Help a noobie understand costs/fees

kennetrunner

First post (don't bite)...

I have a current pension (kinda) managed by a IFA for me - I see him once a year for ~20mins where we agree to transfer money from my work/autoenrolled pension into a managed SIPP.
I quizzed him on costs the other day and it turns out:
- Annual Fee for 'platform' = £140
- His fee = 0.75%
- Service fee for platform = 0.4%
- Management Fee for funds = 0.9%
Total 2.15% plus £140

I'm trying to compare this to a brand name (Fidelity). Where they seem to have 2 options:
Cheap = 0.35% service + 0.25% ongoing + 0.05% per transaction.
Expert = 0.35% service + 1.2% ongoing + 0.17% per transaction.

NOTE: No intention of managing it myself - just buy funds once per year with the transfer from work pension.

Compared to either option 2.15% seems expensive?
If I moved, does it just come down to the question of "do I believe the expert fund will outperform the cheaper option by > 1.1%"

Am I missing anything I should be considering?

Thanks.

Lokolo

How much are we talking about in your SIPP? Personally a £140 + 0.4% platform fee is expensive but it does depend on the amount.

What platform are you using as well?

beamyup

Why transfer from work pension? is it that bad? It would have to be very bad to make it worth all of those costs!

SonOf

I have a current pension (kinda) managed by a IFA for me - I see him once a year for ~20mins where we agree to transfer money from my work/autoenrolled pension into a managed SIPP.

That is medium/high risk transaction for the adviser and one that has quite an audit trail behind the scenes.

I quizzed him on costs the other day and it turns out:
- Annual Fee for 'platform' = £140
- His fee = 0.75%
- Service fee for platform = 0.4%
- Management Fee for funds = 0.9%
Total 2.15% plus £140

Why is the platform charging twice? (you mention percentage and fee - usually its just percentage. There are exceptions but they are not commonplace).
0.4% is at the higher end of things nowadays unless you are talking about a small balance. Even with £1+ you can get 0.2x% nowadays with very good platforms.

The adviser fee sounds reasonable on any value below several hundred thousand pounds.

The investment charges are high. It suggests near 100% active managed. If you dont want that then discuss it with the IFA.

Whilst FAs may be limited in investment choice, an IFA has to follow any instructions you give. So, if you dont want 100% active then say so.

kennetrunner

I've been researching a bit further on this and found:

My workplace pension (~12k) has fixed costs of 0.13% and seems to have done better than my other actively managed SIPP (~50% over 5 years, versus 30% over 5 years - although I'm not totally sure I'm comparing apples with apples).

Actively managed SIPP is about £120k, and from the transaction list does seem to be buy/sell on an almost daily basis - hence the higher fees I suppose.

I'm not averse to paying higher costs, just want to make sure I'm getting higher returns to justify it.

kennetrunner

SonOf

That is medium/high risk transaction for the adviser and one that has quite an audit trail behind the scenes.

How so, seems like fill in a few forms and post them off, no?

SonOf

kennetrunner wrote: »

SonOf

How so, seems like fill in a few forms and post them off, no?

That is what you are seeing. However, behind the scenes, there is probably something like 40 pdf files created for the audit trail.

Pension switching (DC pension to DC pension) is on the FCA radar. Not as much as DB transfers but they have reviewed a number of firms and networks with high switching rates.

beamyup

SonOf wrote: »

That is what you are seeing. However, behind the scenes, there is probably something like 40 pdf files created for the audit trail.

Pension switching (DC pension to DC pension) is on the FCA radar. Not as much as DB transfers but they have reviewed a number of firms and networks with high switching rates.

Do all of these forms (and related costs) add any real value for the end consumer?
Why, with all these "protections" in place , is the IFA still able to sell their services in this way which is very unlikely to add value to the client especially in light of the huge increase in fees

[Deleted User]

In this context you would have been better off simply burning 1K pounds annually than giving this cash to your advisor. As it is, the money was spent on advising you to pick bad platform and make poor investment choices.

As mentioned above, good advisor almost certainly would have told you to keep your investments in your company pension - if the alternative is this crazily expensive fund. These days costs of over 1% are unacceptable but 2% plus is going to hurt your financial health long term.

wjr4

What are the reasons behind moving the workplace pension to the SIPP every year? What are your objectives?

fred246

SonOf wrote: »

That is medium/high risk transaction for the adviser

You mean they are doing something they shouldn't be doing and are likely to get caught out. The only reason this arrangement is continuing is so the IFA can line his own pockets. Pretty standard for IFAs in my experience.