More SIPP advice...

DavRos_2

Hi

I wanted to hear people's latest views on the best SIPP provider to go for as there are changes going on. Firstly I have held a big (for me) SIPP with a smallish provider for 5 years and all the gains have been swallowed by fees... returns haven't been great over that period and by the time I pay the annual fee, the 1% investment advice charge (it is a managed set-up) it has wiped out the gains made. Whilst 5 years isnt a long time in the pensions world I am starting to question if this is a good strategy. So what is changing:

(a) new regulations - so i gather some firms take a cut of the annual charge. I am checking this out with mine and my suspicion is that this goes to the firm. So as well as paying more fees I am not sure if there then is a conflict of interest in what investments are/arent held onto. I gather there is new regulation that will challenge this - so will everyone gravitate towards Sipps where there is no "behind the scenes" commission going on ? (eg will HL go further than they have recently by announcing some return of their annual fund charge ?)

(b) internet - the ease of managing ones own Sipp has become much easier. The platforms are a lot easier and sophisticated and there is a lot of information and "advice". So how confident can I be that the execution sites are not incentivised to recommending certain funds over others in the execution only setups (am thinking HL and II for example)

(c) my experience! - so I took out a small SIPP in parallel with my main "managed" one - and so far this year in 9 months my sipp has grown 15% - early days but not bad and I don't think my managed Sipp has managed that in the 5 years I have held it. My managed fund that I pay 1% has had one sell and no buys so it is fairly stable so its not as if my managed fund is constantly trading - are there tools out there to help you rebalance your fund from time to time and as you get older and change your risk profile?

So in summary I am totally persuaded by Sipps, and am becoming more convinced that I can manage my own (I reckon I am paying £4-5k in fees - annual charge, management fee, probably non access to any fund rebate) so I can make a few mistakes and still be ahead.

Am now down to which one to go. My "mini" SiPP is with HL. Nice website but they are still taking some of the annual fees. I am considering Alliance Trust (has there been ownership change here recently? - would think twice as things may change) and also II (private company so hard to get any info on it, also has had a bit of a slating over some changes over the summer). I like their new fee structure but how safe are they, and who is to say their fee structure wont dramatically change again...? So which way to go...?

Ill probably hold 20% in single equities and the rest in managed funds, OEICS, investment trusts - and I would imaging that I will only do 10 transactions a year (max) so no heavy "trading"

Any views on the specific questions or general comments much appreciated

Thanks

quattro2

Go for it I would say, when i researched sipps it boiled down to 3 to suit my needs, best invest, sippdeal & interactive investor. If its gonna be execution only, it works out very cheap but make sure you get one that fits your needs cost wise, as this is so important. Do a checklist of what investments your likely to hold & how many trades/swaps, buy/sells you think you might do a month then add AMC'S, then add in any platform fee's. The fees on the websites for low cost sipps are easy to access & understand.

dunstonh

I wanted to hear people's latest views on the best SIPP provider to go for as there are changes going on.

There is no one best option.

returns haven't been great over that period and by the time I pay the annual fee, the 1% investment advice charge (it is a managed set-up) it has wiped out the gains made.

1% for a managed solution is very good.

Whilst 5 years isnt a long time in the pensions world I am starting to question if this is a good strategy.

It is about half an economic cycle and includes one of the worst financial periods in 100 years. The five years before could see you largely double your money in that period. Hence you have to look over the whole cycle and not just the worst bit or best bit)

(a) new regulations - so i gather some firms take a cut of the annual charge. I am checking this out with mine and my suspicion is that this goes to the firm. So as well as paying more fees I am not sure if there then is a conflict of interest in what investments are/arent held onto. I gather there is new regulation that will challenge this - so will everyone gravitate towards Sipps where there is no "behind the scenes" commission going on ? (eg will HL go further than they have recently by announcing some return of their annual fund charge ?)

This is currently running late and not going to hit until 2014. Although the issue of clean share classes by fund houses may force providers to make changes earlier. Currently SIPPs are excluded from the platform review but the FSA wants to bring them in (daft to have ISAs and unwrapped included but not SIPPs)

(b) internet - the ease of managing ones own Sipp has become much easier. The platforms are a lot easier and sophisticated and there is a lot of information and "advice". So how confident can I be that the execution sites are not incentivised to recommending certain funds over others in the execution only setups (am thinking HL and II for example)

There is no advice on DIY options. Just marketing. Do not mix up the two.

(c) my experience! - so I took out a small SIPP in parallel with my main "managed" one - and so far this year in 9 months my sipp has grown 15% - early days but not bad and I don't think my managed Sipp has managed that in the 5 years I have held it. My managed fund that I pay 1% has had one sell and no buys so it is fairly stable so its not as if my managed fund is constantly trading - are there tools out there to help you rebalance your fund from time to time and as you get older and change your risk profile?

Was that just in the growth period or were you also invested in the negative period as well? How much of what you have done has outperformed (or underperformed) your benchmark?

BLB53

I have been with Sippdeal since taking over the management of my pension 7 years ago. Very happy to recommend them - I hold a mixture of investment trusts, individual shares and some pibs and fixed interest.
www.sippdeal.co.uk

DavidLaGuardia

There are many good SIPPs out there, but the question is, what is fit for purpose?

A high perfromance roadster may be fantastic, but not if you want to tow a caravan if you get my drift.

What kind of investments do you want to put into it? What is your strategy?

jamesd

I'll start by describing some of the charges for funds:

1. The annual management charge (AMC), levied by the fund manager.
2. The platform charge, usually 0.25-0.3%, that is taken from the AMC and paid to the platform on which the funds are held.
3. The trail commission, usually 0.5%, that is taken from the AMC and paid to an IFA or platform like Hargreaves Lansdown.
4. Dealing and assorted other costs that are on top of the AMC.

So today for a fund with a 1.5% AMC, HL would start out by getting around 0.75-0.8% and the fund manager would keep 0.7-0.75% for doing their active management and other work. HL might then rebate 0.1 to 0.25% and occasionally more of this back to you, still keeping most of it for itself.

The change to unbundled pricing (not included in AMC) for advised platforms means that lots of funds charging 0.75% instead of 1.5% will show up and instead of paying out of the AMC a customer would pay a separate fee.

Changing to unbundled for execution only platforms like HL is likely to happen next year.

It's not clear to me whether your investment advice charge is on top of the fund AMC or not.

Choice of which platform or platforms to use should be made based on what you'll hold, the costs and the customer service levels that you want.

bowlhead99

I'd agree the average savvy investor is perfectly capable of running their own SIPP with some research though this is probably not true of the population at large who don't even realise there are choices to be made inside the pension wrapper.

But Dunston is right that that if you think your SIPP up 15% this year is better than your managed pension flat over 5 years, take care to compare apples to apples. Firstly the 5 years included a huge crash whereas the last year has seen healthy returns whether you were in growth equities or income/bond investments. Secondly, you could have got 18% in a cheapo HSBC FTSE All-share tracker from Sep 2011 to Sep 2012, and be congratulating yourself that this investing lark was easy, while the managed fund produced a lower result because it was well diversified and much better prepared for potential equity downturn while the UK and Eurozone teetered on the edge of recession and negative growth stories all year.

But assuming you know what you're doing with investment choices within the wrapper...:)

Like everyone else says, there is no perfect provider, and you need to compare all the offerings to see the best choice for you. Most of the big names have reasonable online platforms but the availability of different investment options (or the pricing of holding them) vary from place to place. So you need to do what quattro2 and jamesd said and narrow down a few places and check the price for what you hold, what you're going to hold in future, whether you're making ongoing regular contributions or larger lump sums, whether you care about costs of transferring out or arranging drawdowns/distributions etc. And bear in mind those prices may change over time anyway...

This summer I moved an old pension to a new provider for my first SIPP and compared a few I'd had recommendations on:

- HL have had a good reputation for service for years, and a flashy website for easy research plus their Wealth 150 marketing list to give you ideas of what you might like to invest in. But as I wouldn't be just invested in commission-paying funds, they were expensive (0.5% pa on up to 40k worth of shares, ETFs, ITs, bonds etc; £24 per year for each low-TER Vanguard tracker and so on). And if I'd been a big funds investor I'd have been wondering how the costs would change with RDR and platform review.

- I had a normal trading account and ISA with TD Direct, their dealing platform is good and it would have been handy to use them. But I saw they used AJBell to administer the SIPP and when checking them out, I noticed SIPPdeal also used AJ Bell but had an annual fee of £nil while TD's was some positive number which I forget. And unlike SIPPdeal, TD's monthly investing discounted dealing charge only covered certain funds, FTSE 350 and some ETFs, and not ITs. And they didn't have many Vanguard funds which I wanted for a part of my portfolio.

- SIPPdeal did have the Vanguard stuff, but only if you paid a custody fee to account for the lack of commission. But the fee didn't change if I had multiple funds, like it would have at HL. I went with them in the end, transfer-in process was smooth and all follow-up customer service has been fine.

After opening the account, there was a thinly-traded UK stock listed in USD I wanted to buy, but I couldn't do it online because there was no volume for an instant price quote and the system wouldn't let me do a limit order for prices not in GBP. I had to request them on the phone to deal it, so I had a 29.99 charge just for the one stock. But actually TD who would have let me do a limit order online and save that phone dealing charge, always rip me off for 2% on the FX conversion, which is 40 quid plus on 2k plus.

There are a few other names I looked at, Alliance Trust or iii and the like are perfectly reputable. But the gist is that the prices and suitability of service levels will vary from with your circumstances. Hope this helps give you a flavour.