SIPP worth it for me?

grey_gym_sock

well, it depends how quickly you're going to add money to it. but keep it simple if you prefer. (simple is always good, of course.)

lifestrategy might be more expensive until you get to about £8k invested. since it has a TER c. 0.3%, and £24 platform fee is about another 0.3% when you have £8k invested (i.e. £24 / £8k = 0.3%). so the total cost is about 0.6% with £8k invested, which is similar to the blackrock trackers. and the total cost of lifestrategy falls as you invest more.

andy013

That blackrock fund has almost a 12% tracking error over 5 years though.

http://www.iii.co.uk/investing/factsheet/ME13

(click view all above the graph for more detailed info)

kidmugsy

ISA best: some day you want to transfer it, directly or indirectly, to a pension of some sort e.g. because you are offered salary sacrifice, employer contribution or 40% tax relief.

jamesd

andy013 wrote: »

Would it really make a significant difference? Aren't we talking about 0.5% over a couple of years?

Say you paid in £40 a month for a year. The cost of that £2 a month platform fee would be 5% of the amount invested if you added no more money. More like 10% during that first year on the average balance.

The platform fee is a very big deal until you start to get to many thousands invested:

£1,000: 2.4%
£2,000: 1.2%
£4,000: 0.6%
£8,000: 0.3%

The issues of tracking error and higher AMC start out insignificant compared to the platform fee.

andy013

I can probably afford to put in a £3000 lump sum and then £50 a month after that, as well as perhaps some occasional £500 lump sums on top of that.

So we're only really talking about 0.5% of a difference over a few years and continually dropping from there. Which works out to be about £15 or less each year, assuming both funds perform identically.