Sippdeal shocker (& link to template complaint letter)

bowlhead99

Just to explore some of the points, as I have the morning off!

I think there's space in the market for lots of charging structures. Some use percentage based; some a charge per fund held; some a flat charge; some per buy/sell with discounts for volume or regularity; some per corporate action handled; some per family rather than per individual. All of these have attractions if they suit your portfolio and activities - and detractions if they mean you are the one subsidising the people who they suit better.

I hope this choice continues in the marketplace. On top of the charge for administering the SIPP wrapper, Youinvest have a variable charge for how much you have on the fund platform (by value rather than quantity of holdings) and a charge for your activities on the platform (buying and selling). Then on the stockbroking side - shares and ETFs and ITs - they don't have a platform fee but the buy/sell costs for non-regular dealing are higher.

It's true that at each end of the market there may be cheaper options, but these charges are all transparent which is what we want. Someone might be better off getting their shares from ABC and their funds from XYZ, (much as one may buy frozen chips from Aldi and fancy ready-meals from Waitrose) but that defeats the point of having one easy wrapper for hassle-free rebalancing. Personally I'm a Tesco shopper and OK with my total cost.

I can see how Snowman is aggrieved by the changes, after his previous correspondence before signing up about how they had an explicit charge for using the platform for clean funds that was not driven by value or volume of holdings. Lowering the trading costs but increasing the fixed fees heavily is going to screw him over so I hope the complaint is upheld and he can exit for free (despite the fact it will cost me, as a remaining customer!)

Percentage based, if uncapped, is as he says an unnecessary tax on wealth, as the workload doesn't change just because there's an extra couple of zeroes on the statement. But that concept works both ways and there is a minimum level of work to run infrastructure and admin staffing for someone starting up their account with £1000 (e.g. the size of Plunt's)

For some such customer relationships, the £1000 may blossom into a £10,000- 50,000-500,000 investor over time so you don't want to charge them £100 admin plus say £100 flat fee for fund custody (totalling 20% of their fund size) and kill them off, if you can instead nurture a longstanding relationship at £20 +0.2% in the early years, increasing the £20 but introducing a cap on the 0.2% once he gets a bigger pot.

If the person still doesn't want to pay even 20 quid, because its 2% of his pot, and thinks it should be free like his bank account and have the richer customers cover the costs of your customer service desks, infrastructure, premises, HMRC reporting and compliance, marketing and profit margin etc etc etc then that is possibly a customer you don't want anyway.

If, after you introduce the £20 + 0.2% charge because the regulator said you must introduce explicit charging, that guy wants to leave, then I can see why you wouldn't want to do all the transfer out stuff for him for free, if he signed your contract saying you might make unilateral price changes to some fees for certain reasons, but you wouldn't change the exit fee without notice. Thereby, he's entering into a contract with a known exit fee and can leave whenever someone else becomes relatively more competitive.

If he complains about your 'unfair' hike and demands to leave with you doing all the exit admin for free, I would want to know where he is going to find a cheaper SIPP product if he is using your new nominal fees as grounds to leave with compensation or fee waivers.

Clearly, charging £22 is a rise of infinity percent (!) over charging zero. But if the person entered into a contract where he would pay you zero, is that really a 'contract' in the traditional sense? What consideration is he giving you for the services you have provided on your part of the contract? He didn't have any plans to make further investments - did he think it would be sustainable that he pays zero for the setup and admin service for forty to eighty years and then just a closure fee at the end to take it out?

In practice, his expecation of the contract would be he would use your service for free while it suited him and then exit to another provider in due course, for the agreed fee. Being only in his 20s, he probably hasn't even read your fees table for drawdown etc when he's in his 70s, because he'll just pay the exit fee and move to whomever is the most competitive nearer the time. You are now telling him the free funds-in-a-sipp service no longer exists as mandated by your regulator but if he feels he can do better than £22 p.a., he's welcome to exit to another provider for the agreed exit fee, like he would have done anyway eventually at some point down the line.

So to be honest, I am less sympathetic towards Plunt as I don't think the £20 p.a. is a crazy fee to introduce and I don't think it was a deliberate bait-and-switch perpetrated by Sippdeal/ Youinvest. If it had been £50-100 or more, which would have been his entire annual expected investment returns, that's probably too bitter a pill to expect your customer to swallow.

I do sympathise if the customer service person was saying it is a good product because it has low/no fees and then suddenly a £20 fee is introduced. If this was weeks or months ago when this was clearly on the cards, rather than years ago, it would have greater weight in terms of 'unfairness' IMHO - as nobody goes into a service relationship expecting the price to remain forever if the small print says fees might change for a range of reasons. If it was recent, that fact is perhaps worth mentioning in the letter.

As a side note, the person dealing with Plunt said it was 'right for you' because of its low price, presuming you wanted a low fee SIPP. After the change, at that level of investing, it is still a low fee SIPP compared to other SIPP providers. However the wider question of whether you need a SIPP at all if you are only going to hold one fund and not add to it, (i.e. whether you should perhaps have a personal pension /stakeholder pension at low cost instead), was not raised by the customer service person as they weren't acting as an independent paid adviser ; the FOS wouldn't expect them to advise on all the different options before concluding what was 'right for you'.

plunt

bowlhead99 let me start by saying im jealous that your at home and not at work! regarding your comments, despite some criticisms in your post, I definitely take it all on-board and can see the logic you have used.

As for me personally, I have another pension which i will more than likely transfer the balance to (which is a larger amount than my Youinvest balance for the record! )

also noticed that YouInvest would charge me a £30 fee as i wouldnt have enough cash in the account to cover the fees! so we can add that to the list of fees.

As for the £20, no that sum isnt a lot, (oh and dont forget the 0.20% fee that i believe they charge on funds as well), but as you pointed out, in comparison I am worse off. The fund i hold is First State Global Emerging Market Leaders. Which has a current AMC of 1.5% according to trustnet. What will this new charge be now? all I know is that on ~£1000 that is 2.2% not accounting for any fees I may incur from the fund directly, or not having cash in the account!

The part that annoys me is I just dont like the fact of being forced into a position that not matter what i am going to get hit with fees as a result of their change. Anyways i shall see what the ombudsman has to say about it, will be interesting to hear the outcome

bowlhead99

plunt wrote: »

also noticed that YouInvest would charge me a £30 fee as i wouldnt have enough cash in the account to cover the fees! so we can add that to the list of fees.

Well you can add that to the list of fees if you want to paint them as bad guys.

But it is a bit of a red herring, because if you accept that you owe them a fiver for Q1 2014's quarterly admin [which I know you don't like, but putting that aside... ]: The fee is not payable until April 2014, you know about it well in advance, and you can just simply send them a fiver with your debit card and be done with it, no fees necessary.

Actually you can just send them four quid with your card, because as long as you do it a month or two in advance, they will have had the chance to claim back a pound basic rate tax relief from HMRC!

Alternatively if you don't want to put new money in the account to fund it, you could sell part of your fund portfolio to get the fiver (or to get 20 quid to cover the whole year). This would cost you 4.95 in dealing fee to action the sale, so is pretty inefficient (though cheaper than it was in 2013 at 9.95 a trade). I would just send them the 4 quid, get the tax relief and avoid any sale costs altogether.

If you can't be bothered to send them any money, and can't be bothered to action a sale of any investments to fund it, and just stick your head in the sand, they will quite rightly think you are taking the mickey. They will have to go and sell something they're holding for you, and as a manual trade instigated by them (rather than you keying the details online) they will charge you the full 29.95 fee that you'd pay for manual telephone trading. You won't be letting that happen very often because you'll soon learn from your mistake of not topping up your account or keeping a bit of spare cash or dividends lying around in the account.

As for the £20, no that sum isnt a lot, (oh and dont forget the 0.20% fee that i believe they charge on funds as well), but as you pointed out, in comparison I am worse off. The fund i hold is First State Global Emerging Market Leaders. Which has a current AMC of 1.5% according to trustnet. What will this new charge be now? all I know is that on ~£1000 that is 2.2% not accounting for any fees I may incur from the fund directly, or not having cash in the account!

Per trustnet the full priced old retail version "class A" of the GEM Leaders fund was 1.5% management fee and with other operating costs of the fund it worked out to a 1.58% estimated Ongoing Charges Figure. An element of the management fee was set aside for IFA commissions (which most platforms would refund to you, at least in part) and another element of it went to pay platform commission which basically gave Sippdeal and others a fee income to run their business.

Going forward, you can be in the clean version of the fund, "class B". This has an Ongoing Charges Figure of only 0.91%. That's what the manager takes to run the fund and hopefully deliver your 10% profits by deciding to put more money in Tiger Brands than China Mengniu Dairy, and more in Unlilever than both put together. None of it is going to Sippdeal and it doesn't need to, because you're now paying them their 0.2% direct - an explicit charge visible on the Sippdeal statement, rather than a larger charge hidden in the total value of the investment portfolio.

So in summary (if you were to stay) you will likely pay zero for forced sales, and 50p a quarter for using the funds platform which is no more than was previously hidden in your First State manager fee and is likely quite a bit less. Your big change is the annual fiver a quarter or £20 pa charge for the administation of the SIPP wrapper around your assets - the pension trustee service they provide allowing you the ability to hold individual assets with no charges other than dealing fees, and also the general access to 3000 choices in the Funds area which you pay the 0.2% on if you use it.

As Alliance Trust was just mentioned up the thread, it's worth noting that the £20 pa plus 50p/quarter for holding your one fund at Sippdeal would be a flat fee of £186 at ATS, payable for a year up front rather than quarterly in arrears. Dealing charges to buy and sell more of your First State fund would be £12.50 instead of £4.95, and if you later suffered buyer's remorse it would cost you £180 to transfer out to another provider. Clearly they are designing their fees for someone like Snowman, who would find them cheaper, rather than your end of the scale, who wouldn't!

The part that annoys me is I just dont like the fact of being forced into a position that not matter what i am going to get hit with fees as a result of their change. Anyways i shall see what the ombudsman has to say about it, will be interesting to hear the outcome

I guess sooner or later it was inevitable that charges would come in if you were getting something for basically nothing. Where the market has moved to - i.e. with the regulator making everyone introduce transparent and fixed charges, and stop subsidising some products with kickbacks they earn on others - means you now can't get 'free' platform admin anymore and are going to have to pay some bare minimum fee to have someone be your SIPP trustee and platform administrator, whereever you go.

If you don't intend to use the features of a SIPP with self-picked holdings in a whole range of financial instruments, and you don't intend to add to the balance over time, then basically you have bought a product you don't want. The sensible solution you found is to roll it up with your other pension rather than keep running this complex pension product (that costs almost £200 a year at ATS...) wrapped around a trivial amount of money.

Unfortunately the idea that a product is something you don't really want or need, this "buyer's remorse", is known about in the industry and the exit fees are designed to compensate the provider for their investment in time and systems cost, setting up the account in the first place and no longer having any future income to spread it over, plus incremental costs of processing the transfer and closure. The purpose of a transfer out cost is to deter people from casually joining and leaving for free without giving them the chance to earn from the work they've done.

With any such contract you sign that has exit fees, you have to read the T&Cs carefully to understand whether there is any likelihood of you ever wanting to leave and these kicking in. Maybe in your case it's harder to call it buyers remorse, as you were hardly 'buying' anything - paying pennies a quarter via a fund manager fee and not giving them anything towards running their business. But you knew it would cost to exit for any reason and you might have guessed that one of the clauses for changing fees could hit you at any time, given you weren't paying for a service that others charged hundreds for.

I guess I could have summarised my point as - IMHO it was a bit foolish buying a complex pension wrapper with a £75 exit charge for a tiny amount of money that you weren't going to add to and wouldn't want to keep if there were any fees at all. But it's not a decision you'd engage a professional advisor for on 1k, so maybe FOS would come down on the 'consumer' side. Do let us know the outcome. I think Snowman's has more chance because he bought something for a known explicit fee which has gone up by a large percentage. While yours was buying something for an unsustainably low charge in the knowledge that the charge could change and it would be expensive to exit if you didn't like it.

I don't want to labour the point so will wrap up this pretty long post and head out for a spot of lunch. Happy New Year by the way! And don't take my previous post as scathing criticism of, say, your personal position vs Snowman's - it's not your fault your pension pot isn't hundreds of times bigger, just trying to see the angles of how 'unfair' the companies are being to different customers as the new charges ripple across the industry.

Cheers

SnowMan

The SIPP was promoted based on the fact that there was no administration charge. I remember seeing that no administration fee thing on their website even though I don't have a SIPP and have no intention of having a SIPP. The contract that plunt entered into was on that basis. There are a few other issues going on in plunt's case (in relation to the move to clean pricing) but the basic issue here is the introduction of the administration charge.

Plunt took in good faith the comment he/she says was made to him by the customer services person namely

When signing up with them the person on the phone explicitly pointed out that the product was right for me as it had no fees and was ideal for small pensions

In the light of that comment and how the 'no administration fee' aspect was highlighted on the Youinvest website (and others have suggested in magazine advertisements, although I can't verify that and would welcome clarification from Youinvest on that) then the only right thing for Youinvest to do is waive the exit fees.

I am not suggesting for one moment that the customer services person at Youinvest didn't give plunt that information in good faith. But if the customer services person didn't foresee the administration charge then it is not reasonable to expect plunt to foresee that either.

Let's remember that plunt is not making a big ask of Youinvest. He is simply asking to be able to leave without an exit fee. As some platforms routinely have no re-registration away charges it is clear that it is not a big ask. All they are doing is 'signing over' a simple investment to another nominee. Let's remember that Youinvest have been willing to pay up to £500 in exit fees for those moving to them. That's not to say that re-registration fees should be routinely waived (the issue of re-registration fees being a barrier to competition is a separate issue) but where the basis on which the contract was entered into has been materially broken then of course it should be waived.

Youinvest should have done the only fair thing and waived the exit fees.

SnowMan

westy22 wrote: »

But they are for some - if you have a large SIPP portfolio predominantly made up of ITs, ETFs and shares then a fixed £100 pa SIPP custody fee is hard to beat equating to 0.04%pa on a £250,000 pot.

Yes, good point.

With a £250,000 SIPP pot solely in ETFs and shares and no trading the comparison with the platforms I mentioned are

Youinvest: £100pa
ATS: £186pa
Charles Stanley: £270pa

thejman

Thanks for all these posts on the sippdeal charges hike, very useful.
Can I ask- if i have a 100k of sipp in funds- is iii the cheapest provider for me with a fixed charge of 144pa?
Seems to me that for sipp holders with pots of >100k and with most of it in funds, then iii is the cheapest option since it has the lowest fixed fee and no % fee.

grey_gym_sock

AIUI, iii are using cofunds to handle funds, and cofunds are keeping a little commission (c. 0.11%) on funds which pay it. though there are some commission-free funds available (e.g. some vanguard funds).

so presumably some pricing changes will be needed to make the way cofunds is paid compliant with the platform review. (though the way iii themselves are paid is already compliant.)

SnowMan

thejman wrote: »

Thanks for all these posts on the sippdeal charges hike, very useful.
Can I ask- if i have a 100k of sipp in funds- is iii the cheapest provider for me with a fixed charge of 144pa?
Seems to me that for sipp holders with pots of >100k and with most of it in funds, then iii is the cheapest option since it has the lowest fixed fee and no % fee.

1. With £100,000 in a SIPP solely in clean funds (say) and if sales and purchases of funds total 2 pa (say) then the comparison of annual platform costs are

ATS: £211 (0.21%)
Youinvest: £300 (0.31%)
Charles Stanley: £370 (0.37%)
TD Direct: £590 (0.59%)
Interactive Investor £164 (0.16%)


2. With £200,000 in a SIPP solely in clean funds (say) and if sales and purchases of funds total 4 pa (say) then the comparison of annual platform costs are

ATS: £236 (0.12%)
Youinvest: £320 (0.16%)
Charles Stanley: £620 (0.31%)
TD Direct: £940 (0.47%)
Interactive Investor £184 (0.09%)


3. With £100,000 in a SIPP solely in clean funds (say) and if sales and purchases of funds total 6 pa (say) then the comparison of annual platform costs are

ATS: £261 (0.26%)
Youinvest: £330 (0.33%)
Charles Stanley: £370 (0.37%)
TD Direct: £590 (0.59%)
Interactive Investor £204 (0.20%)

thejman

Thanks snowman and greygymsock for the clarification on clean share classes and the comparison. AIUI platforms will have to stop taking all commission including legacy sales from April 2016- so no need to factor in commission from then. The FCA also expects platforms to move investors to clean share classes in the meantime- quite right too.

juliamarsh

QUOTE=noh;64187708]I note that ATS have now published their new charges.
They have waived exit charges for a period of two months for those that wish to leave.
It would be around £200 pa cheaper for me to hold my SIPP with ATS compared with YouInvest

SnowMan wrote: »

I am just switching to ATS and after their fee increase they are still a much cheaper option for me than Youinvest, in fact less than half the cost. So I've definitely made the right choice.

Also it is brilliant to see ATS treat customers fairly with the temporary waiving of exit fees. What a complete contrast to Youinvest who have shown themselves to be an organisation who in my opinion don't treat customers fairly and simply can't be trusted.

I would urge everyone currently with YouInvest to look to see if ATS are cheaper than Youinvest. If they are cheaper then it is worth re-registering to ATS, and if you are being hit by a significant increase in charges at Youinvest, and believe you are being treated unfairly, put in a complaint and take the matter to the Financial Ombudsman Service. I believe it is a near certainty your complaint will be upheld by the FOS.

I currently have a longstanding unsettled complaint dating back to July 2012 lodged with the FOS against ATS for charging me exit fees last time they hiked their charges. The adjudicator found in my favour but ATS refused to accept the adjudicator's decision and insisted it went to the Ombudsman, and I am still waiting for their ruling. I am afraid my experience with ATS is not at all in complete contrast to your experience with YouInvest, it sounds exactly the same! ATS treated me appallingly, I have dealt with some companies that did not provide an acceptable level of service but I can honestly say I have never dealt with an organisation that seemed so hellbent on actively striving to avoid providing any sort of a service to their customers as ATS, I found their attitude truly astounding. What angers me even more is that by waiving exit fees for 2 months now (although I am pleased for everybody who wants to move)they are as good as admitting that they were in the wrong not to do it last time and yet they refused to accept the adjudicator's decision in my case! I originally came on here to see what people were going to do about Hargreaves Lansdown's announcement yesterday and as a result of this have been looking to see what other firms are charging. As someone with a reasonably sized portfolio but who hardly ever trades I think iii will work out quite a bit cheaper for me both on sipp and on isa and fund and share account, even though I used to have an account with them and closed it when they started charging before! Also I note that Fidelity fundsnetwork will be announcing their charging structure next week so I will wait a bit and see what they are doing. Has anybody considered SVS Securities? I have an account with them and currently they charge £5.95 flat fee per trade and other than that no charge at all for share account or isa. They don't have a sipp yet but they have plans to introduce one. My only worry is that they might introduce other charges as yet unknown, and I don't want to move everything away from HL to somewhere else and then find they introduce charges and I am no better off! What a quandary!