Managed SIPP fees

southernlead

Hello,

Looking for advice on whether the fees charged by my IFA are reasonable.

I have 21k I'm transferring to a managed SIPP (Aegon). The SIPP annual management charge is 0.82%pa, and the service charge 0.48%pa. On top of this my IFA is charging an initial fee of 3% and an ongoing fund management fee of 1%pa.

This means my year one costs on the 21k investment are £1,141 (5.29%), and then a rolling annual cost of £495.21 (2.3%).

Does this sound within the bounds of what you'd expect for this kind of pension investment? Particularly the annual 2.3% total charge.

Thanks,
SL.

LHW99

If you don't need / want annual reviews, then you should not need to pay the ongoing charge.

You could always arrange for reviews every other year (or other period) while the pot is small if you prefer that.

dunstonh

I have 21k I'm transferring to a managed SIPP (Aegon). The SIPP annual management charge is 0.82%pa, and the service charge 0.48%pa. On top of this my IFA is charging an initial fee of 3% and an ongoing fund management fee of 1%pa.

The fees are not unseasonable for a small pot like £21k. However, rather than using a servicing contract with an IFA, you may be better off going transactional with them instead. The pot is really too small to make it cost effective to have a servicing style investment.

southernlead

LHW99 wrote: »

If you don't need / want annual reviews, then you should not need to pay the ongoing charge.

To be clear, it's an actively managed fund. So my understanding is they are watching the markets to move the investment around as needed.

At this point, I just want to make sure these fees are within the bounds of sensible. A fixed 1% seems ok with this small pot, but seems massive if it was 10x/100x bigger. Particularly on top of the 1.3% of the Aegon SIPP itself.

southernlead

dunstonh wrote: »

you may be better off going transactional with them instead.

They haven't suggested anything like this. How would this work exactly?

dunstonh

southernlead wrote: »

They haven't suggested anything like this. How would this work exactly?

It's possible the IFA firm you are using has a model where they offer only an ongoing style. Whilst you can turn off ongoing, they may not accept business from those that only want transactional.

Most firms will have ongoing servicing AND transactional offerings. Ongoing is what you are being offered at the moment. Transactional is a one off service (or can be at various points in the future but charged as and when). The products and investments you would use with transactional are usually different. However, they would be cheaper. For example, on your pot of money, you would be closer to 0.45% pa. all in with perhaps a £500-£1500 initial charge on transactional.

Whilst not unreasonable on the adviser charge for ongoing, the adviser could still charge the same and get it under 1.5% all in. So, this makes me think you are fitting their model rather than them fitting you.

bigadaj

southernlead wrote: »

To be clear, it's an actively managed fund. So my understanding is they are watching the markets to move the investment around as needed.

At this point, I just want to make sure these fees are within the bounds of sensible. A fixed 1% seems ok with this small pot, but seems massive if it was 10x/100x bigger. Particularly on top of the 1.3% of the Aegon SIPP itself.

It does look expensive percentage wise but that's due to the relatively small sum.

The fact that it's an actively managed fund means the fund a manager is investing the money to get the highest return, not your ifa. The ifa is there to determine what is best for you in terms of your circumstances, other financial set up and needs and matches the risk he believes you are comfortable with. The ongoing every year simply represents a brief review of his recommendations and ideally a review of your circumstances to see if this still matches, probably overkill every year which is what could cost you money going forward.

TheTracker

Cost can be judged in many ways.

From the point of view of the IFA. Is it a fair cost to charge for the work performed? The consensus here, albeit including those from IFAs, is a cautious yes.

From the point of view of the investor. Is it a fair cost for the benefit that you may gain? It might be fair for a mechanic to charge £300 to service your car each year, but do you really need a full service on your £750 car?

From the point of view of everyone else. What does everyone else pay? As we know across MSE, people generally pay more than they need to for most things in life.