Hargreaves Lansdown SIPP?

TheShape

I've posted before about my desire to open a new pension, transfer old pensions into it and make regular monthly contributions. Link to previous thread with some background info:

https://forums.moneysavingexpert.com/discussion/5527711

I'm considering the Hargreaves Lansdown Vantage SIPP for a number of reasons.

I can make low £20+ monthly contributions. Allows small £80+ lump sum payments. Can transfer in other pensions so long as value £1000+.

I looked at some other options, Best Invest and AJ Bell YouInvest but they required higher regular, lump sum and transfer amounts.

I can get started now with low monthly contributions as I have other financial demands at present (house renovations etc) but once these are done my monthly financial commitments are low enough to allow me to significantly increase my contributions. I would also then like to transfer in my other pensions. Can I transfer at any time?

I have seen mention of the Vanguard LifeStrategy Funds on this forum and think I am correct in saying that annual fees to have this in a SIPP are HL's 0.45% + the fund's 0.24% charge = 0.69% total.

Is there anything I've not accounted for or is there another provider that meets my wants/needs?

bowlhead99

HL's 0.45% is quite expensive - it's the largest percentage-based fee out there. However, they do not have a separate annual fee for SIPP adminstration, whereas some other providers do. And they don't charge you a fee each time you make a purchase, whereas some other providers do.

If you were starting completely from scratch with a balance of £0 and then putting in £500 over the first year , your average balance for the year would only be about £250 and the charge would be about a pound (ignoring the charge levied by Vanguard which would be the same wherever you bought that fund).

You are not going to do cheaper than 'about a pound'. For example, if you used Youinvest, the charge is 0.25% which is around about half the 0.45% of HL, but halving a pound is not much of a saving. And Youinvest have a transaction fee each time you buy an investment, which is reduced to £1.50 if you use their 'regular investing' programme, but if you bought Vanguard 4 times a year by setting it up to only buy in a month when you had £100 of cash sitting in the account, you would have paid £6 in transaction fees over the course of the year and would have been better off using HL.

But you have said that you would plan to later transfer in your other existing pensions. This would change the numbers considerably. Because if you had £10k on the platform, HL are charging you £45 while Youinvest only charge you £25 + £6. If you had £100k on the platform, HL are charging you £450 while Youinvest only charge you £250+ £6. At £100k there are cheaper providers than both, but it's just an example of why you should look at what you plan to do with the account long term.

I looked at some other options, Best Invest and AJ Bell YouInvest but they required higher regular, lump sum and transfer amounts.

I have certainly made one off 'lump sum' contributions to my Youinvest sipp for as little as £10 to help me afford a particular transaction that I wanted to make. You can pay in by debit card whatever you like, when you like. Obviously I wouldn't just put in £10 on its own and try to buy a £10 investment with it if they are going to charge me a minimum of £1.50 transaction fee for making the purchase, but it can be done if you want.

Similarly, Youinvest are not going to mind if you do a transfer in of a small existing pension. Their 'special offer' is that they'll reimburse you up to £500 of exit costs from your old provider if you're bringing £20,000 to them and your old provider charges you for the transfer. This helps out if you were transferring another SIPP and wanted to move every individual fund or line of stock over from the old provider to the new one, as there can be charges for that. If it's just an old workplace pension which is going to be cashed in and cash sent, there will probably not be any transfer costs anyway. But the point is, the £20k is just to qualify for the special offer and doesn't mean they won't happily receive smaller amounts. For example, HL's transfer deal is they give you a free pen if you transfer £10k to them. But as you've found out, they will take smaller amounts.

Anyway, this post isn't intended as advertorial for Youinvest (who are fine for my circumstances) but merely to point out that you should consider how much money you will have in the total pot after you've done all your transfers in, because if it's a big number, the 0.45% will be expensive. HL have a good reputation for customer service to go along with their extreme expensiveness, but it sounds like you only intend to buy one fund so you do not need much in the way of 'bells and whistles' of customer services. You could get an overview of other platforms' costs using one of the various comparison tools like http://monevator.com/compare-uk-cheapest-online-brokers/

As you worked out, buying the cheapest multi-asset fund you can find from Vanguard via HL will still cost you almost 0.7% every year, all in. If you are not hung up on using Vanguard and do not need the functionality of a SIPP, because you are not going to be picking lots of individual company shares or investment trusts yourself, you can get a basic stakeholder pension for about 0.55%. It would have quite limited fund choices available included in that price but would still be a pension.

Bottom line, HL is quite suitable for a very small investor funding their account slowly in dribs and drabs where a high percentage-based fee is not a large absolute amount of money. If you transferred other pensions into the pot, the same high percentage would then be a larger amount of money and with £20k or so it would be getting on for £100 a year; at that level, flat fee providers can start to look more competitive.

dunstonh

Is there anything I've not accounted for or is there another provider that meets my wants/needs?

We dont know what your wants or needs are.

I can make low £20+ monthly contributions.

But realistically, you are not going to do that are you? It would question why you think its best that you have a SIPP, which is an experienced investor option looking for more advanced investor options and generically more expensive (caveats apply)

TheShape

A SIPP was mentioned on the previous thread that I linked to in my first post so I thought I'd come back and ask for more info.

What I want (whether that's the same as what I need, im not sure) was a pension that initially allows low monthly contributions because that's what I have available to invest (at least initially), allows small lump sum contributions (around £100) and will take my three low value personal pensions (valued at 3-4k total).

I fully intend to increase regular payments over time.

If a SIPP is unnecessary, what would be the better option?

I don't have a planned/set retirement date but the ability to access some form of income somewhere between ages 55 and 60 to allow me to reduce my working hours could be of benefit.

dunstonh

If a SIPP is unnecessary, what would be the better option?

Generically, a SIPP would be unlikely to be considered suitable for such small amounts. However, the DIY market tends to be biased towards SIPPS (and for good reason - they have lower solvency requirements, dont provide the higher level FSCS protection and are easier to maintain).

You are below the level personal pensions would be interested (tend to be larger premiums and/or £20k plus value. In those cases you see bottom line (fund and provider) totalling figures around the 0.4% mark.

Stakeholder pension is an option but you are likely to be looking at bottom lines of 0.6%. They have to be flexible by law.

I don't have a planned/set retirement date but the ability to access some form of income somewhere between ages 55 and 60 to allow me to reduce my working hours could be of benefit.

Is that realistic on such small amounts. If you are going to increase later, then you are going to have to be talking about significant increases as the current level is barely worth the effort unless aged 18.

bowlhead99

dunstonh wrote: »

I don't have a planned/set retirement date but the ability to access some form of income somewhere between ages 55 and 60 to allow me to reduce my working hours could be of benefit.

Is that realistic on such small amounts. If you are going to increase later, then you are going to have to be talking about significant increases as the current level is barely worth the effort unless aged 18.

As an illustration, your other thread mentioned you were 38. So you have 17 years to go. Putting in £20 a month over that timescale is £4k total (in real terms, if you increased the £20 with inflation each year).
With a pension pot going from £0-£4k over 17 years, it's like the £4k is only invested for half that time, on average. So maybe it would produce £2-3k growth.

Adding the growth to the £4k... and also the existing £5k pensions and the growth on those... you have enough to produce "some form of income" but not enough to semi-retire. You would have a pot of investments worth under £20k, and £20k of investments produces income of what, £15 a week? So you would be burning through the capital pretty rapidly.

If you plan to increase the monthly amount significantly, great. But then you are talking about larger deposits and larger total pot size, so a high-percentage-charge HL SIPP becomes rather less attractive. It seems like it would be a start, but you might well be better with a cheaper platform or even something like a very basic stakeholder product for the next several years and wait till you have a bigger pot before you try to get clever

TheShape

I am aware that contributing £20 p/m will get me just about nowhere. I hadn't even decided on a precise level of contribution, only that HL would allow from that amount and others required £80+ p/m which could be done right now if I use the money I have been contributing to a S&S ISA. It appeared to be the case though, that some providers would require larger one off payments and wouldn't consider the transfer of my small pension pots.

All being well my partner and I have discussed the possibility of selling each of our homes and moving to a new home mortgage free in the near 2-3 year term. Nothing guaranteed (she might be sick of me by then) but that hypothetical future position would allow me to make far greater contributions.

If I could contribute £80 p/m as of now, is a SIPP worth thinking about still?

Is there a provider that will take my small pensions and what are the smallest lump sums that can be added?

bowlhead99

TheShape wrote: »

If I could contribute £80 p/m as of now, is a SIPP worth thinking about still?

£80 a month is only about £1k a year. So it would likely easily fit inside your S&S ISA allowance which is over £15k a year now and £20k a year from next April. S&S ISAs can hold the same investments as SIPPs.

So, you might as well just put it in your S&S ISA for now, let it grow in there tax free, and then once you've worked out what you're doing for the next couple of decades, "upgrade" it to a pension to get the tax relief. This avoids locking it away with no access for 17 years over which your lifestyle plans might change.

For example: put £800 in a pension now and the provider tops it up to £1000 for basic rate tax relief. Double it through investment growth over next decade and you have £2000 in a pension pot.

Alternatively, put £800 in the S&S ISA. Double it through investment growth over next decade and you have £1600 in the ISA. Use it to make a £1600 pension contribution and the provider will gross it up to £2000 for basic rate tax relief, leaving the same £2000 in a pension pot that you would have got by doing the pension contributions starting today.

Depending on your personal circumstances, if you intend to get promoted at work over the years you might be a higher rate taxpayer in a decade's time and therefore get the advantage of 40% income tax relief when making the contribution instead of just 20% now (assuming you are basic rate now)

If your numbers were a great deal bigger and you delayed contributing to the pension you might come across the problem that you had tens of thousands of pounds in your ISA that you wanted to move into a pension and it might exceed the amount you could contribute to a pension in a single year, so would have to drip it over more than one year. But doesn't seem an issue with your small amounts.

So basically there's no necessity to put £80pm into a pension right now, IMHO. The reason to do it would be if you need the self-discipline of locking it away so you can't cash it in.

Is there a provider that will take my small pensions and what are the smallest lump sums that can be added?

The providers I named, including the stakeholder pension linked, will probably take your small pensions. And I know Youinvest will take a lump sum tenner at a time by debit card as I said above, although it is not very efficient because they have per-transaction fees for investment purchases.

You could try looking at the platform comparison link given above to get a basic overview of who is offering affordable SIPPs, if a SIPP is the way you want to go.

digannio

Where HL does become more competitive with its SIPP offering is when someone is taking regular UFPLS payments or income drawdown payments. Youinvest charge £100 (plus VAT) a year for those whereas they are free with HL.