H & l sipp

MoneyBob

Totally new to the pension world but in a position to begin one (each) for my wife and I.

We've been running our own business for a while and income has finally gone above what we _need_ so time to begin.

Consider myself to be quite astute and have a mathematical background.

Research points me towards the H & L SIPP as likely the best way forward, assuming I put in some effort on research and keep a close eye on it.

The thought occurred however that I might save myself a lot of hassle by simply mirroring the investment distribution chosen by someone more savvy than myself, who's already done/doing the investment research... or do such savvy investors keep their choices close to their chest?

I know it's going to be a steep learning curve, with I expect a considerable amount of risk to completely DIY it.... but at first the "pot" will contain so little that I'll not be playing with all that much (£10k ish total say).

Not 100% sure what I'm asking really... just dipping my toe in.

Thank you.

Gatser

MoneyBob wrote: »

Not 100% sure what I'm asking really... just dipping my toe in.

Thank you.

Good Luck!
As you say... you have to start somewhere.
So the learning process starts too... I have learnt along the way, dipped my toe(s) into different SIPP's and investments (mostly after "advice") and occassionally pulled out some time later.

I think I would ask: What does the HL SIPP offer compared to other SIPP's? Why is HL the best for you?

MoneyBob

Thanks for your reply.


Why H&L. Honestly, at this point in time, I have no idea other than it seems to be the highest rated by the people who seem to know what they're talking about the most. And various comparison websites seem to suggest the fees are by far the smallest (and compound interest is very considerable over the long term, so even a 0.2% gain over another product is not to be ignored, right?)

I will not be moving money around on a daily basis so the per transaction fees don't bother me.

And I figured that if further research proves my money to be better off elsewhere I can always move it there - or at the very least stop adding to it there and start up somewhere else... can't I?

Seems there's little to lose really with it, unless I make bad investment choices?

TY

dunstonh

The thought occurred however that I might save myself a lot of hassle by simply mirroring the investment distribution chosen by someone more savvy than myself, who's already done/doing the investment research... or do such savvy investors keep their choices close to their chest?

For that to work you would need the savvy investor to have the same risk profile, use the same investment strategy and have the same capacity for loss. Plus, you would need to mirror their rebalances and reviews.

Why H&L. Honestly, at this point in time, I have no idea other than it seems to be the highest rated by the people who seem to know what they're talking about the most. And various comparison websites seem to suggest the fees are by far the smallest (and compound interest is very considerable over the long term, so even a 0.2% gain over another product is not to be ignored, right?)

Depends on what you pick to invest in. Modern SIPPs can be cheaper than they used to be if you stick to certain cheap investments. However, they can also be the most expensive as well. Modern personal pensions can be very cheap as well.

I will not be moving money around on a daily basis so the per transaction fees don't bother me.

Not daily as not many do that. However, what frequency will you be rebalancing and reviewing your portfolio?

MoneyBob

Ah OK. My naivety is revealed.

So I can't just copy someone else.

I have no idea how often I'd be moving things around at this stage, having never done it before.

Assuming I decided to leave it all in someone else's hands (managed pension fund rather than IFA) who offer the best rates? I have an application for a Standard Life AMPP but added together their fees seemed rather large for most of the managed options, and considerably more than H&L for the non-managed ones.

dunstonh

Assuming I decided to leave it all in someone else's hands (managed pension fund rather than IFA) who offer the best rates

That isnt how it works. Assuming you mean a portfolio fund where the asset allocation is controlled and managed/rebalanced within the fund, then these two are risk rated and some will use different investment strategies. In some periods, one strategy may be better than another and with different risk profiles, you will also get different returns.

There is no point investing in a fund that is going to lose 40% in bad times if that worries you causing you to pull out even if it ends up being the one that makes the most over the long term.

I have an application for a Standard Life AMPP but added together their fees seemed rather large for most of the managed options, and considerably more than H&L for the non-managed ones.

Compare HL's managed funds (the TER on unit trust/OEIC funds should be compared to the AMC on pension funds for like for like). You will see Std Life is much lower. However, Std Life is not exactly top of the pile on these things. What made you look at Std Life?

Not sure why you are ruling out an IFA. HL keep some of the commissions on the funds that would be paid to an IFA. So, you are paying for something you are not getting. Depending on the timescale and amounts involved, an IFA could end up quite a bit cheaper. Especially if you dont know what you are doing (its not all about explicit cost either. Pick an investment that is not suitable for your risk profile and capacity for loss and the actual charges could be tiny compared to cost of the mistake).

MoneyBob

Well I gave on on IFAs because after some research I contacted a few, and none of them replied.

Then read in various forums quite a lot of negative comments about them.

Anyway I thought IFA "commissions" had now been stopped?

Do you have room on your books for another couple of married clients?

How much would you charge me?

dunstonh

Then read in various forums quite a lot of negative comments about them.

People only moan on internet forums. However, look at some figure. IFAs handle over 75% of pension transactions. Yet only account for 1% of complaints at the FOS and most of those are rejected. The FOS even congratulated IFAs for their record keeping and information supporting their advice back in November which accounted why fewer complaints were overturned compared to other distribution channels.

Research from a consumer body a couple of years ago found that over half the people seeing tied agents/sales reps though they were seeing an IFA. A lot of people dont even realise there is a difference. Frequently you see people moaning about IFAs only to find out it wasnt an IFA but an insurance agent. Not saying its perfect but when the major distribution channel only accounts for 1% of complaints at the FOS, then things cannot be too bad.

Anyway I thought IFA "commissions" had now been stopped?

They have on advice. But not on non-advice. HL is non-advice. So, they can keep the commission. Also, most pension contracts have been fee based effectively for the best part of 5-7 years. The industry was ahead of the FSA by some way.

Do you have room on your books for another couple of married clients?

How much would you charge me?

I don't but my charges are typical of many other IFAs. Remember that the charge can still be collected via the pension. It doesnt require you to write a cheque (indeed, its more tax efficient to pay it via the pension as you get tax relief on it). As an example, I did a transactional personal pension (non-servicing) earlier in the week with a portfolio fund with an AMC of 0.40% (that included fund & provider). A SIPP equivalent would have been more expensive (which is why I didnt use one) and remember that IFAs have cheaper SIPPs (a DIY SIPP has cost of SIPP and cost of distribution factored into it. an IFA SIPP is clean of distribution charges but you have to pay the IFA for advice. So, an IFA would not use a DIY SIPP as it would cost more).

It is possible that the amounts you are looking at are not really in IFA territory and a simple DIY solution may be better. i.e. if you have no existing fund and are paying in a small amount then it doesnt really matter where you invest as the differences on a small amount are negligible. Once you build to a greater amount then you can look at it then.

You say you are running your own business. Is that a limited company or self employment/partnership? (different methods to pay into the pension should be used with those).

MoneyBob

OK thank you. So perhaps my decision initially to start an H&L SIPP isn't a bad idea then, until I've built up a bit more of a pot? And then re-research IFAs? Or would you recommend something else for a beginner? One of the reasons I chose it was that people like the online interface for easy research into the possible investment options, as opposed to the SL AMPP which gets terrible reviews.

(I initially looked at SL due to parents having always used them)

It will be £5k each for my wife and I this year going into it. And it is pretty much all we will have in pensions.

It is a Ltd Co. that I own/run. The £5k payments would be as a result of that Co. earning too much, and making employer contributions on our behalves, to save on corporation tax.

dunstonh

With just 5k each then an IFA will not be cost effective. However, chances are the SIPP wont be that cost effective either. Even a personal pension may not be at this stage but a stakeholder pension may be best.

HL using a cheap portfolio fund would cost you £2pm, have a 0.25% initial charge and a 0.30% annual charge. That £2pm equates to 0.48%p.a. So, ignoring the initial charge, your cost with HL using a cheap fund is 0.78% p.a. A stakeholder pension could be around 0.60% (personal pensions could be cheaper but most of those rely on fund based discounts and you are not at that level yet - typically around 20k plus).

So, you can see that these low cost SIPPs are not all that low cost.

BLB53

I know it's going to be a steep learning curve, with I expect a considerable amount of risk to completely DIY it.... but at first the "pot" will contain so little that I'll not be playing with all that much (£10k ish total say).

Pensions do not need to be complicated and I'm sure a lot of people have done some research via the web and decided to have a go with a DIY sipp.

You may be interested in 'DIY Pensions ebook which was 'book of the week' featured on Monevator last weekend

http://www.amazon.co.uk/D-I-Y-Pensions-ebook/dp/B00B7QN8XM/ref=sr_1_1?s=digital-text&ie=UTF8&qid=1360942380&sr=1-1

There are quite a few articles on Monevator which you may find useful - also worth a look is www.retirementinvestingtoday.com

HL are very popular and also Sippdeal - the main factor over the long term is to avoid high charges so Vanguard trackers are popular.

Good luck with your pension plans!