IFA setting up a pension

dunstonh

As a comparison on my US equivalent of a private pension with Vanguard I pay 0.04% a year in fees.

Is that total cost? or just fund cost?

The US investors I have on my books all moan about high US fees compared to the UK. I am sure if you pick the best US versus the worst UK or the best UK versus the worst US then you would get big differences either way. (and your Aviva examples are at the worst end of the UK).

On a like for like basis you would expect the US to be cheaper as it has economies of scale that the UK does not and is lower regulated.

zagfles

dunstonh wrote: »

Aviva's direct product has a higher charge than the IFA version. If you use Cavendish, you get the early 2000s product versions that do not support the pension freedoms of 2015 and are more expensive than their current product version.

It won't be more expensive when you add advice fees! It'll be much cheaper. And pension freedoms aren't needed till you want to use them, when you can transfer to somewhere that allows them.

zagfles

dunstonh wrote: »

Is that total cost? or just fund cost?

The US investors I have on my books all moan about high US fees compared to the UK. I am sure if you pick the best US versus the worst UK or the best UK versus the worst US then you would get big differences either way. (and your Aviva examples are at the worst end of the UK).

So what's the best UK then in your opinion? Better than 0.04%? Without forgetting to add advice costs (if required).

bostonerimus

dunstonh wrote: »

Is that total cost? or just fund cost?

The US investors I have on my books all moan about high US fees compared to the UK. I am sure if you pick the best US versus the worst UK or the best UK versus the worst US then you would get big differences either way. (and your Aviva examples are at the worst end of the UK).

On a like for like basis you would expect the US to be cheaper as it has economies of scale that the UK does not and is lower regulated.

My total cost is the cost of the funds......actually it's a bit more than 0.04% when I do the maths.....it's 0.07%....0.04% is just my least expensive fund.

As we've agreed on before there are plenty of expensive funds with front end loads sold by US firms that justify their fees with similar words and phrases as used in the UK. There are also plenty of US financial advisors who will be happy to manage you money for a fee....I would also make the observation that any US customer who employs a UK IFA probably isn't looking for the least expensive way to invest in the UK and by extension in the US either. Anyone complaining of the US being expensive hasn't looked very hard.

Comparisons are always difficult and sometimes paying fees is worth it, but sometimes it isn't. The one sure thing is that the OP will be paying 20x the fees that I'm paying the US. Now the UK does have the massive advantage of having far larger tax free saving allowances than the US......if you can take advantage of them.

To me the OP's gut feeling is a good one. Maybe the IFA isn't providing much value here.

MK62

bostonerimus wrote: »

My total cost is the cost of the funds......actually it's a bit more than 0.04% when I do the maths.....it's 0.07%....0.04% is just my least expensive fund.

I don't think there is a UK private pension option available which could compare to that level of fees - does that include everything......fund charges, account charges, withdrawal charges etc?

bostonerimus

MK62 wrote: »

I don't think there is a UK private pension option available which could compare to that level of fees - does that include everything......fund charges, account charges, withdrawal charges etc?

Yes.

Over the years I've had several company defined contribution plans invested with large fund companies and their total fees tended to be in the 0.5% range. When I left each employer I took the opportunity to move my DC pot into an Individual Retirement Account (IRA) with Vanguard. The IRA is a little like a SIPP. With Vanguard in the US there are no platform or trading fees if you buy Vanguard funds, so the only cost is the fund fee itself. Once you reach 59.5 years old then you can make withdrawals from the IRA without any cost, but it's all taxable.

It might well be hard to invest as inexpensively in the UK when all fees are included, but I think it's still worthwhile to look for good value and be frugal with fees wherever you invest. If you pay an IFA make sure they are doing some work and providing some value.

xylophone

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

http://monevator.com/low-cost-index-trackers/

http://monevator.com/vanguard-target-retirement-funds/

may be worth a read.

Andymac1987

Thank you all, I feel far less ignorant than when I started this thread.

I feel based on all your replies and after lots of research, that my IFA won't be providing enough value to justify the large initial and ongoing fees.

I've seen a lot of these online brokers with pre-made portfolios which supposedly balance the funds automatically which seem a much cheaper alternative. (Pension Bee, Canvendish, nutmeg). While I understand that this approach may not yeild huge returns it seems low risk and Cheaper, while giving me more control and not tied to an IFA. I expect this to be only one of a couple of my provisions for retirement.

Based on all this, do we think this seems a more sensible approach?

Many thanks.

Dox

Andymac1987 wrote: »

Based on all this, do we think this seems a more sensible approach?

'We'? It's what you think that matters - because only you know what you are comfortable with, in both cost and risk terms.

bostonerimus

Andymac1987 wrote: »

Thank you all, I feel far less ignorant than when I started this thread.

I feel based on all your replies and after lots of research, that my IFA won't be providing enough value to justify the large initial and ongoing fees.

I've seen a lot of these online brokers with pre-made portfolios which supposedly balance the funds automatically which seem a much cheaper alternative. (Pension Bee, Canvendish, nutmeg). While I understand that this approach may not yeild huge returns it seems low risk and Cheaper, while giving me more control and not tied to an IFA. I expect this to be only one of a couple of my provisions for retirement.

Based on all this, do we think this seems a more sensible approach?

Many thanks.

I'm an advocate of the DIY approach as long as you understand the basics of investing and managing your funds. You'll be saving yourself IFA fees, but now your money is entirely your responsibility. So you must educate yourself. There are lots of books and websites and I particularly like this series of youtube videos by Lars Kroiger as a starting point. Keep things simple and keep investing regularly.

https://www.youtube.com/watch?v=_chiIIxMGl0