cheap".

So there's the conundrum - who to believe? Is HL a good first step into "self-investing" for a quick learning novice? If not, why, and what would be a better option?

And is the MSE article from which I've quoted above out of date?

Thanks in advance for any responses.

The problem boils down to one thing: commission. Hargreaves Lansdown like to make a big fuss about their SIPP being low cost, but for anything other than a small pot the commission they're receiving from the fund providers (usually designated for covering ongoing advice) can be huge. To give an indication, on a £50,000 pension pot, they will be receiving about £250 a year in advice fees, on top of a slightly smaller amount paid to them for administering the funds on their platform. However, the important thing is that they're effectively charging you for advice you don't receive.

For small pots where you want a set of funds unavailable on more cost-effective pensions, it's acceptable.

Unfortunately there don't seem to be many decent options for wider-ranging pension investments on an execution-only basis.

gadgetmind

I really like the HL platform; it's user friendly, very informative, and generally a pleasure. But their fees for a S&S ISA aren't the best, and it's even worse for a SIPP. TBH, you need to shop around a bit.

This thread has links to providers, but it's S&S centric, but it does show the players and does have links elsewhere.
https://forums.moneysavingexpert.com/discussion/3153942

Debbie_A_3

Hi Moose1960, I have an HL SIPP and I am quite happy with it. The choice of funds is pretty impressive and their on-line facility is full of information and easy to use. However, it is not particularly cheap.

I am doing my best to play them at their own game by biasing the holdings in my HL SIPP to the HSBC Trackers that HL seem to offer as loss-leaders (though I would hold these funds somewhere in any case). I am happier to hold actively managed funds in the HL ISA (where they do rebate some of the trail commission). I would not use HL for investment trusts and ETFs. Other places are far better for these investments.

gadgetmind

Debbie_A wrote: »

I would not use HL for investment trusts and ETFs. Other places are far better for these investments.

HL are now better for these in an ISA (£45 pa cap) but the cap is still £200 in a SIPP. Not so bad for a big pot but a killer for a larger one.

Loughton_Monkey

You may wish to wait until RDR is announced [and possibly implemented].

The key issue here is this [forget SIPP for a minute]. When you buy a pension directly from pension companies, you generally have to pay the 'full' charges of the funds. This is typically around the 1.5% to 2% mark (TER). These charges include 'commission' to IFA's, but if you go direct and don't use an IFA, you are simply putting this money into extra profits for the pension provider.

Buy the pension from a commission-based IFA, then as a general rule, you'll have exactly the same thing at exactly the same price, but with 'advice' [whether you want it or not].

Buy a pension from a fee-based IFA then (very much depending upon the size of your pot) you might get a substantially rebated lower TER, which will ultimately add up not only to pay the fee, but then to provide good discounts after that.

The trouble with the latter (and arguably the one before that) you will find that the minute your 'commission rebates' have overtaken the 'flat fee', I can guarantee you will have your IFA coughing and spluttering on your doorstep mumbling words such as 'rebalancing, superior platforms, better deal.....' which will involve moving your pot somewhere else so that the whole process starts again.

[apologies to the IFA brigade, but they are big and ugly enough to fire their own ammunition at my possibly over-simplistic view].

HL's offering is indeed a pension scheme, but they go the whole hog and offer it as a SIPP so that you can invest not just in funds, but all the other things as well. A lot of us don't particularly want this. But they are basically simply offering a pension at 'gross' rates, without offering advice. At least if your investments are under an ISA, then they do rebate a bit of the commission. This approach could be termed 'execution only'.

What is required (but not yet forthcoming) is a pension platform that offers an 'execution only' service, with full rebate of what would otherwise be paid as commission. This may, or may not, be available after RDR.

jamesd

Take care with investment-related articles on the main site, they aren't updated as frequently as the core money saving articles.

HL promotes their product as a low cost SIPP. It can be, it depends on the investments you choose and the amount of money involved. It's also easy to beat it for larger amounts. Also note their wording carefully, it's low cost SIP, not low cost pension.

Part of the reason HL is easy to beat is that they take full annual commission on the investments in the SIPP. No problem if it's a tracker fund charging 0.3%. If it's a fund charging 1.5% you can eliminate the 0.5% annual commission that the fund charges and pays to HL by instead buying one of the products that will eliminate the commission. For something like Skandia that would reduce the annual charge of the fund from 1.5% to about 1%. Skandia has a charge of a bit under £70 a year so this doesn't break even until about £18,000 is invested. You also need to allow for the once-only cost of the IFA reseller, probably a few hundred Pounds if you get a competitive deal. Not all IFAs will want to make a sale on execution only basis and not all will be willing not to charge 0.5% ongoing commission on either execution only or advised basis. Just use a different one if you aren't getting suitable pricing for the service you want to buy.

HL works out quite inexpensive for people starting out because of the lack of an initial fee and I use them myself. But I'm also investigating moving from them because that 0.5% a year is now getting to be serious money, a couple of decent TV sets a year worth. That makes it worth paying an IFA to eliminate that ongoing 0.5%.

HL can also work out quite inexpensive if you use the HSBC tracker funds because those are quite inexpensive anyway, and nothing extra to pay HL.

HL are good and easy to work with and a good place to get started. Just don't become too wed to them longer term when it no longer pays you to be using them.

They are a good option now because the Financial Services Authority is soon to publish a paper about reform of the investment platform market that may ban some business models, including that of HL. This makes it a relatively bad time to be paying fees to set up new pensions because you might get a better deal later. Any deals started today still use today's rules. The Skandia product is also one that might be affected. There's a chance that commission will be banned.

noh

Alternatives that spring to mind are Alliance Trust Savings which rebates most of the trail commission and Sippdeal which rebates some.

jamesd

For the amounts here Alliance Trust is relatively expensive: £125 annual charge plus £12.50 per transaction for buying funds after the first two buys. HL is 0 and 0. Lower annual charge from the funds with AT but the amounts here are some way from being large enough for that to cover the extra costs.

Same probably applies to Sippdeal if the investments will be mostly funds and Sippdeal charges for fund purchases as it seems to.

Either could work well for bulk holdings longer term.

hugheskevi

Whilst we are on the topic of providers, any thoughts about Skandia CRA arranged through Clubfinance?

Looks to be a decent offering for pension pots of a size where it isn't quite worth paying a fee-based IFA to rebate 100% of trail? Or am I missing something?