Lowest platform costs for drawdown scheme?

Mutton_Geoff

Does anyone have any links to recent reviews of platform costs for a SIPP/Drawdown scheme.

I'm looking to move my pension pot to a SIPP, buy two "lifestyle" funds, eg one Vanguard Lifestrategy and one Blackrock Consensus in equal portions. Hold for around three to four years before starting drawdown.

AMC is the most important initially since I won't be dealing. When I start drawdown, that could either be monthly or quarterly. I assume each drawdown payment is a "trade" of the fund so max 12 trades a year.

Looking at usual suspects, HL, III, TD (owned by III now) but only finding out of date articles online.

Pension pot is c £1m.

dunstonh

I'm looking to move my pension pot to a SIPP, buy two "lifestyle" funds, eg one Vanguard Lifestrategy and one Blackrock Consensus in equal portions. Hold for around three to four years before starting drawdown.

Lifestyle funds are in decline. Most providers have started pulling them as they are not longer considered the most appropriate option for most people (they were aimed at people planning to use annuity. With drawdown now being the main option, the risk reduction is no longer necessary). So, why do you want one?

I assume each drawdown payment is a "trade" of the fund so max 12 trades a year.

Trading costs is only an issue if you use a provider that charges for them.

Pension pot is c £1m.

And you want to use just two multi-asset funds? That is unusual. You tend to find larger investors run bespoke portfolios.

Are you going to be suffering a lifetime allowance charge?

zagfles

Download Snowman's spreadsheet:

https://forums.moneysavingexpert.com/discussion/5583030

Mutton_Geoff

dunstonh wrote: »

Lifestyle funds are in decline ...
So, why do you want one?

Because, as far as I can see, the investments within them closely mimic what pension fund investors are already doing.

dunstonh wrote: »

And you want to use just two multi-asset funds? That is unusual. You tend to find larger investors run bespoke portfolios.

And therein lies the problem of costs. I already have a "bespoke" portfolio running but with high fees. I do not want to be a trader and I want to start reducing risk as I approach drawdown although this pot can afford to be slightly more risky than normal since I also have the benefit of a defined benefit scheme. That, and the state pension, will more than cover my needs.


My "bespoke" portfolio contains ten funds and comparing them to the lifestyle funds mentioned, they look pretty similar in % of asset class/geo location etc.

dunstonh wrote: »

Are you going to be suffering a lifetime allowance charge?

Yes, I have IP2016 but my benefits already exceed that. I am already talking to an IFA about options and being introduced to a tax advisor (my own accountant not specialising in pensions).


The IFA will be discussing alternatives to my plan but I thought I would post in this forum since it's clear, especially from posters like yourself and James, that there is a lot of highly intelligent thinking going on and I want to tap into that knowledge to help me make the right decision.


Platform costs are one part of that decision making.


Just downloaded Snowman's spreadsheet. Thank you.

EdSwippet

dunstonh wrote: »

I'm looking to move my pension pot to a SIPP, buy two "lifestyle" funds, eg one Vanguard Lifestrategy and one Blackrock Consensus in equal portions. Hold for around three to four years before starting drawdown.

Lifestyle funds are in decline. Most providers have started pulling them as they are not longer considered the most appropriate option for most people (they were aimed at people planning to use annuity. With drawdown now being the main option, the risk reduction is no longer necessary). So, why do you want one?

OP seems to be confusing Lifestyle and Lifestrategy funds. The former are indeed out of style. The latter are fine, though.

BLB53

Does anyone have any links to recent reviews of platform costs for a SIPP/Drawdown scheme.

I would think with the large sums involved it would be better to select a fixed fee option rather than percentage so the likes of Halifax would be worth a look. Rather than go for monthly drawdown, you could use flexi-drawdown to take out the required lump sum each year and deposit in your bank/building society and withdraw from that.

Here's a link from DIY Investor which may help

http://diyinvestoruk.blogspot.co.uk/2016/08/selecting-your-diy-pension-platform.html

...and also Monevator

http://monevator.com/compare-uk-cheapest-online-brokers/

Mutton_Geoff

EdSwippet wrote: »

OP seems to be confusing Lifestyle and Lifestrategy funds. The former are indeed out of style. The latter are fine, though.

Possibly incorrect terminology but I did specify the two funds of interest - "Vanguard Lifestrategy and Blackrock Consensus in equal portions" so my intention is clear. I will have to read up on the difference between lifestyle and lifestrategy to ensure I use the correct terminology. Thank you.

dunstonh

My "bespoke" portfolio contains ten funds and comparing them to the lifestyle funds mentioned, they look pretty similar in % of asset class/geo location etc.

That is normal. All bespoke portfolios are built to a strategy and one of the most common strategies is asset/sector allocation. (i.e. UK equity, US equity, Japan equity etc). So, depending on fund size, you would have at least one fund in each sector. However, the key decisions are in the weightings and the funds used in each sector.

Cost is important but is not the primary consideration. If you focus on charges as the primary consideration, you may be reducing your investment returns by a level that is greater than the charges. i.e. saving 0.2% on charges may make you feel you have achieved something to save money but if it costs you 4% on returns, then it's a false economy. Equally, paying more does not mean you will get more. For example, we run active, passive and hybrid models. The hybrid beats the passive and active most of the time. Active is the most expensive, passive it the cheapest. Hybrid is a mixture and is in between.

Also, platforms are not all equal. Platforms are a value added service. Some have simple charges (which may just be an annual charge which covers virtually all services) and others have a long menu of charges for virtually everything they do.

The functionality of the platform varies. For example, does the platform require paper forms signed when you do drawdown events or can it all be keyed online without a signature? Do, they use CHAPS or BACs for lump sums? Do they have a quick turnaround on tasks or do they take longer than an insurance company contract?

You want to avoid paying peanuts and getting a service that frustrates you and delays things and causes issued down the road.

I had a client on a cheap platfrom with paper form requirements in most areas. They were out in Spain when their son had a major issue and they needed money quickly. Had they been with a platform that didn't need wet signatures, we could have had the money in their account quickly. However, they had to wait much longer and the costs of that wait and the inconvenience were greater than the platform cost difference.

You should aim to pay the least for the functionality you want and the service you are after. You dont want to pay for things you are not likely to use but you dont want to pay for something that doesn't do what you want it to.

OldMusicGuy

I am approaching retirement (less than 6 months away) and I have quite a large portfolio. It is currently in 3 funds, a Blackrock Consensus Fund, a Vanguard LifeStrategy Fund and a dividend income-focused fund. Previously I had a bespoke portfolio of 12 funds. For me, the bespoke portfolio suffered from "diworsification", too many funds with too many charges. So I decided to take control and move to a simpler allocation, partly to reduce costs. I am also holding 30% of the fund in cash as I haven't fully decided how I will approach drawdown and decumulation in retirement yet and want to make sure I am insulated from any short term shocks. The invested money is there for at least 10 to 15 years.

FWIW if I had left all my funds in the default Blackrock fund that my company DC scheme uses I would have got a better return than my bespoke portfolio with far lower costs. Sometimes it doesn't pay to overthink things.

As far as platform is concerned, I am on HL because that's what my company uses. It's a great platform but I may shift to a lower cost one when I retire.

bostonerimus

Mutton_Geoff wrote: »

Does anyone have any links to recent reviews of platform costs for a SIPP/Drawdown scheme.

I'm looking to move my pension pot to a SIPP, buy two "lifestyle" funds, eg one Vanguard Lifestrategy and one Blackrock Consensus in equal portions. Hold for around three to four years before starting drawdown.

AMC is the most important initially since I won't be dealing. When I start drawdown, that could either be monthly or quarterly. I assume each drawdown payment is a "trade" of the fund so max 12 trades a year.

Looking at usual suspects, HL, III, TD (owned by III now) but only finding out of date articles online.

Pension pot is c £1m.

I like your thinking. Keep the portfolio relatively simple, costs down and use total return in drawdown. Many people will keep a cash buffer that they regularly top up with a drawdown...quarterly feels like a good frequency. In the US I take a similar approach (although I'm still reinvesting dividends) using Vanguard US equity, International and US bond tracker funds and keep my fees around 0.1%. The UK isn't quite there yet, but things are slowly getting better.

Tax planning is going to be very important at your pension pot levels. That will require a long term strategy. I'm in a similar situation to you having a large pension pot that could attract a lot of tax. To mitigate that I'm making small withdrawals that I don't actually need so that I can pay a lower rate of tax on them and put them into a tax free account. I plan to do that for the next 15 years. I'm also going to defer my state old age pensions so that I can take larger withdrawals from my pension accounts. I imagine there are similar strategies in the UK. I'm also looking into trusts as part of my estate planning.

I am sure an IFA would not be too enthusiastic about such an approach because they will believe that a bespoke portfolio will be better for you. Of course it will definitely be better for them. I'm sure you know that some bespoke portfolios will beat your simple approach and some won't and that you are ok with that.

dunstonh

I had a bespoke portfolio of 12 funds. For me, the bespoke portfolio suffered from "diworsification", too many funds with too many charges.

8-15 funds is typical. So, 12 is right on the mark for a decent level of diversification without going into overkill. There are 10 main sectors (some may include 1 or 2 more). So, a fund in each is going to see you in the ballpark of 12 just to get basic diversification.

If you think 12 funds is overkill, then why are you holding over 20 funds in your portfolio?

So I decided to take control and move to a simpler allocation, partly to reduce costs.

You have not taken control. You have passed it to three fund houses and are running three different strategies using at least double the number of funds