SIPP Pension via Nucleus WRAP

Thrugelmir

alexprokop wrote: »

I guess I want to know whether this 1.89% fee is standard for this type of pension, or whether these values are outrageous? (they look that way to me!)

With investment returns likely to fall. Fees are increasingly coming under scrutiny in terms of effect on performance.

alexprokop

@dunstonh That's useful to know and shows up something else. They appear to have some sort of minimum annual fee. The charge for the first year is £302 and by the end of year 3 there will have been £1390 of charges.

Other than selecting the funds to invest in the only other thing it seems I am paying for is an annual rebalancing of the portfolio.

dunstonh

Other than selecting the funds to invest in the only other thing it seems I am paying for is an annual rebalancing of the portfolio.

Go with something cheaper and less advanced and when you get to around 25k plus (which wont be that long with your contribution) then look at servicing options.

I like platforms. They make sense with larger amounts and multiple tax wrappers. They are less suited to small amounts (caveats apply as there are exceptions). I think at the moment you are being fitted into the way the IFA wants to work rather than the advice fitting you. That happens a lot. The term "IFA" covers many different business models. Some are only set up (currently) to offer a certain type of service and you either take it or leave it. Maybe you should leave it in this case if you cant get the adviser to alter the charge.

richyg

alexprokop,

You know more than you realise as you have already worked out the problems and as such you are ahead of 99% of the population.

If your fund grows at say 6% then 2% charges is 33% lost from the growth that your fund gets. Thats a bigger figure than 2% sounds.

Meanwhile you carry all of the risk. All of the other parties get their combined 2% of your pot like a monkey on your back.

Whether it rises or whether it falls they still get their money - year after year.

Add in inflation at 2-3% reducing the real spend of your pot and the problem worsens.

One trick is to reduce the charges to as low as possible but still try and get a fair share of the overall long term growth of the stock market that historically has stood the test of time.

Hang fire for a month and invest £20 on Tim Hales - Smarter Investing book off Amazon or even get from the library. It shows how the passive method of fund investing with low charges often / invariably beats active management which is burdened by higher charge structures and a raft of other problems.

Its also a good read and British as opposed to American.

Then if you want it easier and DIY witout the ongoing management effort research Vanguard Lifestyle funds which have come over from America with charges of 0.3% as opposed to 2% as work out the maths . These make it zero effort.


I wish you luck.


Best Regards Rich G

dunstonh

If your fund grows at say 6% then 2% charges is 33% lost from the growth that your fund gets. Thats a bigger figure than 2% sounds.

Fund performance is published net of charges. Not before charges.

Then if you want it easier and DIY witout the ongoing management effort research Vanguard Lifestyle funds which have come over from America with charges of 0.3% as opposed to 2% as work out the maths . These make it zero effort.

I like and use the vanguard lifestyle funds. However, they are in effect a managed strategy as the asset allocation is selected. It is a portfolio of index trackers. It should also be noted that the charge of the Vanguard funds you suggest are virtually the same as the charge on the recommended fund. You also fail to mention that the vanguard funds require a platform to use them (such as Nucleus) or £100k minimum investment per fund if direct.

richyg

dunstonh,

I agree with you on both of these points and thanks for adding value.

My intention was simply to suggest to the OP that 2% pa was detrimental to his long term wealth creation and to give a pointer to some further research that might be of value.

With regards the £100,000 minimum investment direct I was hoping a google search might again be a simple but worthwhile exercise!
Rich:beer:



Give a man a fish and he will live for today.
Teach a man to fish and he can live forever.

mania112

There are good arguements (like http://en.wikipedia.org/wiki/Modern_portfolio_theory) that suggest Index Trackers are better than active funds over the long term.

For an inexperienced investor its almost detrimental to use actively managed funds (in my most humble opinion) because of the costs involved.

richyg

dunstonh,

As an aside do you happen to know whether the graphs of funds versus indexes , include or exclude charges out of interest? I have recently wondered this but am not sure and judging by your signature it might be that you know.

Best Regards Rich G

Linton

mania112 wrote: »

There are good arguements (like http://en.wikipedia.org/wiki/Modern_portfolio_theory) that suggest Index Trackers are better than active funds over the long term.

For an inexperienced investor its almost detrimental to use actively managed funds (in my most humble opinion) because of the costs involved.

In my view:

Index trackers may be better than active funds in the long term in many but not all cases where the active funds and the tracker invest in the same set of equities.

For the really inexperienced investor trackers are not such a good idea because they tend to be narrowly focused. Where the investor does not have the experience to put together and maintain a balanced portfolio (or the amount of money invested does not warrant the use of multiple funds) then it is worth paying a fund manager to do it.

dunstonh

As an aside do you happen to know whether the graphs of funds versus indexes , include or exclude charges out of interest? I have recently wondered this but am not sure and judging by your signature it might be that you know.

They include the retail fund charges as default. This can create a few anomalies as Vanguard funds are charged as unbundled. So, comparing unbundled (clean) with bundled funds (retail) isnt quite like for like. Although with RDR and platform review, all funds will be going unbundled. So, that should clear things up.

Financial Express Analytics allows for clean fund charges + platform + IFA charge. I dont think the free data sources do though (yet).