SIPP "too expensive" - Why?

dunstonh

But if you had a small pension pot and wanted to DIY, why would you voluntarily pay an unnecessary £500 a year? Are you saying that you get charged this without receiving anything in return?

You assume that the average person has the time and sense to do the research to end up on the right decision. Rembemer the person who came out of their Aegon Scot Eq personal pension to go into a low cost DIY SIPP? Their expensive personal pension with Aegon would have been around 0.7% a year. The SIPP they used was 1.8% a year. Plus, the fund they picked was underperforming the one they had with Aegon. All they did was follow the low cost SIPP hype thinking it was better and cheaper. They didnt actually check.

I don't know what these "lower-cost institutional fund classes" are -- they sound like the sort of opaque concept that SIPP enthusiasts want to escape from.

The opposite of what you think. The retail fund classes (which most SIPPs offer) lack the transparency. Institutional funds are either low cost versions as they dont have the retail costs in them or fully clean versions (the latter being the ideal one to aim for). It would be very strange for "SIPP enthusiasts" not to want clean charges but prefer to pay hidden commissions.

And as you rightly say, to pay an IFA in order to access a lower cost fund seems like very muddled financial management to me.

IFAs are distributors as well as advisers. The cost of distribution/advice is added on top of the manufactured prices. DIY is still a bit hybrid where they factor the costs of distribution into the overall pricing or even into other areas.

Also, remember that the DIY market, whilst important, is still very small in comparison to IFA distribution. Economies of scale does come into play with financial services as much as any other retail market.

bigfreddiel

dunstonh wrote: »

You assume that the average person has the time and sense to do the research to end up on the right decision. ..... They didnt actually check.

its actually not that hard to do the research on just a few websites and if you don't check and then double check well i guess you deserve what you get - strangely i bet these very same people who can't diy know every single score and scorer in the premier league for the past 10+ years - much more importnat than securing your future i guess!

fj

dunstonh

bigfreddiel wrote: »

its actually not that hard to do the research on just a few websites and if you don't check and then double check well i guess you deserve what you get - strangely i bet these very same people who can't diy know every single score and scorer in the premier league for the past 10+ years - much more importnat than securing your future i guess!

fj

Or that they put more research into buying their mobile phone every 2 years.