SIPPS - own choice or IFA ?

Shrimp_Stu

My dilemma is can you administer your own SIPP ?

I am thinking about taking out a SIPP and I believe that I am quite financially savvy (I work for an investment consultancy group). The thing is should I go through an IFA or by myself ? What are the pros and cons ?

I have gone to an IFA for advice but he wouldn’t budge on any fee rebates that he received from my SIPP contributions I wanted him to rebate some of his commission as I believed that I was doing a lot of the investment decisions. The thing is for the next 10 years I only want to invest in retail funds and don’t need the property lending facility that you can have under the SIPP, which I would seek advice on. Also, I am choosing all the funds in the SIPP provider he recommended and due to my age ,30 , I am going to invest primarily in equity funds - a little bit in property and no fixed interest.

The thing is I could monitor the funds in my SIPP by setting up my own spreadsheets and I have the data available through work to administer these. The IFA not only takes a commission from my ongoing contributions but charges an annual fee to administer the SIPP, for me this isn't fair as I am prepared to do the majority of the work and change the funds as and when I choose.

The thing is I can either go with the IFA and he gets his commission or I pay him a £250 fee and go solo - I have to pay him £250 as I sought some advice and didn’t realise that he charged a minimum fee if work was carried out and no business was taken on. The IFA gets his commission on the lump sum I was investing £2,000 plus I was going to transfer £30,000 from an old company pension into the SIPP - he was going to get commission on this - when I offered that he should waive some commission and rebate it back to my SIPP he refused, I even bartered saying that my SERPS payment could be set up away from the SIPP which he would get commission on as well - I was a bit put off by his attitude and thus thinking of going it alone, as he only saw his commission he would earn for little work ! I would begrudged giving him £250 and not anymore as he would see me as his cash cow and I could go it alone ?

I thought before that you couldn’t set up your own SIPP but had to go through an IFA - I believe that this isn't the case ? I really want to invest in some retail funds and keep costs to a minimum - anyone else got any ideas ?

Thanks
SJ.

dunstonh

The thing is I could monitor the funds in my SIPP by setting up my own spreadsheets and I have the data available through work to administer these. The IFA not only takes a commission from my ongoing contributions but charges an annual fee to administer the SIPP, for me this isn't fair as I am prepared to do the majority of the work and change the funds as and when I choose.

Tell him you dont want that service and are not willing to pay for it.

The thing is I can either go with the IFA and he gets his commission or I pay him a £250 fee and go solo - I have to pay him £250 as I sought some advice and didn’t realise that he charged a minimum fee if work was carried out and no business was taken on. The IFA gets his commission on the lump sum I was investing £2,000 plus I was going to transfer £30,000 from an old company pension into the SIPP - he was going to get commission on this - when I offered that he should waive some commission and rebate it back to my SIPP he refused, I even bartered saying that my SERPS payment could be set up away from the SIPP which he would get commission on as well - I was a bit put off by his attitude and thus thinking of going it alone, as he only saw his commission he would earn for little work ! I would begrudged giving him £250 and not anymore as he would see me as his cash cow and I could go it alone ?

With specialist pension business, there is a trend to include a minimum retention of £250 regardless of whether you proceed or not. All fees should be agreed in advance prior to commencing with any chargeable work though. You could ask the IFA to provide the documentation that showed you agreed with this.

To be fair on the IFA, he would have factfinded, researched and recommended. There is probably 4 hours work there. He is also financially liable for that advice until 6 years after you retire (thats a long time) and you are going to follow his advice. Now you just don't want to pay for it. The IFA would also have paid out for the transfer analysis (which is around £40).

By all means refuse the ongoing service and payment deduction from your SIPP and put that in writing. Also verify the charges on the SIPP. Many SIPPS have zero commission paid but have fees deducted from them to pay the IFA. By refusing in writing, prior to the contract being signed, it would not be possible for those fees to be taken (well it would be possible to take them still but the complaint that would no doubt follow would come down in your favour).

Shrimp_Stu

Thanks - but do you think I should go it "alone" or go through the IFA ?

So what you are saying is that I can go through the IFA but then accompany my letter with reference to no fees being deducted to the IFA ? Surely he would try and sling me over a barrel over this ?
When I mentioned to him that I may go for the SIPP but without his commission he tried to say that he would charge me £900 for 9 hours work ???
Do you think I should just pay up the £250 and then seek my SIPP myself - suppose their is nothing stopping me taking out the SIPP that the IFA recommended on my own and that is done and dusted ?? Or could he find out from his contacts that I took out a SIPP with who he recommended ?? I am so confused - he has already sent me a reminder for the £250 charge.

(btw The Standard Life SIPP was the one he recommended but I fancy the Hargreaves SIPP as it has more fund choices.)

dunstonh

So what you are saying is that I can go through the IFA but then accompany my letter with reference to no fees being deducted to the IFA ? Surely he would try and sling me over a barrel over this ?

No, the letter needs to be with the IFA before the application is signed. After all, your concern is over the ongoing charges which you do not want.

When I mentioned to him that I may go for the SIPP but without his commission he tried to say that he would charge me £900 for 9 hours work ???

Seems fine. I would have charged £125 an hour or agreed a fixed fee in advance (which probably would have been less).

Do you think I should just pay up the £250 and then seek my SIPP myself - suppose their is nothing stopping me taking out the SIPP that the IFA recommended on my own and that is done and dusted ??

Nothing stops you doing that.

Or could he find out from his contacts that I took out a SIPP with who he recommended ??

1 - Does it matter? 2 - He probably wont 3 - he cant do anything about it anyway.

btw The Standard Life SIPP was the one he recommended but I fancy the Hargreaves SIPP as it has more fund choices.

I wouldnt be surprised if they used Standard Life as well. Remember this is a SIPP, so there is no such thing as restricted fund choice.

Personally, I havent moved mine into a SIPP yet but will do so. However, I am waiting to see what wrap platforms and what the other providers will offer over the next 18 months. Unless there is a reason for you to do it now, such as 'A' day limits, it may be worth holding off for the time being and stick with the old fashioned PPP/SHP.

Shrimp_Stu

My situation is that my new company pay 10% into a personal pension fund - which I have to choose (set up) = such a hassle. I probably want the flexibiilty of a SIPP but I also want something which has low initial costs and maybe look to transfer into a SIPP at a later date ??!?? I have about 7 months contributions to set up as well.
So what you are saying is if I didnt want his commission he would probably charge me £900 (wow!) - so I cant see a letter from me about looking at his commission swaying his decision.
What I might do is pay £125 to him now and pay him £125 in a month's time - £250 whack is a lot of money to pay up in one go !

dunstonh

If you paid the fee of £900, the SIPP would be set up on enhanced terms which would probably save you more than £900 in the long term. Or you could have the fee deducted from the SIPP premium instead. Or, you could do it yourself through HL and pay £250 to get the IFA off your back and get it cheaper.

The problem is that SIPPs allow a variety of charging methods to be allocated to them so its hard to say how it has been recommended to you.

£900 is not a lot. £100 an hour is around the going rate. You must remember that to do occupational pension transfers, this IFA is going to be qualified to a higher level than a normal IFA. He has earned that right by getting qualified to a higher level. The work itself may not cost £900 but knowing what to do does. The pension transfer also is a higher business risk and he will have a lifetime liability on that risk. Would you want to cover a £2000-£5000 personal liability for the rest of your life on the off chance that the regulator may change its mind on pension transfers in the future and decide that they are not a good thing? If you do it yourself or use an execution only provider life HL, you are totally responsible for it going wrong. No-one else is.

I can't tell you what is best for you. If it was me and I was in your position I would tell this IFA that I do want to do it through him and ask for the fee agreement that you have signed saying you agreed to the fees. You need to be able to like and trust the person you are dealing with and that is clearly not there any more.

I would also stick with stakeholder for now (getting in before April to guarantee 1% or lower amc) and then review SIPPs as the rest of the providers enter the market in the next 12 months. The only exceptions would be if you have circumstances that would be better under pre 'A' day rules rather than after 'A' day. Or you fund is already over £50k and would benefit from lower SIPP charges.

We are going to see the launch of proper wraps, exclusive fund supermarket links, discount fund charges if bought through certain platforms, online management etc. I want to see who does what and who with first before i comit.

Shrimp_Stu

Thanks a lot for the pointers - I think I will set up a stakeholder.
My pension pot will be initially worth - £2,000 and I shall leave my £30,000 in my old company pension scheme at present.
So I think I can reassess what the SIPP is after A-day next year, as surely the popularity in SIPPS will see a more competitive market.
So I'll have to swallow my pride and £250 (ouch!) to get this IFA off my back and hopefully next time I seek advice from an IFA I can be more clued up on the ins and outs , and where I am being charged - this commission lark is nagging as I am sure some IFA's are willing to reimburse it back into your pension pot and it will benefit them as well.

The agreed £250 fee was signed by me and is complete - the thing was at the time I was certain that I was going to use him as an IFA for my SIPP that I just quickly signed it at the end of the meeting - upon further discussions and investigation I ultimately don’t want to use him but I am over the barrel having signed this initial £250 fee agreement - doh!

So off now to check out Stakeholder plans over Easter - what fun !!

deemy2004

I was going to post -

£250 may sound like a lot but when your £100k portfolio moves against you 3% in a day.... does not seem a lot then

But on reading that your only putting in £2k then £250 is an absolute gob smackingly large amount....

Afterall your just picking two stocks ! Say British Telecom and Lloyds TSB !

cheerfulcat

Hi, Shrimpers Joy,

You don't need an IFA for a SIPP, they are designed so that you run your own investments. I don't quite understand this bit

"So I think I can reassess what the SIPP is after A-day next year, as surely the popularity in SIPPS will see a more competitive market."

as SIPPs are already pretty competetively priced. I have mine with Hargreaves Lansdown; there is no set-up fee and no annual management charge if you invest in funds which pay renewal commission, (otherwise there is an amc of 0.5% + VAT, to a maximum of £200). There are dealing costs but they are similar to the dealing costs outside of a SIPP. I really don't see how it could be much cheaper!

http://www.hargreaveslansdown.co.uk/sipp/sipp_fees.asp

I have no experience of Sippdeal, but they are popular.

http://www.sippdeal.co.uk/default.asp?O=SDL

Charges are a bit more complicated than HL, but still cheap -

http://www.sippdeal.co.uk/charges.asp?O=SDL

I don't see that a " stakeholder " pension ( honestly, who comes up with this stuff? Social workers?) has any advantages over a SIPP, though I'm happy to be put right on that score.

HTH

Cheerfulcat

dunstonh

Cheerfulcat, there are not many SIPP providers around at the moment but the big players are going to be entering into the market soon. There are also the first proper wraps coming which will be perfect for the SIPP. At present a number of providers are negotiating terms with the fund supermarkets which will see different terms coming. Currently, SIPPs are not a mainstream product.

If you get a stakeholder now, you are guaranteed 1% or lower amc. In the meantime, you can sit back on a low charge product watching what is going to develop over the next few months. Remember a SIPP has no charges guarantee.

I was speaking with a provider recently as I was involved in their forthcoming pension range (due to the amount of pension business my firm generates) and the sort of comments coming out were that they didnt want to come out with a pre A day SIPP just to have to revise it again after A day. They wanted to wait until A day legislation was cast in stone.

and no annual management charge if you invest in funds which pay renewal commission,

Do you mean there is no additional annual management charge? There has to be a base annual management charge to pay that renewal commission.

cheerfulcat

Hi, dunstonh,

You're quite right, of course; there's no guarantee that the charges on the HL SIPP won't go up.

I would be very interested to hear what sort of wraps are being envisaged? Perhaps you're not allowed to tell, though, in which case I quite understand.

Yes, no additional charge on top of what you pay within the fund. But since you would be paying those charges anyway, it seems a fair enough deal?

They say -

"The investments that you choose will have their own initial and annual charges and may also have a bid offer spread. There are no additional charges levied by Hargreaves Lansdown for those funds which pay renewal commission. For securities, cash and those funds that do not pay renewal commission, an additional fee of 0.5% + VAT per annum will apply (maximum £200 + VAT per annum)."

Cheerfulcat