0.2% charges on deferred pension.

waveydavey48

Hi folks, just enquiring whether I can better this. Any views welcome.

I am 57 and have a deferred DC pension (pot currently £150k) which is from the time I worked for Direct Line. It's managed by Fidelity and I have just left it on the default (lifestrategy) basis.

I also have a DB pension we can happily live off starting at age 60. My tentative plan is just to leave the DC pot with Fidelity and take lump sums via UFPLS as and when we need them, if we do.

I've just read through the bumf and it seems the pot is invested in 3 funds and the total expense ratios are 0.21%, 0.194% and 0.20%, say average 0.2%.

That seems pretty cheap to me. I did wonder about finding some sort of "fire and forget" option but am I likely to do any better bearing in mind I don't really have the knowledge or confidence to actively manage a portfolio.

Any ideas? Thank you in advance.

Albermarle

say average 0.2%.

It is possible to go lower but 0.2% seems competitive , without knowing exactly what the funds are.
I presume you are aware but there will be a platform charge from Fidelity as well - maybe around 0.35% .
By shopping around you might get the charges down a bit but as you say :

I don't really have the knowledge or confidence to actively manage a portfolio.

then probably best to leave well alone.

waveydavey48

Thanks for your reply. I've read through it again and can't see any reference to a platform fee. Maybe because it's the company scheme they (Direct Line) pay fidelity to manage it as a perk to staff?

The funds are described as "Fidelity Life Funds" and are "BlackRock Consensus Fund", "Blackrock Over 15 Years Gilt Fund" and "Fidelity Blackrock Cash Fund". Each shows an "Annual Management charge" (.19%, .19% and .20% respectively) and "other charges" (.02%, .004% and 0.0%) to give "Total Expense Ratio" of .21%, .194% and .20%.

If I'm really paying 0.2% that's £300 on a pot of £150k. The old maxim "if it seems too good to be true it probably is" comes to mind.

I think I'll have to ring them.

Thrugelmir

Equally as important as the charges is the performance of the funds. Little point in focussing on low fees if underlying performance is poor.

shinytop

The three funds look like a standard lifestyle mix - very similar to my company's default options. They also look fairly mainstream, safe choices in themselves, although others are better placed to comment. You might want to look at the proportions invested in each and whether/how the lifestyle option varies this as you approach default retirement age and decide whether this is what you want. I did this and changed things a bit. This should be set out in the documentation.

AnotherJoe

This is an ultrasafe very dull no risk minimal growth set of funds and are no doubt associated with it being what you call a "lifestrategy" arrangement but I'd say it more likely a lifestyle arrangement, which means that in the years leading up to retirement they start moving you essentially into cash and bonds from equities so that when you buy an annuity you arent hit by a market crash.


However you arent going to buy an annuity and are going to stay invested longer term. So thats a poor choice of funds for your strategy of staying invested.



The one fund that will be a bit different is BlackRock Consensus Fund and that comes in a variety from nearly all cash to high % of equities. You'd have to check which variety you have.


As others have posted you are starting through the wrong end of the telecope by looking at charges before performance. Certainly cash isnt going to grow much at all, indeed it will lose out to inflation so you'd expect low charges anyway.
In say ? 15 years? time when you come to start burning this down you wont thank your current self if you've left it as is and even what is no doubt a small% in equities in blackrock is now cash and in real terms you've lost about 15% to inflation when even with some cautious funds you coudl have matched it.

waveydavey48

Thanks folks, both valid points.

As regards performance I must admit I haven't followed this closely but from under £100k when I left the scheme nearly 6 years ago to £155k today, and nearly 7% over the last year seems OK.

If it's really only costing me 0.2% a year whereas an IFA would charge about 1.5% (my rough guess) then I think I'll leave it with them.

Thanks again.

waveydavey48

Thanks Another Joe, just seen your post. I'm going to have to get my thinking cap on.

AnotherJoe

waveydavey48 wrote: »

Thanks folks, both valid points.

As regards performance I must admit I haven't followed this closely but from under £100k when I left the scheme nearly 6 years ago to £155k today, and nearly 7% over the last year seems OK.

If it's really only costing me 0.2% a year whereas an IFA would charge about 1.5% (my rough guess) then I think I'll leave it with them.

Thanks again.

Is there a transaction history to see how its changed over the past few years? You may have been shifted into cash and gilts very recently. Or if you've been in cash and gilts the last 7 years then you dont want to try and work out what that £155k would be now had you been 100% in Blackrock instead


p.s. should have asked, i cant see from what you've written, whats the split of these three?

waveydavey48

One of the things I've learned from this forum is that low charges are very important. I accept of course that performance is crucial.

I will clarify whether a platform charge is being deducted from the pot and if it's not and the charges are therefore low maybe the answer is to tell Fidelity to change my default retirement age from 60 so that higher risk/reward funds are used.

I don't have the knowledge to select the funds myself so presumably just asking them to switch to more equity based funds is the answer?

Further thoughts please folks. Thanks again.

AnotherJoe

OR just tell them to stop lifestyling you and put you in their default fund which is likely one of the middle of the road blackrock consensus ones.