Pension wrapper advice

MrC100

Hi,

I have a pension that I no longer contribute to, and wonder if I would be better moving to a low cost scheme to save annual charges. Any advice would be really useful, because I am not clear that any potential gains would outweigh the pain of moving!

My situation is that I have an Aviva Stakeholder Pension set up by my previous employer's financial advisor. The value of the funds in this plan are approximately £200K, and they are invested in external funds that are available in this scheme.

I currently invest 20% of my income in an Aegon plan mandated by my current employer. (10% + 10%)

I was considering a SIPP by AJ Bell (or similar).

It isn't clear to me if I am indirectly paying commission to the original advisor - either from Aviva or the funds that are in the plan.

I also don't know the (rough estimate) holding charges between the Stakeholder and a SIPP.

Lastly, I know there is a premium on external funds. Is this competitive in the Aviva scheme - or do they apply additional charges that will not appear on the main 'plan' charge?

Please can anyone offer any comment on my situation?

Thanks in advance.

Neil

Your_Hero

MrC100 wrote: »

It isn't clear to me if I am indirectly paying commission to the original advisor - either from Aviva or the funds that are in the plan.

It is possible.

I also don't know the (rough estimate) holding charges between the Stakeholder and a SIPP.

It depends on what you are invested in and the plan charges. Stakeholders have a charge cap of 1.5% for first 10 years of the plan, and then dropping to 1% thereafter.

As for a SIPP, it should be pretty crystal clear on the platform charge (usually tiered % or flat fee). Then you have to add on the fund charges depending on what you're planning to invest in and the proportions (you need to weight the charges accordingly). This is usually done via a plan illustration if you are doing it through an adviser.

Lastly, I know there is a premium on external funds. Is this competitive in the Aviva scheme - or do they apply additional charges that will not appear on the main 'plan' charge?

What do your plan's T&Cs say? Do some research yourself.

dunstonh

It isn't clear to me if I am indirectly paying commission to the original advisor - either from Aviva or the funds that are in the plan.

Does it matter? You pay the product charges. not the commission. Aviva pay the commission. You need to focus on the charges. not the commission.

When you buy a washing machine, do you focus on the price of the machine or the profit the retailer will make on it?

I also don't know the (rough estimate) holding charges between the Stakeholder and a SIPP.

That is something that needs to be a priority for you to check. Your Hero has mentioned the stakeholder cap. However, many Aviva stakeholders will be lower than that cap due to fund based discounts. Plus, group schemes often have negotiated lower charges.

Lastly, I know there is a premium on external funds. Is this competitive in the Aviva scheme - or do they apply additional charges that will not appear on the main 'plan' charge?

There are no external funds on Avivas stakeholder. It cant add them at a premium due to the stakeholder cap.

It is also possible that a modern Aviva plan is better than the stakeholder. Alternative personal pensions should form part of your review and not just more expensive SIPPs.

MrC100

Thanks for the information. The last reply made me question the Aviva product I'm in. I have just looked, and it is the Aviva Designer Pension.

The reason I'm questioning this is that I have looked at the Daily Telegraph pension wrapper article, and some of the SIPP's look to offer a low cost way of holding a wide variety of investments. I suspect I am being charged more than the figures in the charts relating to my total holdings.

Telegraph article: The cheapest SIPP fund supermarkets. (sorry can't post link due to newby restrictions)

dunstonh

The reason I'm questioning this is that I have looked at the Daily Telegraph pension wrapper article, and some of the SIPP's look to offer a low cost way of holding a wide variety of investments.

Remember the media tends to focus on the fashionable. Often gets the articles written by an advertiser or sponsor company. In this case, the Telegraph lifted information from a consultancy company who only looked at SIPPs. Not stakeholder pensions or personal pensions.

Stakeholders have become niche now. Really aimed at the very small funds for people that dont really care but want something simple.

SIPPs are a niche product aimed at a small part of the population. Just last month, the Consumer Panel reported concerns over the increasing number of SIPPs being used by people who they are not suitable for. SIPPs can be low cost but they can also be very high cost.

Personal pensions are often cheaper. For example, the Aviva personal pension (current version) can do 0.4% p.a. all in with no other charges. Hargreaves Lansdown charge 0.45% (upto 250k) plus the fund charges on top of that plus a menu of charges for a range of events.

The A J Bell SIPP willl have a £100 a year custody charge. 0.20% p.a. on the value of your holdings if you use funds and a menu of other charges for various events plus dealing costs. Plus, the investment fund(s) charges on top of that.

I suspect I am being charged more than the figures in the charts relating to my total holdings.

Possibly. Possibly not. However, it is important to compare like for like. For example, pension funds use the TER (or OCF) as the annual management charge. You must not compare the AMC on a pension with the AMC on unit trust/OEICS. You must use the TER/OCF on UT/OEICs to compare against pension funds. The Designer pension from Aviva is a number of versions out of date in terms of availability but it still may be competitive. However, an internal change to another Aviva option or another personal pension may be a better option than a SIPP.

If you are not going to use the functionality of the SIPP and not utilise investments that a SIPP can offer (but a PPP will not) then it could end up that the SIPP is an expensive folly.

DaveMcG

What kind of idiots are moderating this forum - I posted a link to The Pension Regulator's site detailing the rules around management charges and the post was deleted.

dunstonh

DaveMcG wrote: »

What kind of idiots are moderating this forum - I posted a link to The Pension Regulator's site detailing the rules around management charges and the post was deleted.

There are no rules on charges with individual schemes.

As you have just 2 posts, perhaps it was never made in the first place as the board does not allow lost post count people to post links.

Linton

DaveMcG wrote: »

What kind of idiots are moderating this forum - I posted a link to The Pension Regulator's site detailing the rules around management charges and the post was deleted.

Not idiots, there are rules.

You cant post links until you have made (I think) 10 posts. This discourages the spam.

DaveMcG

dunstonh wrote: »

There are no rules on charges with individual schemes.

A stakeholder has a limit on charges for advice according to tPR

Any extra charges for provision of advice on stakeholder pensions must be entirely optional. Any charge levied for advice over and above the 1.5% stakeholder charges limit should be entirely separate from the scheme charging structure.

dunstonh

DaveMcG wrote: »

A stakeholder has a limit on charges for advice according to tPR

Any extra charges for provision of advice on stakeholder pensions must be entirely optional. Any charge levied for advice over and above the 1.5% stakeholder charges limit should be entirely separate from the scheme charging structure.

The stakeholder cap applies to stakeholders only. Not personal pensions and SIPPs. Stakeholders are niche product nowadays with most going PPP or SIPP.

Sobryma

MrC100 wrote: »

Hi,

I currently invest 20% of my income in an Aegon plan mandated by my current employer. (10% + 10%)

I was considering a SIPP by AJ Bell (or similar).

Dependent on your Aegon scheme, it may have a SIPP option, our company scheme does. It is also quite competitive at 0.25% platform charge although that may be influenced by the amount of funds our company is investing.

If so it has a wide choice of funds, although we cannot access ETF's unless we have an IFA.