Is 1% high for basic stakeholder FUND AMCs?

mlaf

Hi everyone.

I've got an occupational pension that I've got to transfer. As the amount is rather small (~£3500), I've had a look at a few stakeholders and I'm surprised that for what I've found so far, the cheapest fund AMCs are often 1% at the very least, even for a cash fund or fixed interest tracker, obviously making the total pension cost 2%. I'd prefer not to pay £70/year for such a simple product. Am I wrong in thinking this is higher than need be?

I realize the small transfer value doesn't give me too many options, but Scottish Widows' SIPP (which I'm below the minimum) definitely had funds that were managed and only 0.1% or 0.2%, which is ten times less!

I'm happy to invest without an IFA, I don't need SIPP or sharedealing options, but if it turns out cheaper...why not! I'm guessing there must be a reason why SIPP funds are cheaper, or am I just talking nonsense!?


I'm not expecting people here to do the research for me, are there any quality site that I can use to compare the various pensions. I've googled a couple sites but they often only took into account the 1% pension AMC and not the individual fund AMCs. Along the same lines, I've previously spoken to IFAs who have said certain pension providers "came out at the top of my report", it was clear it was a system they used, anyone know which systems are popular with IFAs?

Well that turned into way more questions than I was anticipating.. sorry about that. If anyone is able to toss their opinion at me it'd be greatly appreciated, and thanks so much for all the work you've done with other threads, it's been very helpful!!

xylophone

http://www.cavendishonline.co.uk/pensions?gclid=CNfN-LXwxa8CFYsntAodSw07YQ
Anything here? (Pension Guidance booklet and transfer details offered.)

jamesd

A 1% fund AMC for a Stakeholder pension is standard and normally includes the pension provider and IFA charges. Why do you think that you would be paying 2%?

IFAs have access to specific comparison systems that aren't available to consumers.

What investments do you want to use? That'll help to give some idea of which pensions might be appropriate for you.

If the Scottish Widows SIPP you were thinking of was part of a workplace pension scheme they may have had some funds at special pricing. Other than that it's unlikely that you would find any actively managed funds at a 0.1 or 0.2% AMC. AMCs of 0.1 to 0.4% is where passive tracker fund pricing lies.

mlaf

thanks for your replies, that site looks helpful.

I never understood why company's called their charge AMC, just as the funds do, so confusing.

The stakeholder company's management charge is 1%, that's fine, I realize that's the standard price, but the funds themselves that you can select have an AMC of 1%. So, for instance, fully investing in the UK equity fund at Standard Life means paying 1% to Standard Life for their stakeholder charge, and 1% for the money going into the UK Equity fund.

If 1% AMC on the funds is standard then so be it. But I worked for Scottish Widows under the 'retirement account' (SIPP-like product open to anyone) and a fair few funds were 0.1%, with a great deal being below 1%. Yet I can't seem to find a provider with fund AMCs below 1% on a stakeholder. I was just surprised since I was used to working with much cheaper funds. What's more confusing is that Scottish Widow's stakeholder's funds also start at 1%. Just seems strange.

It's not a huge deal for my small transfer value, but it's ten times less, that could be a big deal for a large pension fund. I know most funds are usually about 1% and up, I just thought a 'cheap' pension, setup myself, would be cheaper than 2%!

jem16

mlaf wrote: »

The stakeholder company's management charge is 1%, that's fine, I realize that's the standard price, but the funds themselves that you can select have an AMC of 1%. So, for instance, fully investing in the UK equity fund at Standard Life means paying 1% to Standard Life for their stakeholder charge, and 1% for the money going into the UK Equity fund.

It's not both charges together. It's 1% of your total fund value.

http://www.standardlife.co.uk/1/site/uk/pensions/products/stakeholder

if you were to use the Standard Life stakeholder through Cavendish, the AMC would be 0.72% as opposed to 1%.

http://www.cavendishonline.co.uk/pensions/stakeholder-pensions/standard-life/

mlaf

Oh! Well then Stakeholders are even simpler than I expected!

So essentially it doesn't matter what fund(s) you're invested in, the only charge is that 1%. Seems strange each fund doesn't have its own charge, not even built into the unit price, but I guess that's part of the appeal of the product for some.

Feels really weird not having to take into account each fund's own charge..even my occupational plan with them had individual fund TERs.

Alright thanks for clearing that up! Very much appreciated.

jamesd

The fund, pension company and IFA charges are all built into the fund price. They are taken from the money in the fund and affect its value directly. The split of money between fund manager and pension company is a matter for negotiation between them unless the fund is run by the pension company itself.

For stakeholder pensions the AMC is expected to be the same as the TER. Same for all pension-specific funds.

In a SIPP or other pension product that allows you to hold funds that aren't run by the pension company itself you will often find a TER that is different from the AMC, particularly for the non-pension funds. Non-pension funds are generic unit trusts, OEICs etc, while pension funds are specific releases of a fund just for pension use.