Drawdown Choices

shinytop

I’m looking into options for drawdown. My company DC pension is managed by XPS and offers (they say) “flexible drawdown”. The platform charge is 0.39%. The choice of available funds does not have any of the usual market leaders. The choices have names like ‘balanced growth’, ‘adventurous growth’, etc. and the asset mixes looks very similar to the aforementioned market leaders at their different risk levels. The fees for most of these funds is 0.11% and they are “maintained by” L&G. Total amount invested will be c.£400k. I’m not particularly interested small differences between funds but more in the ease and flexibility of the drawdown process. My questions are (1) is 0.5% total fee reasonable (I thought so) and (2) Are these proprietary funds likely to be reasonably comparable to the well-known ones?

dunstonh

The platform charge is 0.39%. The choice of available funds does not have any of the usual market leaders. The choices have names like ‘balanced growth’, ‘adventurous growth’, etc.

Sounds like the sort of basic option that the FCA are encouraging to avoid inexperienced investors who dont know enough to DIY but dont want to use an adviser to end up in a harmless investment option.

I’m not particularly interested small differences between funds but more in the ease and flexibility of the drawdown process.

On 400k, small differences is a large monetary amount. And the differences wont be small.

Are these proprietary funds likely to be reasonably comparable to the well-known ones?

Normally they run as close to benchmark as makes no difference. Benchmark returns are generally lower than what you would hope for.

My questions are (1) is 0.5% total fee reasonable (I thought so)

It's not bad. However, you can get basic options at around 0.3x%. Whether you really think £400k on s basic option is sensible is a different matter.

Do they support all drawdown methods or just some of them? Or more importantly, do they support the drawdown method you intend to use? We find most of our clients use phased flexi access drawdown but many of the basic providers do not support that particular method.

shinytop

Thanks Dunstonh. I'll be using the money to fund gap before DB at 60 (2 and a bit years) and then as a flexible top-up to our DB pensions. I don't know if my provider does phased flexi access but will ask. I take your point about the differences being significant and I'm also considering the IFA option.