Wanted - Framework for thinking about a SIPP question

EdInvestor

Certainly one should avoid these insurance company SIPPs.As it says in the IFA "house mag", they have just been turned into personal pensions with higher charges.

http://www.ifaonline.co.uk/public/showPage.html?page=ifa2006_articleimport&tempPageName=474096


The whole point about SIPPs is that they are designed for self investment to give people access to investments for their pensions that advisors are not authorised to cover, such as shares, gilts, property, investment truts and exchange traded funds, plus the full range of unit trusts and OEICs, plus immediate access to income drawdown.

A very useful product which people should be encouraged to investigate.

dunstonh

Ed, your anti-IFA bias is so obvious to all to see.

The SIPPs you regularly recommend suffer exactly the same problem yet you only want to be negative on the IFA distribution channel.

The whole point about SIPPs is that they are designed for self investment to give people access to investments for their pensions that advisors are not authorised to cover, such as shares, gilts, property, investment truts and exchange traded funds, plus the full range of unit trusts and OEICs, plus immediate access to income drawdown.

You almost got it right there. The whole point about SIPPs is for direct investments. Whether an IFA is used or not doesnt matter. Yet as the research shows, most SIPPs are being used for funds. Funds which can be present on stakeholder and personal pensions and can be cheaper than they are in SIPPs.

I do not understand why you focus so much on charges on certain investment products yet totally disregard charges on SIPPs. The same principles apply to all tax wrappers and all products.

EdInvestor

Latest FSA guidance on SIPPS vs personal pensions and charges.

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=151421

Ed, your anti-IFA bias is so obvious to all to see.

I am not against advisors as such, but I do look for value added.Too often the way the advisor makes money is not aligned to the interests of his client: there is a conflict.This may not apply to NMA advisors like you - but you are in a very small minority at present.

Very often it seems that if the client is willing to put in a bit of effort to educate himself (eg by following up pointers from sites like MSE) where fairly straighforward investment issues are concerned, he will be better off to DIY.

dunstonh

Thank you for posting a link to something that backs up everything I have been saying.

I am not against advisors as such, but I do look for value aqdded.Too often the way the advisor makes money is not aligned to the interests of his client: there is a conflict.This may not apply to NMA advisors like you - but you are in a very small minority at present.

It is the way you come across. You regularly post that charges on investment bonds are too high. Yet low cost examples exist which are cheaper than unit trusts. Yet with pensions, you tell everyone to go into a SIPP despite the fact that stakeholder and personal pensions with lower charges may be more suitable. Sticking an inexperienced investor into an experienced investor product paying charges above that of a stakeholder or PPP doesnt make any sense. The great thing is that we have choice. SIPPs are a great product but any product can be great if the needs match. I wouldnt touch a stakeholder personally but for many people they are the best option.

As for advisers, you only ever hear bad things. Not good things. The majority of transactions take place with suitable advice and the correct advice.

purch

Can I ask a question here; ??

Not that I doubt in any way your assertion that a purely Fund based SIPP can be done cheaper with SW and SE...



Just as an rough guide could you give ballpark figures of the costs say for a 40yo with a pot of £150K who wanted to stick it into say 20/30 odd different funds.

I guess with H-L the upfront costs would be nil ( other than a couple of postage stamps ) if you assume he/she chose funds where they discount all the initial charges, and then ongoing AMC's of maybe 1.5 to 1.75 pct

dunstonh

Just as an rough guide could you give ballpark figures of the costs say for a 40yo with a pot of £150K who wanted to stick it into say 20/30 odd different funds.

Selestia: 0.9% initial charge (would drop to 0.7% for transfers over £200k)
annual management charges would be retail unit trust/oeic/sicav as per HL but nominated trail of 0.25%. So, if fund has 0.5% trail, that would be rebated with 0.25% taken. (rebate would be higher with larger fund values). There is a members charge of £50pa.

So, initially more expensive than HL but cheaper annually. (online access and ability to switch yourself available, automatic rebalancing available and switches at 0%)

Scottish Widows: Designed with much bigger funds in mind than £150k and wouldnt be cost effective at that level. At 300k plus it matches HL with no initial charge and retail amc. At 500k plus it starts getting cheaper with a rebate on amc and further rebates at 750k plus. The SW stakeholder funds are available on this at stakeholder charge so a bit of mix and matching can make it good value.

purch

Thanks

A bit of context to the on-going argument :T

I do think there alot of people who, for numerous reasons just don't want to go to an IFA to organise their affairs ( probably for historic reasons that no doubt don't apply nowadays ) and thus the concept of a seemingly low-cost way to manage their own pension affairs is appealing.

Knowing the costs and/or savings might make them change their minds a little. 0.25 pct of a hopefully ever growing pot over 20/25 years adds up to a large chunk of change !!!

EdInvestor

But this is not a SIPP surely?It only offers funds.
H-L's SIPP also offers direct investment options.

Judwin

dunstonh wrote: »

Selestia: 0.9% initial charge (would drop to 0.7% for transfers over £200k)
annual management charges would be retail unit trust/oeic/sicav as per HL but nominated trail of 0.25%. So, if fund has 0.5% trail, that would be rebated with 0.25% taken. (rebate would be higher with larger fund values). There is a members charge of £50pa.

So, initially more expensive than HL but cheaper annually. (online access and ability to switch yourself available, automatic rebalancing available and switches at 0%)

I'm in a similar boat to the O/P too.

I'm looking to transfer a Pru Personal pension from their with profits to another PPP with a large range of external funds. I only want to invest in OEICS funds, nothing else. I've looked at a couple of PPP providers - Scottish Widows, Prudential, Standard Life - and whilst they all have a reasonable range of funds, they don't have any of the funds I'm currently holding in my ISA. For arguments sake, lets say I want to include :

Gartmore China Opportunities Accumulation
Allianz RCM BRIC Stars Accumulation
INVESCO PERPETUAL High Income Units

H-L include these in their SIPP, but Dunston seems to be saying that it would have higher charges than a decent Supermarket-PPP. And they can't take Protected Rights at the moment.

Selestia also seem to include the Funds I'm looking for, but if I understand it correctly, I need to go to an IFA and get them to do an Execution only for that? Once it's setup, I can do my own switching/rebalancing online without going back to the IFA? Can Selestia take Protected rights?

I understand that the funds I've picked might be a bit 'adventurous' for pension planning, but assume I'm happy with that risk level.

Any other options for an OEICS only pension?

dunstonh

But this is not a SIPP surely?It only offers funds.
H-L's SIPP also offers direct investment options.

Correct, the Selestia option is not a SIPP. However, it fits the needs of the majority that want only unit trust funds and most of HL's (and others) find the bulk going into unit trust funds.

Selestia also seem to include the Funds I'm looking for, but if I understand it correctly, I need to go to an IFA and get them to do an Execution only for that? Once it's setup, I can do my own switching/rebalancing online without going back to the IFA? Can Selestia take Protected rights?

Understood correct. You get an IFA to set it up, register for online access and you can view values and switch yourself without needing the IFA. It will take protected rights as well and will do drawdown when the time comes.

Obviously some IFAs may not be willing or able to do execution only transactions. So, that is a limitation. Also, some may not be willing (or able) to offer those terms. Like many financial services products, they are priced differently with different IFAs. The default Selestia terms would have 1.7% as an initial charge if that IFA doesnt qualify for improved terms.

Any other options for an OEICS only pension?

From a PPP point of view, Selestia would probably top it. Otherwise you are looking at SIPPs. (Scot Wid and Transact are more expensive than Selestia).