SIPP Charges

roboboy

Hopefully, everyone with a SIPP either just saving or in drawdown will be supporting Angela Eagles' bill to cap charges on these products. So much money being taken out of peoples' pots and invariably for little or no service or good performance. Excessive profits being made in this sector is a sure sign of the market not working for consumers. Something needs to be done. What do others think?

JoeCrystal

roboboy wrote: »

Hopefully, everyone with a SIPP either just saving or in drawdown will be supporting Angela Eagles' bill to cap charges on these products. So much money being taken out of peoples' pots and invariably for little or no service or good performance. Excessive profits being made in this sector is a sure sign of the market not working for consumers. Something needs to be done. What do others think?

The providers and products are providing the service. It is up to the buyer to find the cheapest options and willing to shop around. I do however think that it is a good idea for auto-enrollment funds to be capped at 0.75% though.

shinytop

There is plenty of choice for SIPPs covering a wide range of services, prices and pricing models so I'm not sure why legislation is needed. Isn't it a bit like saying the price of cars needs to be capped?

JoeCrystal

shinytop wrote: »

There is plenty of choice for SIPPs covering a wide range of services, prices and pricing models, so I'm not sure why legislation is needed. Isn't it a bit like saying the price of cars needs to be capped?

You can see the thoughts behind Pension Charges 2017-2019 Bills in this link: https://hansard.parliament.uk/commons/2019-05-08/debates/19050826000002/PensionCharges

To quote: "The aim of the Bill is threefold: to drive down significantly the total cost of pension fund management; to achieve better value for money in what is currently a failing market, and to ensure that a higher proportion of pension savings will actually go to help the beneficiaries to achieve a comfortable retirement."

Prism

I pay over 0.75% on most of my funds. If I wanted a lower charge I would pick a lower charge. I agree that default funds should be low charge but I don't see the need for a cap

dunstonh

Hopefully, everyone with a SIPP either just saving or in drawdown will be supporting Angela Eagles' bill to cap charges on these products.

Absolutely not.

The whole point of SIPPs is to allow people to invest in a massive range of assets. Some of those assets will be cheap. Others more expensive. Any move to curtail choice and force people into limited options based on price is foolish and poorly thought out.

Angela Eagle doesn't appear to understand it either. Referring to an article from Which? that had a comment about one niche SIPP provider that has a high content of non-mainstream investments (mainly property) is not a good way to introduce legislation. If that SIPP provider had to reduce or remove those charges, it would have to prevent those assets being available to invest in. It was a provider aimed at a specialist side of the market. People using that provider do so as they pay explicitly for transactions/services and not a catchall fee that everyone pays whether they use the services or not.

If you kill off those providers and reduce investment options, you remove consumer choice. Actually, as a Labour MP that makes sense as Labour is anti-choice by nature.

There are also errors in her assumptions and it lacks focus. Is it auto-enrolment schemes she is referring to or pension funds or any funds or investments that can be held in a pension.

So much money being taken out of peoples' pots and invariably for little or no service or good performance.

What has performance got to do with it?
People choose a provider on the services they need. If someone wants a basic option at low cost then they should look at those options and its likely that a SIPP is not the right thing for them (caveats apply).

What do others think?

You need to learn a lot more about the subject and the proposals.

Personally, I do think its time to bring the auto-enrolment default fund charge down to 0.5% as a cap. Mainly as individual retail pensions can be set up under 0.3% nowadays. (I did one last week at 0.28%). So, if the individual retail market can price at 0.28% for low cost options then workplace schemes should be able to achieve that given their increased volume. However, the retail market is seeing continued year on year reductions in costs and does not need Government intervention.

AnotherJoe

roboboy wrote: »

Hopefully, everyone with a SIPP either just saving or in drawdown will be supporting Angela Eagles' bill to cap charges on these products. So much money being taken out of peoples' pots and invariably for little or no service or good performance. Excessive profits being made in this sector is a sure sign of the market not working for consumers. Something needs to be done. What do others think?

"For every complex problem there is a simple solution, that is wrong." H.L Mencken.

dunstonh

I guess the OP didn't expect these responses!

ffacoffipawb

dunstonh wrote: »

I guess the OP didn't expect these responses!

Indeed. Labour. Misery for the many.

tacpot12

I'm not sure the case for interfering in this market place has been made well enough. I feel that SIPP investors can exert pressure on the providers by selecting products with low charges if this is what they want. Those products with high charges already feel and respond to this market pressure; there have been cases where performance charges have been reviewed downwards or eliminated entirely.

Capping charges on pension funds where employees have no choice but to invest is a good idea, e.g. where employees are auto enrolled into schemes such as NEST. Once change that politicians should be arguing for is to reduce NEST's charge on contributions. The current charge of 1.8% seems excessive for the work involved.

greatkingrat

dunstonh wrote: »

Personally, I do think its time to bring the auto-enrolment default fund charge down to 0.5% as a cap. Mainly as individual retail pensions can be set up under 0.3% nowadays. (I did one last week at 0.28%). So, if the individual retail market can price at 0.28% for low cost options then workplace schemes should be able to achieve that given their increased volume. However, the retail market is seeing continued year on year reductions in costs and does not need Government intervention.

It is not surprising the costs of autoenrolment pensions are higher than individual pensions. They tend to be used by lower paid employees and the average pot size will be quite small. Many of the admin costs are fixed whether the pot contains £1k or £100k, so in order to make a profit the providers will need to charge higher percentages on the auto enrolment schemes.