TRANSACT - Pension

FineBoneChina_2

Hi,

I have a Group Company Pension, and someone from our external Pension Advisors have said because I have built up a considerable sum over the years for my Pension, I should consider moving my fund to something called "Transact".

Basically, it costs more, but gives you more choice in what you can invest in (this is my brief understanding). Ultimately, if everything goes fine, then returns are much bigger, however if everything takes a turn for the worse, then I stand to lose more (i.e. the basics of gambling!).

Does anyone have anything they know about "Transact"? Is there anyone who actually holds funds in "Transact", etc, etc?

Any advice greatly appreciated.

Thanks

:beer:

jem16

FineBoneChina wrote: »

Hi,

I have a Group Company Pension, and someone from our external Pension Advisors have said because I have built up a considerable sum over the years for my Pension, I should consider moving my fund to something called "Transact".

Will the company still pay into the pension through Transact?

Basically, it costs more, but gives you more choice in what you can invest in (this is my brief understanding). Ultimately, if everything goes fine, then returns are much bigger, however if everything takes a turn for the worse, then I stand to lose more (i.e. the basics of gambling!).

Does anyone have anything they know about "Transact"? Is there anyone who actually holds funds in "Transact", etc, etc?

Basically it's a wrap platform that allows you to hold various investments all in the one platform. For example you can have a pension, ISA, General Investment Account etc.

https://www.transact-online.co.uk/

It's not one of the cheaper unbundled platforms around though but yes it does give you more choice.

FineBoneChina_2

jem16 wrote: »

Will the company still pay into the pension through Transact?

Yep, my Company has confirmed they will contribute into Transact

jem16 wrote: »

Basically it's a wrap platform that allows you to hold various investments all in the one platform. For example you can have a pension, ISA, General Investment Account etc.

https://www.transact-online.co.uk/

It's not one of the cheaper unbundled platforms around though but yes it does give you more choice.

Just wandering if it is something people would recommend? I'm just wandering with the global markets going crazy if is a bad idea or not?

There is no pressure to go into it, but something they have suggested for people who have built up a bigger pension pot.

iolanthe07

I would ask a trusted financial adviser - best not to make such an important decision based on amateur advice from random posters on an open internet forum.

jem16

FineBoneChina wrote: »

Just wandering if it is something people would recommend? I'm just wandering with the global markets going crazy if is a bad idea or not?

Now is a better time to invest than 6 months ago.

However is it the best platform to use? Is the only option Transact or will your company pay into a different platform?

What funds are available in the Group company pension and what are the charges?

jamesd

It allows a broad range of investments including funds, shares and investment trusts, as well as non-UK investments like US shares. You should look at the FAQ and then at the live demonstration linked from the top of the page, one option in the demonstration is Information/ Transact documents that will give you access to a lot of documentation about Transact.

It has tiered discounts that can make it cost-effective for larger pension pots. The discount levels depend on total money invested, across pension, ISA and unwrapped investments held there.

There's a charge of 0.2% of all purchases, including the purchase part of a switch. Halved if the total portfolio value is at least a million Pounds, waived if two million. For transactions on a stock exchange, £14.99 per trade, but if multiple clients do the same deal this is split among them all.

There's also an annual charge based on a percentage the total amount of money invested:

First £60,000: 0.55% (£330 at £60,000 invested)
next £120,000: 0.4675% (£330+561=£891 at £180,000 invested)
next £120,000: 0.4125% (£330+561+495=£1386 at £300,000 invested)
the rest: 0.3575%

But where the value has been at least £300,000 for the last six months the charges are instead:

First £600,000: 0.4125% (£1237.50 at £300,000 invested)
next £600,000: 0.22% (total £2557.50 with £1.2 million invested)
the rest: 0.0825% (total £3052.50 with £1.8 million invested)

There's also an annual charge of £80 for pension, £12 for ISA. The 0.55% is reducing to 0.5% from January 2012 and the others will also drop by the same 9.1%. For cash the base charge is .045%, not 0.55%.

Your work group pension might have a fund annual management charge of 1.25% (assuming 0.25% discount on a 1.5% annual management charge) of which 0.25% might go to the firm's IFA and 0.3% to the platform that holds the investments. With Transact and other unwrapped platforms that 1.25% would drop to 0.7%, varies depending on the fund. So that would start out by reducing the cost by 0.55%. For the first £60,000 there's no gain but at larger amounts it's possible to save as the discount tiers come into play.

If that was the pricing then a £180,000 portfolio would save £99 before the annual fee and any purchase charges.

If you were instead switching from say a Hargreaves Lansdown personal pension the saving would rise by another 0.25% because HL charges undiscounted annual management charges, the full 1.5%. So that would be an extra saving of £450 a year for the £180,000 portfolio.

There might also be some fee to pay to the IFA firm that sets it up.

One negative is the requirement to hold at least 2% in cash in each type of account, which is wasteful if you want to be fully invested.

Transactions for all customers are normally combined and their order executionpolicy contains this note:

"Unless we agree otherwise, for Instructions received before 1pm on a Business Day, we place all aggregated purchase Instructions and all aggregated sale Instructions from 2pm until those Instructions have been executed within working hours on the same Business Day."

Since most UK funds have a noon valuation point that would mean a one day delay in all fund deals and might be unacceptable, particularly if you contemplate selling in a dropping market and don't want to be forced to be in the market for an extra day. But I haven't checked whether this does apply to funds. Some places have worse terms than this - the Standard Life pension is particularly bad - others like Hargreaves Lansdown will trade on the same day for instructions given by 8AM.

There is an option to pay an extra £10 fee for an express trade that isn't included in this aggregation.

If you visit the US a lot you might find the prohibition on issuing any instructions while in the US a problem.

It appears that the SIPP requires minimum payments of £100 a month to set it up, which probably won't bother you but might bother someone in a work salary sacrifice scheme who'd lose NI savings by paying this directly to Transact. However they say you can stop payments altogether without penalty. If that doesn't make it paid up and bar additional payments by transfers or lump sums it may not be an issue for others - I'm assuming your employer contributions are sufficient for you.

Charges are punitive if you don't have an IFA; there's a 0.5% annual extra charge and 3% extra charge per deal levied by Transact in this case.

If you were to use their cash or S&S ISA wrapper there's an option to have their charges taken from a fee payment account instead of from within the ISA. That leaves more money in the ISA wrapper.

Transact is one of the options I've been looking at for myself. If it really adds a one day delay to fund dealing I'll eliminate it from consideration.

sandsy

FineBoneChina wrote: »

Hi,

I have a Group Company Pension,

Good plan!

and someone from our external Pension Advisors have said because I have built up a considerable sum over the years for my Pension, I should consider moving my fund

Uh-oh! Someone might be trying to make some money out of you!

to something called "Transact".

It's a platform. It makes admin easier (especially for the adviser) but it brings in an extra layer of charges for you.

Basically, it costs more, but gives you more choice in what you can invest in (this is my brief understanding).

Do you need more choice?

Ultimately, if everything goes fine, then returns are much bigger, however if everything takes a turn for the worse, then I stand to lose more (i.e. the basics of gambling!).

The returns depend what investments you have inside your pension - not whether it is on a platform or not. If you can access the same funds off-platform, you'll make just as much and you won't be paying the platform fee.

There was new research out just this last week by TCF Investments that the most expensive funds had a worse performance than lower charging funds so be wary of paying more for something that is unlikely to deliver more.

What would the adviser charge you for this advice or what is his commission? If you move your funds, you will need to make up the costs of advice from the returns made to be back where you are now.

What charges do you pay at the moment for your Group Pension and the investments inside it? What would they be going forward? And why does he think the returns would be so much better?

jamesd

sandsy wrote: »

It makes admin easier (especially for the adviser) but it brings in an extra layer of charges for you.

Things like the CGT report can save significant time for unwrapped investments if there's a need to report that to HMRC.

It doesn't add an extra layer of charges. It replaces commission with explicit charges, potentially saving money.

sandsy wrote: »

There was new research out just this last week by TCF Investments that the most expensive funds had a worse performance than lower charging funds

Over five years. Over ten years the ones with higher charges did better.

FineBoneChina_2

jem16 wrote: »

Now is a better time to invest than 6 months ago.

True. I appreciate with share prices going downward, I would be buying at the lower share price.

jem16 wrote: »

However is it the best platform to use? Is the only option Transact or will your company pay into a different platform?

This is the only "platform" that was put forward as the best to suit our company's needs.

jem16 wrote: »

What funds are available in the Group company pension and what are the charges?

The available funds I have in my Group Pension tend to be very low risk, and are pretty limited for anything medium risk. I currently pay a 1.3% annual management charge.

I think he knows that if I invested in the very low risk funds then I would be making very little by the time I retired (still have about 40 years to go) as inflation would have more than eaten away at the money I would have made.

FineBoneChina_2

jamesd wrote: »

It allows a broad range of investments including funds, shares and investment trusts, as well as non-UK investments like US shares. You should look at the FAQ and then at the live demonstration linked from the top of the page, one option in the demonstration is Information/ Transact documents that will give you access to a lot of documentation about Transact.

It has tiered discounts that can make it cost-effective for larger pension pots. The discount levels depend on total money invested, across pension, ISA and unwrapped investments held there.

There's a charge of 0.2% of all purchases, including the purchase part of a switch. Halved if the total portfolio value is at least a million Pounds, waived if two million. For transactions on a stock exchange, £14.99 per trade, but if multiple clients do the same deal this is split among them all.

There's also an annual charge based on a percentage the total amount of money invested:

First £60,000: 0.55% (£330 at £60,000 invested)
next £120,000: 0.4675% (£330+561=£891 at £180,000 invested)
next £120,000: 0.4125% (£330+561+495=£1386 at £300,000 invested)
the rest: 0.3575%

But where the value has been at least £300,000 for the last six months the charges are instead:

First £600,000: 0.4125% (£1237.50 at £300,000 invested)
next £600,000: 0.22% (total £2557.50 with £1.2 million invested)
the rest: 0.0825% (total £3052.50 with £1.8 million invested)

There's also an annual charge of £80 for pension, £12 for ISA. The 0.55% is reducing to 0.5% from January 2012 and the others will also drop by the same 9.1%. For cash the base charge is .045%, not 0.55%.

Your work group pension might have a fund annual management charge of 1.25% (assuming 0.25% discount on a 1.5% annual management charge) of which 0.25% might go to the firm's IFA and 0.3% to the platform that holds the investments. With Transact and other unwrapped platforms that 1.25% would drop to 0.7%, varies depending on the fund. So that would start out by reducing the cost by 0.55%. For the first £60,000 there's no gain but at larger amounts it's possible to save as the discount tiers come into play.

If that was the pricing then a £180,000 portfolio would save £99 before the annual fee and any purchase charges.

If you were instead switching from say a Hargreaves Lansdown personal pension the saving would rise by another 0.25% because HL charges undiscounted annual management charges, the full 1.5%. So that would be an extra saving of £450 a year for the £180,000 portfolio.

There might also be some fee to pay to the IFA firm that sets it up.

One negative is the requirement to hold at least 2% in cash in each type of account, which is wasteful if you want to be fully invested.

Transactions for all customers are normally combined and their order executionpolicy contains this note:

"Unless we agree otherwise, for Instructions received before 1pm on a Business Day, we place all aggregated purchase Instructions and all aggregated sale Instructions from 2pm until those Instructions have been executed within working hours on the same Business Day."

Since most UK funds have a noon valuation point that would mean a one day delay in all fund deals and might be unacceptable, particularly if you contemplate selling in a dropping market and don't want to be forced to be in the market for an extra day. But I haven't checked whether this does apply to funds. Some places have worse terms than this - the Standard Life pension is particularly bad - others like Hargreaves Lansdown will trade on the same day for instructions given by 8AM.

There is an option to pay an extra £10 fee for an express trade that isn't included in this aggregation.

If you visit the US a lot you might find the prohibition on issuing any instructions while in the US a problem.

It appears that the SIPP requires minimum payments of £100 a month to set it up, which probably won't bother you but might bother someone in a work salary sacrifice scheme who'd lose NI savings by paying this directly to Transact. However they say you can stop payments altogether without penalty. If that doesn't make it paid up and bar additional payments by transfers or lump sums it may not be an issue for others - I'm assuming your employer contributions are sufficient for you.

Charges are punitive if you don't have an IFA; there's a 0.5% annual extra charge and 3% extra charge per deal levied by Transact in this case.

If you were to use their cash or S&S ISA wrapper there's an option to have their charges taken from a fee payment account instead of from within the ISA. That leaves more money in the ISA wrapper.

Transact is one of the options I've been looking at for myself. If it really adds a one day delay to fund dealing I'll eliminate it from consideration.

Thanks for your informative breakdown.

I do remember asking our Pension chap about the "turn-around" on any potential instructions I may have on investments I like, and he did say it was about a day delay, i.e. it's not a platform for "day-trading" and should not be considered as such.

FineBoneChina_2

For Transact, he said the initial setup charge would be 2%, and then the subsequent annual management charge would be 2%. Both as a percentage of the total fund invested.