IFA Managed SIPP

itsmege

First post, looking for feedback/any red flags on pension investment & fees proposed by IFA. Pot is £800k+ so happier to go down route of management by IFA than DIY. Looking to stop work at 55 (in 4 years) - although IFA did say why not stop earlier, with the value of funds in play? Not decided when to start drawdown or level/frequency of income from the pension.

About me:
Married, no mortgage, debts or dependents (other than spouse). Income £40k, spouse £25k. Savings apart from pension £350k. Currently adding £2.5kish pm to savings pot and should continue till work stops. Full SP at 67.

The investment:

Risk Mandate: 4

Asset Allocation:
Managed Liquidity 10%
Fixed Interest 50%
Property 10%
Global Equity 10%
Global Value/Small Cap Equity 15%
Emerging Markets Equity 3%
Emerging Market/Small Cap Equity 2%

Funds:
Dimensional - Global Ultra Short Fixed Income Dis
L&G - All Stocks Index Linked Gilt Index Trust C
Vanguard - Global Bond Index Inst Plus Hedged
BlackRock - Global Property Securities Equity Tracker D
L&G - Japan Index Trust C
L&G - Pacific Trust Index C
Vanguard - FTSE Developed Europe ex UK Equity Index Plus
Vanguard - FTSE UK All Share Index Inst Plus
Vanguard - FTSE UK Equity Income Index Plus
Vanguard - US Equity Index Plus
Dimensional - Global Targeted Value Dis
Vanguard - Emerging Markets Stock Index Inst Plus
Dimensional - Emerging Markets Targeted Value Dis

Initial Fees for Portfolio Setup, etc:
Custodian Charge 0.25%
Advisor Charge 0.84%
Dealing Charge 0.00%

Annual Fees:
Fund OCF 0.22%
Custody Charge 0.20%
Discretionary Fund Management 0.00%
Advisor Charge 0.75%
Ongoing Dealing Charge 0.00%

Not sure what else to include, so ask away if any more details needed. Thanks.

zagfles

Adviser charge looks high especially for that pot value - I believe 0.5% is typical and as your pot is large I'd have thought you could get it for less.

You're in danger of breaching the LTA if you put more in - what's your spouse's pension pot - would have thought the first thing any IFA would recommend is to start filling your spouse's pot (assuming it's nowhere near the size of yours).

dunstonh

The ongoing charge seems high on a pot of £800k. 0.50% is the dominant figure. A lot of IFA firms taper their charges as the investments get larger. 1% on small amounts falling to 0.5% (sometimes lower on very large amounts).
You may wish to go back and negotiate on that point. Rest of it seems reasonable though

itsmege

zagfles wrote: »

Adviser charge looks high especially for that pot value - I believe 0.5% is typical and as your pot is large I'd have thought you could get it for less.

You're in danger of breaching the LTA if you put more in - what's your spouse's pension pot - would have thought the first thing any IFA would recommend is to start filling your spouse's pot (assuming it's nowhere near the size of yours).

Thanks for commenting. Was comfortable with fee but have opportunity to discuss before signing on with the IFA. Won't put any more into the pension because of LTA as you rightly say. Main discussion with IFA is the pension transfer and then best (tax efficient) route for the other £350k (mix of ISAs, bonds, cash) if we want, but priority is the pension transfer decision. No mention during discussion with IFA of spouses's pot, but assumed that's because they're already retired with income from work pension, so any 'pot' limited to £2,880 pa contribution?

Any thoughts on the mix of investments?

itsmege

dunstonh wrote: »

The ongoing charge seems high on a pot of £800k. 0.50% is the dominant figure. A lot of IFA firms taper their charges as the investments get larger. 1% on small amounts falling to 0.5% (sometimes lower on very large amounts).
You may wish to go back and negotiate on that point. Rest of it seems reasonable though

Thanks, will discuss with IFA to see what room there is for manouevre on fee- he did mention "sitting back and letting the investments get on with it" so maybe shot himself in the foot there?. Good to know there's no red flags with the investments.

zagfles

itsmege wrote: »

Thanks for commenting. Was comfortable with fee but have opportunity to discuss before signing on with the IFA. Won't put any more into the pension because of LTA as you rightly say. Main discussion with IFA is the pension transfer and then best (tax efficient) route for the other £350k (mix of ISAs, bonds, cash) if we want, but priority is the pension transfer decision. No mention during discussion with IFA of spouses's pot, but assumed that's because they're already retired with income from work pension, so any 'pot' limited to £2,880 pa contribution?

Ah OK I assumed the £25k was employment income.

bigadaj

I was going to say that the proposed investments look incredibly conservative with the amount of bonds and fixed interest allocation but maybe the proximity of the lifetime allowance has influenced this.

Also everything in there seems to be passive, is this a request you've made or has up been substantiated and explained by the ifa.

I know the vanguard equity income has lagged many active funds over most of its life and whilst I probably have a passive bias on the basis I don't like paying extra without justification then I'd expect to see more of a mix of active and passive.

Al.

.. looks like a Parmenion portfolio.

If so, and they won't thank me for saying so, I'd apply a little pressure there, too. Have you established the volatility? So close to retirement, that's what I'd be chewing over. Also, don't underestimate the impact of inflation on the value of the lifetime allowance. It's due to increase, and if you don't draw from your pension for a few years, you may find it has increased by an appreciable margin.

The cost is a little punchy, and I don't want to sound like an apologist for high costs, but the adviser may be working his or her tush off so I'll defer judgement. Further, ask for a fixed fee, whatever you negotiate. That works both ways of course, but if you assume steady growth for a few years, you may find the arrangement advantageous. Of course, when you elect to enter drawdown in a few years, and funds start to diminish, it may work against you.

I imagine your adviser will have proved their worth by then, one way or another.