Sipp

youngbob

i have a sip which has about 300k in, this is looked after by financial advisor, who put it with intelligent pensions, who hold it with james hay, i find I'm paying all three to look after my sipp, which this last year cost me £5000, is this a reasonable cost, because it seems to be a high charge

dunstonh

i find I'm paying all three to look after my sipp, which this last year cost me £5000, is this a reasonable cost

That equates to 1.66% which is reasonable if it covers the three parties involved (adviser, provider/platform and investment).

because it seems to be a high charge

If you instruct your adviser to only use passive investments as a restriction, then you should be able to get the costs down a bit more but it may compromise the investment selection and "could" result in lower returns. However, if your priority is cost before investment then that is your choice.

It should be noted that your savings account interest rate likely has higher charges than that. Only difference is that you cant see it.

EdSwippet

dunstonh wrote: »

...However, if your priority is cost before investment then that is your choice.

But see also research from Vanguard, backed up by other similar surveys:

"Vanguard Asset Management ... conclusively found low-cost funds are more likely to outperform higher-cost funds."

dunstonh

EdSwippet wrote: »

But see also research from Vanguard, backed up by other similar surveys:

"Vanguard Asset Management ... conclusively found low-cost funds are more likely to outperform higher-cost funds."

Although there is more to it than that. Vanguard themselves admit it and that is why they retail managed funds as well. Plus, including all managed funds in a comparison is always going to harm the average return. In reality, if you are doing proper research, you would be eliminating an awful lot of them.

Most people are better off using a tracker where tracker is best and a managed where managed is best. Not restricting themselves to one or the other.

jamesd

EdSwippet wrote: »

"Vanguard Asset Management ... conclusively found low-cost funds are more likely to outperform higher-cost funds."

Vanguard primarily sells tracker funds, sometimes being the lowest cost provider, sometimes not, so naturally it is going to "conclusively" find whatever serves its business. If you can get two identically performing funds before charges, the one with lower charges would have the higher return. Life isn't so simple and except in the area of truly passive trackers with identical rebalancing schedules and money flows you don't get identical underlying performance. Even within trackers there are substantial differences and once you go beyond them to active management the differences get larger.

jamesd

youngbob wrote: »

i have a sip which has about 300k in, this is looked after by financial advisor, who put it with intelligent pensions, who hold it with james hay, i find I'm paying all three to look after my sipp, which this last year cost me £5000, is this a reasonable cost, because it seems to be a high charge

That's a 1.67% charge. Is it the combination of all fund charges, the James Hay platform charge and the Intelligent Pensions charges and the FA charges? If it's all four and you're using active managed funds it's reasonable enough. If you're using tracker funds, less so, since those could have charges in the 0.05-0.3% range meaning potentially 1.62-1.37% being split between the other three parties.

Are you getting advice and/or other services from the FA for your money that you're happy with?

It appears that the Intelligent Pensions service for FAs is to let the FA keep the relationship with you and cream off some income, while Intelligent Pensions does the underlying work. In such a setup the FA may not be adding value for you.

It's also worth asking you whether you will be 55 or older before 6 April 2015 and whether you might want to take a lump sum or income before having your annual pension contribution limit reduced from £40k to £10k. You can avoid that by putting at least some pension money into capped income drawdown before 6 April, allowing you to take the usual 25% tax free lump sum and 6-8% a year at normal pension access ages, without triggering the reduction in contribution limit. This can let you do things like recycling the income to gain more tax relief. Even one pot partially put into capped drawdown will allow more to be moved later but the option to set up new capped drawdown ceases on 6 April.

If you're anywhere close to state pension age and considering an annuity purchase you should know that deferring the state pension provides inflation-linked income of at least 5.8% of the money spent on it, roughly double the rate for an inflation-linked annuity and about the same as for a level annuity, at common annuity purchase ages.