Is my gf stuck with the Pension provider her employer chooses?

DoctorW

Hi all,

My girlfriend has been a qualified Architect for a couple of years now and has recently been enrolled on her company's pension scheme.

She brought the info pack home last night and asked me to read through the small print. This detailed AMCs (annual management charges) of around 0.7-0.8%

I, as a self-employed guy with an ultra low-cost SIPP know charges as high as that to be pretty poor (based on assumption that the pension fund is investing mainly passively in indexes etc...as it should be in my opinion!).

Not the end of the world considering how little she'll be contributing at the moment, but I wondered what flexibility a staff member has in going against the provider their employer chooses in order to go the SIPP route or choose a much cheaper provider with AMCs in the reasonable spot of the 0.2-0.3% range.

Really appreciate any help from the experts

Thanks

DW

molerat

If she wants to keep the employer contribution then probably yes. They may consider another provider of her choice but unlikely, she can only ask.

dunstonh

I wondered what flexibility a staff member has in going against the provider their employer chooses in order to go the SIPP route or choose a much cheaper provider with AMCs in the reasonable spot of the 0.2-0.3% range.

The employer has the choice. An individual plan does not satisfy auto-enrolment rules. So, she would have to opt out of the employer scheme, lose the employer contribution and have her own plan.

bigadaj

Surely she should be raising it with her company, either management or hr.

It's not a situation where the company is getting any benefit so it shouldn't be contentious, though the likely conclusion may well be that the pension provider isn't being reviewed sufficiently often to get a good deal. It may well be the case this is a legacy issue, those charges aren't horrendous and would he as been run of the mill a few years ago, though you are right op in that they could be quite a bit lower, and maybe this is the opprtunity to point this out.

DoctorW

Thanks a lot all. Pretty much what I feared.

She's pretty shy so really can't see her marching into HR to question them about "excessive AMCs for a sensible pension investment" of which she'd never heard about before last night....but I'll see if I can persuade her to ask, ha!

Thanks again

greenglide

This detailed AMCs (annual management charges) of around 0.7-0.8%

choose a much cheaper provider with AMCs in the reasonable spot of the 0.2-0.3% range

Are you comparing like with like?

Your SIPP will, presumably, have [latform charges on top of the fund charges?

Does the 0.7% - 0.8% included all the charges?

Are you comparing active with passive with trackers?

Can you switch funds in her scheme?

Trackers arent always the cheapest overall - not everyone subscribes to the "trackers are always best" school of though (I have some, but not all by any means).

Maelwys

Agree with greenglide -

0.8 sounds about right for a managed fund. And (without opening up the can of worms again) last I checked, there was at least a decent argument for managed funds outperforming passives on this side of the pond due to tax-free ISA rules. So it's probably not the worst option out there especially if the employer's also making contributions.

Depends what they're investing it in of course. I'd imagine the scheme administrators will be a bit more risk-adverse than some owners of custom SIPPs...

dunstonh

She's pretty shy so really can't see her marching into HR to question them about "excessive AMCs for a sensible pension investment"

0.75% is not excessive (that is the cap on default funds). 0.8% would indicate external funds.

Are there fund based discounts?
Remember that the workplace scheme will likely be packaged on charges (provider fund fund cost all in one) compared to the SIPP which will be unbundled (SIPP charge plus fund charge equals total)

Uglymug

Before I retired I had a similar problem in that to benefit from my employers' contribution I had a subscribe to the Company pension plan.
However this plan allowed free transfers to any other authorized pension plan.
So, once a year, I transferred from the company plan to my Sipp. In my case the reason for this was that it opened up a very much larger range of investments and I felt I was in full control.
The only proviso was I should leave £1 in the company scheme to keep it open ready for my next months contribution.
So you could consider that once your GF has amassed a reasonable sum in her company pension of transferring it to a Sipp (or wherever).

jamesd

The company decides so she can't change that. What she can do is ask them to allow periodic transfers out so she can switch money to a cheaper place every few years.

The charge is probably for the default fund which is probably an active managed balanced fund. There may be cheaper and/or better funds available.