Low-cost passive funds living in a high-cost personal pension world. Where to go?

Joe1212

Dear MoneySavingExpert forum members,

I’d be grateful for your advice with this pensions conundrum -

I’m in the process of moving my investments (old DC pension pots from previous employers, and a Stocks and Shares ISA) away from active funds and into passive (low-cost, index-tracked).

The pension provider / ‘container’ of one of my old DC pension pots (60k), Standard Life, is a vanilla personal pension plan which has a nice SIPP-like service in the sense that there are many funds on offer (not typically the case I find) which I can choose from.

I’ve moved this 60k ‘pot’ sitting under my Standard Life personal pension plan from an active to a passive Vanguard fund (Global Assets ex-UK).

However, I’m not happy with the fund management charge (FMC) which Standard Life are charging for a passive fund (1%). This seems to high to me.

In contrast, #1. the FMC on my earlier _active_ fund wasn’t so different (1-point-something, around 1.5%), and #2. I have the _SAME_ Vanguard fund (Global Assets ex-UK) held with Vanguard UK in the form of a Stocks & Shares ISA for which I’m only charged 0.15% as on-going charge (ONF) though of course I don’t have the benefit of a 20% pension tax relief there.

My questions are -

1. Does this 1% FMC for a _passive_ fund also seem too high to you?

2. Are there pension providers which are ‘friendly’ to investors who want to focus on passive-funds, and pass on the low cost of such funds to their customers? (N.b. Vanguard UK have a SIPP in the works by the end of 2018, apparently, but there is no release date and no concrete info on if / when this is being released). Any ‘big-name’ pension providers?

Thank you for reading this post and for your comments.

Kind regards,

Joe

msallen

1. Yes this is high.
2. There are many SIPPs available that will do what you want. Try taking a look at https://monevator.com/compare-uk-cheapest-online-brokers/ to compare costs.

Prism

Check to see if that 1% includes the platform charge - often with a personal pension it does. Also, confirm that there is no discount built into that charge, by checking the documentation or maybe an online portal. For example, my wife's company negotiated a 1% rate down to 0.35% rate (total charge including funds and platform)

Joe1212

Thank you for your comments Msallen & Prism, very useful.

Alexland

If you are paying 1% that is at least twice a reasonable fee for a passive investment fund with platform.

Vanguard are making some progress so it might be worth waiting a few more months to see their offer.

https://citywire.co.uk/new-model-adviser/news/vanguard-s-fnz-pension-delay-holds-back-uk-takeover/a1162451

Although if you plan to transfer multiple DC pots (assume there are no protected benefits?) then their combined value might be high enough that a fixed price SIPP platform works out cheaper. For example the £180 pa on the Halifax SD SIPP works out less than the 0.15% platform fee on the Vanguard ISA once you exceed £120k but Halifax charge for transfers and trades so it depends how you use the SIPP. I just park money in a multi asset fund and trade very infrequently.

Alex

Joe1212

Very insightful and interesting news, thank you Alexland.

dunstonh

The pension provider / ‘container’ of one of my old DC pension pots (60k), Standard Life, is a vanilla personal pension plan which has a nice SIPP-like service in the sense that there are many funds on offer (not typically the case I find) which I can choose from.

The majority of new business pensions on offer today are whole of market.

However, I’m not happy with the fund management charge (FMC) which Standard Life are charging for a passive fund (1%). This seems to high to me.

It sounds like you are in a legacy contract. Std Life were doing half that from around 2005.

1. Does this 1% FMC for a _passive_ fund also seem too high to you?

It was great for 2001. Easily beaten by 2005. However, do remember that the 1% you are seeing includes the provider/plan charges (it wont be a platfrom as both Standard Life platforms have passives available from 0.06% p.a.)

2. Are there pension providers which are ‘friendly’ to investors who want to focus on passive-funds, and pass on the low cost of such funds to their customers? (N.b. Vanguard UK have a SIPP in the works by the end of 2018, apparently, but there is no release date and no concrete info on if / when this is being released). Any ‘big-name’ pension providers?

Vanguard do not have a SIPP in the works. They have a pension in the works and it wont be arriving in 2018. FNZ only have a SIPP on their software and Vanguard do not want a SIPP. This is requiring FNZ to code a new pension offering. It is unlikely to be a stakeholder pension or personal pension as that would include setting up insured funds or operating an insured contract and that would be expensive for them (as they are not an insurer). So, most likely option is a master trust scheme.

Plenty of pensions available which offer passives.

Joe1212

Extremely useful Dunstonh, thank you.

Albermarle

If your SL pot is over £25K then there should be a 0.3% discount . This is on a new SL pension so hopefully it would apply to an old one as well .

dunstonh

Albermarle wrote: »

If your SL pot is over £25K then there should be a 0.3% discount . This is on a new SL pension so hopefully it would apply to an old one as well .

Legacy plans have their own charging structures. Some had tiers. Some did not.