Fidelity or HL for ETF Only SIPP

Retirement55

This is my first post after a long time reading the forum so excuse any gaffes please.

I am already retired and fast approaching 55. I have two DB pensions and will receive the full SP. I have a combination of cash and an ISA portfolio which can bridge the gap to age 60 when the DB pensions kick in.

I have a £260K personal pension which I am now thinking of accessing at 55. I have no burning need of or use for the maximum TFLS. I am currently not a taxpayer and I wish to use this pension to fully utilise my tax free allowance by drawing down on this pension. I would like to drawdown £16,665 annually with 25% tax free and the balance being used towards my allowance for the tax year 2019/20. I believe that by making a nominal drawdown of say £100 that this will trigger a tax code which should mean that any future drawdowns will be tax-free as they will fall within my tax allowance.

The level of drawdown will drop to a more realistic 2-4% of the fund when the DB pensions start so I am not worried about depleting the SIPP due to a higher drawdown than would be recommended.

As I have other investments within my ISA I am considering an ETF only SIPP with HL or Fidelity. Cost is a consideration as neither I believe charge for drawdown. My understanding is that my platform charges with HL would be capped at £200 per year and with Fidelity at £45 per year. Or am I missing something? I may hold a reasonably high percentage in cash over the next few months as I will be transferring in cash and would be more comfortable phasing my purchases as the market rises and dips over the coming months.

I believe that the HL platform is "slicker" than Fidelity. However I have no desire to trade regularly. I only want to hold low cost ETFs which will track global indices with perhaps a specialist ETF or two on occasion.

Am I missing anything or is there a flaw with my thought process.

Thanks

AnotherJoe

I dont know about Fidelity but I have HL and a lot of ETFs and shares with them so the charges are reasonable as you say, limited to £200 for those.

I like and understand the HL interface, have always had good response times from them on the phone and to email enquiries i dont know what the Fidelity one is like, i take the view that when i snuff it there will be a fair chunk of money left over so I'm trading my convenience now for leaving a bit of extra money to the kids they wont notice anyway (or if i dont leave anything, there will have been such a catastrophic financial issue the extra £155 a year wont make any difference anyway).



There's also the consideration that history has shown that companies that start off with very cheap charges inevitably raise them and so there's always the danger that Fidelity's £45 might end up easily being say £100 or more. Not an issue if they are easy to use and responsive, very annoying if they arent for saving £100 I'll never see.

dunstonh

As I have other investments within my ISA I am considering an ETF only SIPP with HL or Fidelity.

Why ETF? Not hinting your shouldn't but since unbundling in 2013, there isn't the cost difference any more and ETFs need more research and understanding than UT/OEICs and increased potential for errors compared to UT/OEICs. If you are knowledgeable enough to know the differences and avoid the wrong type of ETF then fine.

My understanding is that my platform charges with HL would be capped at £200 per year and with Fidelity at £45 per year. Or am I missing something?

Dealing costs?

If you are runing a portfolio of single sector funds then you need around 8-12 ETFs. You can going to incur dealing costs on purchase and sale and switching to rebalance. Part of the rebalance could be done through your annual draw but you will suffer some dealing cost.

nd would be more comfortable phasing my purchases as the market rises and dips over the coming months.

Statistically, that will likely lower your returns. Especially if you are investing in areas that have yet to fully recover from the recent market falls. It does hint that your risk profile is quite low. So, will the ETF spread reflect that?

I believe that the HL platform is "slicker" than Fidelity. However I have no desire to trade regularly. I only want to hold low cost ETFs which will track global indices with perhaps a specialist ETF or two on occasion.

So, if you hold a global ETF instead of region ETFs that will reduce the count (although it will also reduce the choice to adapt strategy). One assumes you will be holding lower risk assets as well. Such as corp bonds, gilts, index linked gilts, global bonds and high yield bonds?

How often do you plan to rebalance?

There's also the consideration that history has shown that companies that start off with very cheap charges inevitably raise them and so there's always the danger that Fidelity's £45 might end up easily being say £100 or more. Not an issue if they are easy to use and responsive, very annoying if they arent for saving £100 I'll never see.

I heard the issue over charging different rates for different asset types could be looked at (one of the FCA regional meets). There is very little reason why, post-RDR, that different fund universes should be charged in different ways. Many consider it unfair and not in the spirit of RDR. It was meant to remove any bias in the distribution method for different types. Yes, there will be small differences but not of this scale.

In respect of Fidelity, I don't care if its cheap. It is horrible to use. A second hand black and white TV is cheap but I bet you don't have one of those. So, why compromise on your investment platform?

Aiki

Dear Retirement55
You are in a similar situation to myself, retired already, 55 in the summer, have at DB pension, DC pension and ISA savings. I got my quotes for taking my DB at 55 as opposed to 60. I then tried to run a series of scenarios for taking the DB at 55 and comparing with taking DB at 60 but taking DC pension and/or ISA savings at 55 to cover the 5 years. I looked a various annual spends over the years. I initially thought I would be better off taking my DC pension or ISA making full use of personal allowance to minimise tax payments but I could not find a scenario when waiting to 60 for my DB left me better off this side of 90 years old. My actuarial reduction was much less than I thought, so I was 'lucky'.

It may be worth having a look for your situation.

Retirement55

Thank you for the responses. I've decided to try HL based on the negative views of the Fidelity platform that I've picked up on this forum and elsewhere.

I am comfortable with ETFs and will most likely select around 4 with the bulk in a "global" ETF tracking the MSCI world index. I will likely rebalance once a year or maybe less often. I will avoid synthetic ETFs as I have no control over the counterparty risks and prefer the "security" of a physical ETF.

I would rather leave my DB pensions as they are for now. One in particular may be the subject of another post relating to transferring to my SIPP.

Albermarle

The complaints about Fidelity on this forum seem to be more from more sophisticated investors / active users/traders. Less active /critical users seem to be quite happy with them. My own ( very short) experience is positive ( so far ).
Regarding trading ETF's the charging is different in a Fidelity SIPP ,compared to their ISA/investment account, as they charge 0.1% of value rather than the usual £10 .
The OP might like to be aware that transferring a £250K pot to Fidelity will currently generate a £750 cashback .

cloud_dog

Albermarle wrote: »

Regarding trading ETF's the charging is different in a Fidelity SIPP ,compared to their ISA/investment account, as they charge 0.1% of value rather than the usual £10 .

They are migrating customers away from the 0.1% dealing charges to the £10 per trade / £1.50 for regular investments in a SIPP.

Alexland

Albermarle wrote: »

The OP might like to be aware that transferring a £250K pot to Fidelity will currently generate a £750 cashback.

£500 surely? The pot would need to be £400,000 - £499,999 for £750 cashback? It's a particularly generous offer as they are also willing to cover up to £500 in exit fees.

https://www.fidelity.co.uk/pension-transfer/#cashback-offer

II were running a similar offer until recently. I don't understand why platforms with fixed or capped fees are willing to be so generous with larger transfers. Next time II run that offer they might get our S&S ISAs.

Alex

Albermarle

Alexland ,
Yes you are right about Fidelity cashback . A bit of a strange structure .
Transfer £100K to £150K - £250
150K to £400K - £500
£400K to £500k - £750
Over £500K - £1000
If you had £250K would be better transfer £150K now and then another £100K the next time they offer it .
Although of course cashback should not be a deciding factor in which platform to choose.

Alexland

Albermarle wrote: »

Although of course cashback should not be a deciding factor in which platform to choose.

True but sometimes cashback gives you the motivation to do something you had been pondering anyway. Or it helps cover the initial 0.1% trade fee on buying into the ETFs.

Alex

cloud_dog

Albermarle wrote: »

Alexland ,
Yes you are right about Fidelity cashback . A bit of a strange structure .
Transfer £100K to £150K - £250
150K to £400K - £500
£400K to £500k - £750
Over £500K - £1000
If you had £250K would be better transfer £150K now and then another £100K the next time they offer it .
Although of course cashback should not be a deciding factor in which platform to choose.

Obviously desperate to grow the customer base....wonder why?