If I'm reading it correctly, someone with £150k in ISA and £50k dealing ( all in funds) with Charles Stanley would save over £400 a year by transferring to iWeb ( assuming about 10 trades a year).
Are there any snags in doing this? Are the same funds available in iWeb?
Not all the same funds are available, based on previous comments on this forum. You can see a list of what they (IWeb or Halifax Sharedealing) offer on the http://www.halifaxfundscentre.co.uk/ website.
For example they don't have any PAIFs (so that's an unnecessary 20% tax on your net income from several major UK property funds that you might have wanted to hold directly in your ISA, but have to hold a taxpaying 'feeder fund' instead) ; they are missing a number of popular non-UCITS funds (e.g. Lindsell Train, Blackrock Consensus range, L&G Multi-Index range). However, you could always call them up and explicitly ask them before you switch, to avoid being misled by what is or isn't showing on the site.
For many people they will be absolutely fine and if a fund isn't available, will select a suitable alternative - there are, after all, a couple of thousand choices. Of course there are only a thousand choices once you realise that an Inc or Acc version of the same fund is still basically the same fund. IMHO, if you are going to switch a £200k fund portfolio to save £400 (about 0.2%) of charges, make sure you are not left with constrained choices on what you can hold (asset allocation and fund selection can easily make a 0.2% difference a year).
I've uploaded version 29 of the spreadsheet (link in the opening post). In this I've added a sheet called 'SIPP flexible charges' tabling the extra costs of flexibly accessing pensions.
These costs include drawdown set up costs, extra annual costs while in drawdown, charges for UFPLS payments, and closure costs amongst others things.
It is simply a table of extra costs of accessing the pension (rather than a calculation of extra annual cost). Many of the flexible access charges such as set up and closure costs are one off charges so don't easily equate to extra annual costs. The user is left to work out what those extra flexible charges might amount to as an average annual extra cost over the period that flexible access is taking place. Put simply
Total platform cost = main platform cost + extra charges for flexible access.
The main annual platform cost of holding the investments is estimated by the spreadsheet as it always has done.
Remember using platform A with no extra charges for flexible access, rather than platform B which charges explicitly for flexible access, doesn't work on cost grounds if the extra main platform costs for platform A are greater than the explicit flexible charges for platform B.
And conversely using platform A with lower main platform charges than platform B, is on cost grounds not a good option if there are extra flexible charges on platform A (vs platform which makes platform A overall more expensive.
Perhaps those looking to compare SIPP costs can be split into 3 groups
1. VERY CLOSE TO ACCESSING SIPP: it is important to work out which platform is cheapest taking into account the availability of flexible options, and the extra costs (if any) of flexible accesing their SIPP.
2. FAIRLY CLOSE TO ACCESSING SIPP: it is important to take into account the extra flexible charges of their platform. If these are high then consider also the transfer costs of moving to another provider to access the pension through another platform. If the SIPP is small and will be emptied in a short period once accessed, also consider any closure charges that apply. These closure charges are often based on the period the SIPP is held rather than the period over which flexible access takes place, so there can be logic to transferring before accessing the pension.
3. MANY YEARS FROM ACCESSING SIPP: the extra flexible charges are of interest but of limited relevance
This is my first attempt at detailing the flexible charges, and some of the platforms fee schedules are very unclear or incomplete. So it is particularly important that you use the table only as a starting point for looking at flexible access charges; do your own research.
What a stunning piece of work ! So glad I found it as I look for a new SIPP (and probably ISA) provider.
But I'm interested to note that Hargreaves Lansdown have managed to pull the wool over your eyes over the cost of drawdown, which it's true they say is free, but I discovered (only by asking the questions) that it is nothing like free for those with more than £250,000 in a SIPP.
Here's how it works: Funds between £250,000 and £1,000,000 in a SIPP attract an 0.25% custody charge (as opposed to the 0.45% charge that funds below £250,000 attract). But when one moves into flexible drawdown Hargreaves Lansdown split a SIPP into two accounts, "SIPP" and "SIPP drawdown", and each of these two accounts attracts its own charges !
Let's suppose I want to take a £25,000 tax-free lump sum this year, but draw no taxable income yet. This means I must move £100,000 into my "SIPP drawdown" account, withdraw £25,000 and leave the £75,000 invested. The £75,000 in the "SIPP drawdown" account now attracts a charge of 0.45% per annum, i.e. £337.50, whereas if Hargreaves Lansdown hadn't dreamed up this ripping wheeze to increase my charges it would still be in the "SIPP" account attracting a charge of 0.25% per annum, i.e. £187.50.
So to me it looks like I'm being charged £150 for flexible drawdown with Hargreaves Lansdown. On that basis they are close to the most expensive for drawdown, which is (I suppose) where they feel most comfortable.
The above assumes it's OEIC's I chose to crystallise. Does it help if it was shares I moved into the drawdown account ? No, in fact could be worse, as the £200 cap on charges for shares applies to both of these SIPP accounts (separately).
With more than £1 million in a SIPP (not me, I'm afraid) then the hit is even bigger. Hey, you can afford it, HL reckon you won't miss it. But your SIPP might be all you've got, you need to make it last, so it's well worth keeping tabs on expenses that aren't one-off but which will apply every year for the rest of your life.
I kept on asking the questions of HL because I really didn't believe what they were telling me. But in the end I realised they were deadly serious. But not quite serious enough to make this properly clear to their clients until the very last moment when they are about to move to drawdown.
So I do think it's worth a cell comment in cells E23, F23, G23 of the "SIPP flexible charges" sheet.
i think there are at least 2 ways a platform may handle the case where you crystallize only part of a pension.
they can (like HL) have 2 separate pots, 1 crystallized, 1 uncrystallized, each containing separate holdings. (e.g. suppose you have a £400,000 uncrystallized pension pot, and then you crystallize £100,000 of it, and take a £25,000 PCLS. now you have a £300,000 uncrystallized pot, and a £75,000 crystallized pot (and the 2 pots may contain similar, or completely different, holdings).)
or they can have a single pot of holdings, but record that a certain percentage of that pot is crystallized, the rest isn't. (so you now have a £375,000 pot, which is 20% crystallized, 80% uncrystallized (and the pot contains a single set of holdings). these percentages won't change when the value of your investments rise or fall; but will change when you draw income from the crystallized part, or when you crystallize more of the uncrystallized part.
i think i've seen some reference to some platforms using the separate pots approach. not sure who.
a single pot is better for minimizing charges. e.g. tiered charges (like HL's). or dealing charges, where applicable - suppose you want to change the investments you hold, in both pots - you would incur 2 sets of dealing charges.
separate pots could be better if you want to pursue a different investment approach in crystallized and uncrystallized pots.
(many people will not really need to part-crystallize in this way, so this won't affect everybody. taking a series of UFPLS doesn't get you into this, because the remaining pot is 100% uncrystallized. and just crystallizing the whole remaining pot is also fine.)
i think there are at least 2 ways a platform may handle the case where you crystallize only part of a pension.
Is there not an obvious 3rd way? Multiple pots but a single charge on combined assets? I don't know how Charles Stanley split their SIPPs but it is their charging structure for their ISA/unwrapped accounts
Is there not an obvious 3rd way? Multiple pots but a single charge on combined assets?
Seems obvious to me too, ColdIron ! It is a totally arbitrary decision to apply the charges the way HL do. And considering that one is already paying top-dollar for being with HL, the word "greedy" comes to mind.
I've added the new Vanguard platform into the spreadsheet comparison. A link to version 30 has been uploaded to the first post.
Although only Vanguard funds and ETFs can be held on the Vanguard platform, it is still a useful comparison of platform costs for those following an index-tracking investment stategy, hence the inclusion
They have no SIPP currently (they are planning to introduce one in 2018) so charges are calculated only for dealing and ISA accounts.
Replies
For example they don't have any PAIFs (so that's an unnecessary 20% tax on your net income from several major UK property funds that you might have wanted to hold directly in your ISA, but have to hold a taxpaying 'feeder fund' instead) ; they are missing a number of popular non-UCITS funds (e.g. Lindsell Train, Blackrock Consensus range, L&G Multi-Index range). However, you could always call them up and explicitly ask them before you switch, to avoid being misled by what is or isn't showing on the site.
For many people they will be absolutely fine and if a fund isn't available, will select a suitable alternative - there are, after all, a couple of thousand choices. Of course there are only a thousand choices once you realise that an Inc or Acc version of the same fund is still basically the same fund. IMHO, if you are going to switch a £200k fund portfolio to save £400 (about 0.2%) of charges, make sure you are not left with constrained choices on what you can hold (asset allocation and fund selection can easily make a 0.2% difference a year).
Can't disagree with that!
These costs include drawdown set up costs, extra annual costs while in drawdown, charges for UFPLS payments, and closure costs amongst others things.
It is simply a table of extra costs of accessing the pension (rather than a calculation of extra annual cost). Many of the flexible access charges such as set up and closure costs are one off charges so don't easily equate to extra annual costs. The user is left to work out what those extra flexible charges might amount to as an average annual extra cost over the period that flexible access is taking place. Put simply
Total platform cost = main platform cost + extra charges for flexible access.
The main annual platform cost of holding the investments is estimated by the spreadsheet as it always has done.
Remember using platform A with no extra charges for flexible access, rather than platform B which charges explicitly for flexible access, doesn't work on cost grounds if the extra main platform costs for platform A are greater than the explicit flexible charges for platform B.
And conversely using platform A with lower main platform charges than platform B, is on cost grounds not a good option if there are extra flexible charges on platform A (vs platform
Perhaps those looking to compare SIPP costs can be split into 3 groups
1. VERY CLOSE TO ACCESSING SIPP: it is important to work out which platform is cheapest taking into account the availability of flexible options, and the extra costs (if any) of flexible accesing their SIPP.
2. FAIRLY CLOSE TO ACCESSING SIPP: it is important to take into account the extra flexible charges of their platform. If these are high then consider also the transfer costs of moving to another provider to access the pension through another platform. If the SIPP is small and will be emptied in a short period once accessed, also consider any closure charges that apply. These closure charges are often based on the period the SIPP is held rather than the period over which flexible access takes place, so there can be logic to transferring before accessing the pension.
3. MANY YEARS FROM ACCESSING SIPP: the extra flexible charges are of interest but of limited relevance
This is my first attempt at detailing the flexible charges, and some of the platforms fee schedules are very unclear or incomplete. So it is particularly important that you use the table only as a starting point for looking at flexible access charges; do your own research.
What a stunning piece of work ! So glad I found it as I look for a new SIPP (and probably ISA) provider.
But I'm interested to note that Hargreaves Lansdown have managed to pull the wool over your eyes over the cost of drawdown, which it's true they say is free, but I discovered (only by asking the questions) that it is nothing like free for those with more than £250,000 in a SIPP.
Here's how it works: Funds between £250,000 and £1,000,000 in a SIPP attract an 0.25% custody charge (as opposed to the 0.45% charge that funds below £250,000 attract). But when one moves into flexible drawdown Hargreaves Lansdown split a SIPP into two accounts, "SIPP" and "SIPP drawdown", and each of these two accounts attracts its own charges !
Let's suppose I want to take a £25,000 tax-free lump sum this year, but draw no taxable income yet. This means I must move £100,000 into my "SIPP drawdown" account, withdraw £25,000 and leave the £75,000 invested. The £75,000 in the "SIPP drawdown" account now attracts a charge of 0.45% per annum, i.e. £337.50, whereas if Hargreaves Lansdown hadn't dreamed up this ripping wheeze to increase my charges it would still be in the "SIPP" account attracting a charge of 0.25% per annum, i.e. £187.50.
So to me it looks like I'm being charged £150 for flexible drawdown with Hargreaves Lansdown. On that basis they are close to the most expensive for drawdown, which is (I suppose) where they feel most comfortable.
The above assumes it's OEIC's I chose to crystallise. Does it help if it was shares I moved into the drawdown account ? No, in fact could be worse, as the £200 cap on charges for shares applies to both of these SIPP accounts (separately).
With more than £1 million in a SIPP (not me, I'm afraid) then the hit is even bigger. Hey, you can afford it, HL reckon you won't miss it. But your SIPP might be all you've got, you need to make it last, so it's well worth keeping tabs on expenses that aren't one-off but which will apply every year for the rest of your life.
I kept on asking the questions of HL because I really didn't believe what they were telling me. But in the end I realised they were deadly serious. But not quite serious enough to make this properly clear to their clients until the very last moment when they are about to move to drawdown.
So I do think it's worth a cell comment in cells E23, F23, G23 of the "SIPP flexible charges" sheet.
i think there are at least 2 ways a platform may handle the case where you crystallize only part of a pension.
they can (like HL) have 2 separate pots, 1 crystallized, 1 uncrystallized, each containing separate holdings. (e.g. suppose you have a £400,000 uncrystallized pension pot, and then you crystallize £100,000 of it, and take a £25,000 PCLS. now you have a £300,000 uncrystallized pot, and a £75,000 crystallized pot (and the 2 pots may contain similar, or completely different, holdings).)
or they can have a single pot of holdings, but record that a certain percentage of that pot is crystallized, the rest isn't. (so you now have a £375,000 pot, which is 20% crystallized, 80% uncrystallized (and the pot contains a single set of holdings). these percentages won't change when the value of your investments rise or fall; but will change when you draw income from the crystallized part, or when you crystallize more of the uncrystallized part.
i think i've seen some reference to some platforms using the separate pots approach. not sure who.
a single pot is better for minimizing charges. e.g. tiered charges (like HL's). or dealing charges, where applicable - suppose you want to change the investments you hold, in both pots - you would incur 2 sets of dealing charges.
separate pots could be better if you want to pursue a different investment approach in crystallized and uncrystallized pots.
(many people will not really need to part-crystallize in this way, so this won't affect everybody. taking a series of UFPLS doesn't get you into this, because the remaining pot is 100% uncrystallized. and just crystallizing the whole remaining pot is also fine.)
Although only Vanguard funds and ETFs can be held on the Vanguard platform, it is still a useful comparison of platform costs for those following an index-tracking investment stategy, hence the inclusion
They have no SIPP currently (they are planning to introduce one in 2018) so charges are calculated only for dealing and ISA accounts.