SJP pension should I back out?

Kesteral

Hi,

I've fairly recently signed up for SJP pension fund. I'm a IT contractor and I have my own company. From my company I've invested approximately £9,000 into this pension fund but I've been reading online about how expensive SJP are and they have a limited fund to choose from.

I know the exit fees are pretty big year 1 (6%) but I don't want to lose more money in the long run because I've made the wrong choice. I'm only 29 as well so it's not as I haven't got time to make it up.

Personally I don't really like actively managing my money in a pension and I am happy paying someone to do it for me, but I don't want to get completely ripped off doing it. Any advice would be greatly appreciated. Should I try and transfer?

jamiex

As you've said, it's best not to throw good money after bad if you think you've made a mistake. My advice would be for you to research your options then make a decision on what would be best and cheapest for you.

That might include leaving what you have with SJP where it is for now (depending on exit fees) but not adding to it, and starting a pension elsewhere.

As you've mentioned you don't want to have to actively manage the pension, you might want to consider using a Vanguard fund, which would probably be cheapest to hold with someone who charges 0.25% as a platform fee such as Cavendish Online, who also have no exit fees for their SIPP. They also have a wide range of funds available to choose from should you wish to start actively managing your money in future.

You can use this website to compare fees for various platforms:
http://www.comparefundplatforms.com

Kesteral

Hi

Thanks for the response. In terms of exit fees It'll be 6% in this first year and then 5% the next year and so on until it gets down to 0. In theory I could just stop paying into it but it seems like a waste that the £9,000 will always under perform? And it won't be with the rest of my pension so will affect my potential compound interest as well.

Is it worth taking the hit and then reinvesting all of that somewhere else that is cheaper? It'll be approximately £600 which does seem like a lot now but not on what I could make in theory?

Again any advice is much appreciated, very new to this.

LobsterMemory

A 6% loss would be difficult to make up just through lower charges short term

For example say you have a fund of £10k, investment growth is a constant 5%, SJP charges are 1.25% and a lower cost provider is 0.5%

In year 1 with SJP, you'll have £10k * 1.05 - 1.25% = £10368
With newCo you'll have £9400 * 1.05% - 0.5% ~ £9850 so ~ £520 worse off

In year 2 if you kept the £10k in Year 1 and only pay an exit fee of 5% (of the £10368 = £518) then you'll have

SJP £10750
NewCo £10290 so £460 worse off

I'll leave it to you to carry out the calculations for Years 3-5 using real-life figures to see if it's worth switching before the 0% exit fee kicks in

The compound interest point you make is, I believe, a red herring

AnotherJoe

Someone else posted an analysis the SJP funds, pretty poor. So you could make it up on fund performance.
OP you say you don't want to be managing and would pay someone to do it but there's a half way house, pick some passive funds and leave them alone.
Read this article and see what you think. https://theescapeartist.me/2015/09/07/honey-i-fired-the-financial-adviser/
If I was you I'd get out now, take the hit and start afresh

Voyager2002

Kesteral wrote: »

Hi

Thanks for the response. In terms of exit fees It'll be 6% in this first year and then 5% the next year and so on until it gets down to 0. In theory I could just stop paying into it but it seems like a waste that the £9,000 will always under perform? And it won't be with the rest of my pension so will affect my potential compound interest as well.

Is it worth taking the hit and then reinvesting all of that somewhere else that is cheaper? It'll be approximately £600 which does seem like a lot now but not on what I could make in theory?

Again any advice is much appreciated, very new to this.

The most outrageous SJP charges are the initial set-up fees and then the exit fees.You have already paid these on your £9,000 and there is nothing you can do to get them back. If you leave your £9,000 invested there the performance will be at least as good as on a comparable sum elsewhere (SJP funds are pretty good, although their annual charges are also above-average).

However, you should not add any more to your holding with SJP, since that would mean paying another set of outrageous charges. So start another personal pension with a less expensive provider for any future pension contributions.

talexuser

On balance I think the SJP performance would not be as bad as the early redemption hit/5 years worth of charges. I would leave the money with SJP until the exit charge is zero and start elsewhere on a more cost effective basis. Then transfer the SJP to the new platform/provider.