Dismal pension performance

zagfles

dunstonh wrote: »

An IFA should beat them as they can stick it down as no-trail. So, a small set up fee to put it in place with 100% trail rebated or even a nominal annual amount for misc admin should be cheaper than HL.

Well if I've understood the figures correctly, taking Aberdeen Emerging as an example, the TER with trail is 1.93%, without it's 1.3%, ie 0.63% difference. HL will rebate 0.25% from Jan, so that's 0.38% difference. On £200k that's £760.

Will an IFA really bother with random investments and frequent switching for less than £760pa?

dunstonh

Well if I've understood the figures correctly, taking Aberdeen Emerging as an example, the TER with trail is 1.93%, without it's 1.3%, ie 0.63% difference. HL will rebate 0.25% from Jan, so that's 0.38% difference. On £200k that's £760.

HL are using the retail versions. Not clean versions. Trail on that fund is 0.50%. Not 0.63%. HL are rebating half the trail. An IFA (using skandia as an example) could rebate all the trail. Even if the IFA takes 0.1% pa. its cheaper.

Will an IFA really bother with random investments and frequent switching for less than £760pa?

The IFA doesnt handle the switching on DIY cases. They will be done online. Ad hoc payments would be an issue if they are frequent. However, a fixed regular wouldnt be as that would be set up at start.

zagfles

dunstonh wrote: »

HL are using the retail versions. Not clean versions. Trail on that fund is 0.50%. Not 0.63%. HL are rebating half the trail. An IFA (using skandia as an example) could rebate all the trail. Even if the IFA takes 0.1% pa. its cheaper.

So an IFA would only charge £200pa?

The IFA doesnt handle the switching on DIY cases. They will be done online. Ad hoc payments would be an issue if they are frequent. However, a fixed regular wouldnt be as that would be set up at start.

I don't think I've ever paid the same into my SIPP two months running!

dunstonh

So an IFA would only charge £200pa?

Seems very fair on an execution only case.

I don't think I've ever paid the same into my SIPP two months running!

The problem with that is an IFA cannot be cost effective because of the compliance requirements on advice cases in that scenario. Even execution only comes with some requirements but most of the IFA platforms need the IFA to key in the expectation of the amount and what initially to do with it (which could be cash account pending decision by the SIPP holder). An IFA could not really offer you a non-advice service and be profitable at the same time unless you get a set up like HL. However, they are making money on the platform commission and part of the trail commission as well as having a computer system that allows it to be done easily and without the liability that an adviser would have.

jamesd

zagfles wrote: »

Could you give an example please, for instance how you could invest in Aberdeen Emerging Markets for no initial charge and a discounted AMC outside of a SIPP?

Some of the best buys on this site do no fund initial charge and discounted AMC.

zagfles wrote: »

Well it might be a strange question, but you haven't answered it! I've had a look at the pension best buys on this site. They all seem to either not rebate trail commission, or they have annual charges/initial admin charges etc.

That's a different question. The funds may not have initial charges but there may be a dealing charge to buy or sell or there may be a platform charge for whatever place the fund is held at, or both.

zagfles wrote: »

So where can I go to get a pension which allows me to choose funds like Aberdeen Emerging Markets with no initial charge, no IFA fees, no initial/annual charges for the wrapper, rebate of all the trail commission, and no charge for switching, irregular contributions etc? Because I've not found one.

Let me know if you know of any SIPP, personal pension or S&S ISA that meets those criteria. I don't know of one that does. They have to make money somehow and marketing payments from the fund house to the provider are one of the few ways of making money that you didn't exclude.

One that has been mentioned that doesn't:

Hargreaves Lansdown SIPP: usually full initial discount (except spread), no dealing charge for funds, currently no AMC discount, introducing a small discount of around 0.15%-0.25% average of the .75-0.8% or so total they receive from a fund charging around 1.5% AMC.

zagfles wrote: »

So it seems you have a choice of either paying via non-rebate of all the trail commission, or paying via some other charges.

Right. I was mainly trying to address the SIPP aspect and suggestion that SIPPs were cheaper, when that's usually not the case. Though it could be sometimes, depending on the specifics of the deal and where the money might be getting moved from.

zagfles wrote: »

Say I have £50,000 in various funds, say 10 typical funds like Aberdeen Emerging, Henderson European SS, Jupiter India, Artemis Strategic Assets.... What would be the cheapest way of holding them in a pension wrapper? Is HL really that bad value? Who is significantly cheaper?

£50,000 is an interesting value, it's around the threshold where it starts to become possible to do enough better to matter. Though not hugely better, since 0.5% trail commission is £250 a year. Those with fees and no trail commission, but still a platform commission of some sort should do better. The best buys here included.

You could probably get Skandia with no initial commission and break even in between one and two years, depending in part on the fund choices. If you're using lots of low cost trackers it'd take longer or might not even be possible. But later I see varying monthly payments, so a combination of two places or base regular and periodic top-ups might be a way to do it that would be cheaper.

zagfles wrote: »

Even with say 200-300k in 20-30 funds, with variable investments at random intervals, and frequent fund switching?

For that amount, a 0.5% trail commission is £1,000 to £1,500 a year. That'll pay for a fair bit in trading costs. You can also mix and match, using one place for seldom traded core funds and another for active trading. Say HL for ongoing monthly payments and transfers elsewhere every year or three to reduce ongoing costs.

zagfles

jamesd wrote: »

Some of the best buys on this site do no fund initial charge and discounted AMC.

But other charges instead, by the looks of it. Setup charge (that's an "initial charge"), annual charges, trading charges (another "initial charge"), or IFA charges (probably another "initial" charge). Perhaps I didn't make clear what I meant by "initial charge"

That's a different question. The funds may not have initial charges but there may be a dealing charge to buy or sell or there may be a platform charge for whatever place the fund is held at, or both.

Let me know if you know of any SIPP, personal pension or S&S ISA that meets those criteria. I don't know of one that does.

Well that's what I was asking! You seemed to imply HL are a bad deal. All the other "best buys", whether SIPP or otherwise, seem to either keep most/all of the trail commission as well, or they have other charges which come to much the same. Or they require you to go via an IFA and hence more charges.

They have to make money somehow and marketing payments from the fund house to the provider are one of the few ways of making money that you didn't exclude.

One that has been mentioned that doesn't:

Hargreaves Lansdown SIPP: usually full initial discount (except spread), no dealing charge for funds, currently no AMC discount, introducing a small discount of around 0.15%-0.25% average of the .75-0.8% or so total they receive from a fund charging around 1.5% AMC.

At least there are some solid figures there...

Right. I was mainly trying to address the SIPP aspect and suggestion that SIPPs were cheaper, when that's usually not the case. Though it could be sometimes, depending on the specifics of the deal and where the money might be getting moved from.

So no solid figures?

£50,000 is an interesting value, it's around the threshold where it starts to become possible to do enough better to matter. Though not hugely better, since 0.5% trail commission is £250 a year. Those with fees and no trail commission, but still a platform commission of some sort should do better. The best buys here included.

"Should" do better? No figures? Anyway if half the trail commission gets rebated (as in the example of AEM with HL after Jan) then that leaves £125. With no other charges, no set-up, no dealing, no annual charge. Is that a bad deal? For a SIPP where you can switch as often as you like and make random payments/investments?

You could probably get Skandia with no initial commission and break even in between one and two years, depending in part on the fund choices.

Why would it take one to two years? If there's no initial charge why would it need a couple of years to break even?

If you're using lots of low cost trackers it'd take longer or might not even be possible. But later I see varying monthly payments, so a combination of two places or base regular and periodic top-ups might be a way to do it that would be cheaper.

For that amount, a 0.5% trail commission is £1,000 to £1,500 a year. That'll pay for a fair bit in trading costs. You can also mix and match, using one place for seldom traded core funds and another for active trading. Say HL for ongoing monthly payments and transfers elsewhere every year or three to reduce ongoing costs.

So now you're suggesting HL? Do other platforms really charge you for trading funds? Shares OK, but funds? Anyway if half the trail commission is refunded then it's £500-750.

I can see that if you invested £200k and just wanted to leave it in the same fund for 20 years, or wanted to pay in £200pm which you always put into the same fund/small selection of funds, then HL are expensive. But that would be non-sensical, it would be like putting your savings in your current account. The HL platform is designed for active trading, regular switching, flexible payments etc. By the looks of the competition, they are not bad value.

jamesd

Initial charge usually means on fund purchase or switch. Same for annual management charge, refers to what the fund takes from the investment value, not any annual or quarterly or whatever charge by a platform that you buy the fund via. Different from explicit provider charges or the commission they might get from a fund.

For solid figures you can look at the best buy guide here. Or for an alternative, here's a selection of fund annual management charges from my work pension, which include a 0.25% IFA renewal commission and usually a 0.75% discount on the fund charge:

1.22% SL Invesco Perpetual High Income
1.25% SL M&G Recovery
1.50% SL Fidelity South East Asia
1.25% SL M&G Global Basics
1.25% SL Henderson European Growth

1.35% SL Jupiter Merlin Growth
1.35% SL Jupiter Merlin Balanced portfolio
1.35% SL Jupiter Merlin Income

These are from the Standard Life gpen4 pension range for their group personal pension product.

For Skandia you'd have to pay an IFA to sell you the product and that would involve a fee as well as Skandia's ongoing annual charge.

Yes, some platforms charge you for trading funds. Look for it in unbundled platforms, but check for all just in case. A place like Ascentric has a £12.50 switching cost for funds, but also has just a 0.75% AMC for Invesco Perpetual High Income compared to 1% at Cofunds.

The Alliance Trust SIPP generally has no fund initial charge and rebates 0.75% but has an annual charge of £135+VAT and deals cost £12.50 online after the first four; also a £50 charge to transfer in. This charging can make it a nice option for funds that aren't getting added to regularly or changed much but a bad one if you have more than a few funds or change regularly.

To see relatively bad value for HL just compare to say Cofunds and the effect of the fund annual charge discount of around 0.5% vs the annual charge. After a certain total value Cofunds ends up being cheaper than HL.

zagfles

jamesd wrote: »

Initial charge usually means on fund purchase or switch. Same for annual management charge, refers to what the fund takes from the investment value, not any annual or quarterly or whatever charge by a platform that you buy the fund via. Different from explicit provider charges or the commission they might get from a fund.

For solid figures you can look at the best buy guide here. Or for an alternative, here's a selection of fund annual management charges from my work pension, which include a 0.25% IFA renewal commission and usually a 0.75% discount on the fund charge:

1.22% SL Invesco Perpetual High Income
1.25% SL M&G Recovery
1.50% SL Fidelity South East Asia
1.25% SL M&G Global Basics
1.25% SL Henderson European Growth

1.35% SL Jupiter Merlin Growth
1.35% SL Jupiter Merlin Balanced portfolio
1.35% SL Jupiter Merlin Income

These are from the Standard Life gpen4 pension range for their group personal pension product.

Those are all pretty much the same prices as HL! I don't think you're getting a 0.5% discount on those funds, it's more like 0.25%? (I presume you are talking AMCs nor TERs as that what you said above, and they're too round to be TERs)

Few example HL prices (with the rebate coming in):

Invesco Perpetual High Income, AMC 1.5%, discount 0.25%, 1.25%, compared to your 1.22%

Fidelity SE Asia, AMC 1.5% discount 0.2%, ie 1.3%. That's cheaper than your 1.5%!

Henderson European Growth, 1.5% AMC, 0.25% discount, 1.25%. Same as you.

For a works pension those aren't really good prices, my works pension generally charges 1% or less AMC for actively managed funds (and under 0.5% for trackers though I don't much like trackers). But there's very little choice of funds.

For Skandia you'd have to pay an IFA to sell you the product and that would involve a fee as well as Skandia's ongoing annual charge.

Yes, some platforms charge you for trading funds. Look for it in unbundled platforms, but check for all just in case. A place like Ascentric has a £12.50 switching cost for funds, but also has just a 0.75% AMC for Invesco Perpetual High Income compared to 1% at Cofunds.

The Alliance Trust SIPP generally has no fund initial charge and rebates 0.75% but has an annual charge of £135+VAT and deals cost £12.50 online after the first four; also a £50 charge to transfer in. This charging can make it a nice option for funds that aren't getting added to regularly or changed much but a bad one if you have more than a few funds or change regularly.

To see relatively bad value for HL just compare to say Cofunds and the effect of the fund annual charge discount of around 0.5% vs the annual charge. After a certain total value Cofunds ends up being cheaper than HL.

Cofunds seem to want an adviser as well. 0.5% AMC discount compared to typical 0.25% HL discount would work out at £125 extra for a £50,000 pot, and £500 extra for a £200k pot. That doesn't leave a lot to pay for an adviser and/or any other charges.

They and the others could well be cheaper with a bigger pot, regular or a one off payment/transfer, and little trading/few funds. But for the way I use it, random irregular payments, lots of funds, often a different fund with every investment, I think HL's charges stack up pretty well the others, at least once they start giving discounts on AMCs in the SIPP.

jamesd

Those are the prices with the discount and then an IFA charge added on top. In theory that would provide some additional services from the IFA. Discount is also from SL's usual somewhat inflated price.

Here's how the list compares:

Invesco Perpetual High Income: SL: 1.22%, HL 1.50%, later 1.25%
M&G Recovery: SL: 1.25%, HL 1.50%, later 1,25%
Fidelity SE Asia: SL: 1.50%, HL 1.50%, later 1.30%
M&G Global Basics: SL: 1.25%, HL 1.50%, later 1.25%

SL Jupiter Metlin Growth: SL: 1.35%, HL 1.50%, later 1.25%
SL Jupiter Merlin Balanced Portfolio: SL: 1.35%, HL 1.50%, later 1.30%
SL Jupiter Merlin Income:: SL: 1.35%, HL 1.50%, later 1.25%

What HL's change is doing is making it more competitive for many of the funds available in that work pension, sometimes cheaper, but there are still the bundled IFA services included that HL doesn't provide, like advised transfers.

[STRIKE]Where the price is the same, the HL version has the advantage because the rebate leaves the pension. So it could in theory be reinvested in new contributions to get tax relief again.[/STRIKE]

As well as the other places discussed here, this is an example where the SIPP at HL is more expensive today and has been for a while now. But HL is still not inexpensive compared to the alternatives of paying a fee and eliminating all of the 0.5% trail and maybe some of the platform charge percentage also... provided the total amount invested is sufficiently large.

The Cofunds advisor can be one of the places from the best buys section here that has a fee and rebates the adviser commission.

I agree with you that HL becomes significantly more competitive when it starts to pay rebates.[STRIKE] For a higher rate tax payer who recycles the rebates into more pension contributions, the 0.25% discount ends up being more like 0.42% discount after the tax gain. And that's getting quite interesting sometimes.[/STRIKE]

It's not SIPP or non-SIPP that makes a difference, just the pricing of the particular product being compared. Sometimes a SIPP will be cheaper than some products, other times not.

zagfles

jamesd wrote: »

Those are the prices with the discount and then an IFA charge added on top. In theory that would provide some additional services from the IFA. Discoutn is also from SL's usual somewhat inflated price.

Here's how the list compares:

Invesco Perpetual High Income: SL: 1.22%, HL 1.50%, later 1.25%
M&G Recovery: SL: 1.25%, HL 1.50%, later 1,25%
Fidelity SE Asia: SL: 1.50%, HL 1.50%, later 1.30%
M&G Global Basics: SL: 1.25%, HL 1.50%, later 1.25%

SL Jupiter Metlin Growth: SL: 1.35%, HL 1.50%, later 1.25%
SL Jupiter Merlin Balanced Portfolio: SL: 1.35%, HL 1.50%, later 1.30%
SL Jupiter Merlin Income:: SL: 1.35%, HL 1.50%, later 1.25%

What HL's change is doing is making it more competitive for many of the funds available in that work pension, sometimes cheaper, but there are still the bundled IFA services included that HL doesn't provide, like advised transfers.

Where the price is the same, the HL version has the advantage because the rebate leaves the pension. So it could in theory be reinvested in new contributions to get tax relief again.

Excellent - I didn't realise they'd rebate the commission outside the SIPP!

As well as the other places discussed here, this is an example where the SIPP at HL is more expensive today and has ben for a while now. But HL is still not inexpensive compared to the alternatives of paying a fee and eliminating all of the 0.5% trail and maybe some of the platform charge percentage also... provided the total amount invested is sufficiently large.

The Cofunds advisor can be one of the places from the best buys section here that has a fee and rebates the adviser commission.

I agree with you that HL becomes significantly more competitive when it starts to pay rebates. For a higher rate tax payer who recycles the rebates into more pension contributions, the 0.25% discount ends up being more like 0.42% discount after the tax gain. And that's getting quite interesting sometimes.

Yes. It would be better if they gave a 0.5% rebate outside the SIPP and charged 0.25% as a "platform fee" But I guess HMRC may not be too impressed if they did that!

It's not SIPP or non-SIPP that makes a difference, just the pricing of the particular product being compared. Sometimes a SIPP will be cheaper than some products, other times not.

Indeed. But by the looks of it, HL will be pretty much the best value for my SIPP in the new year.