Help a noobie understand costs/fees

beamyup

If I were you -

Do a little research so that you realise that low cost trackers perform better on average than managed funds, and that it is impossible to pick a managed fund that will be in the "better than average" bracket going forwards. There is plenty of information on this elsewhere.

Tell your IFA that you understand the above and that you ONLY want to minimise your costs as that is the only way to improve your position for retirement, say that you want the total cost of what he recommends including his fees to be lower than your company fund costs.

Finally, say that you want to minimise your costs on the same basis for all of the money that has already been transferred to your SIPP as far as possible.

Albermarle

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.

As with most SIPPS there are thousands of options on Fidelity, not just two.
I presume what you have looked at is their Pathfinder tool , which narrows down the choice to around 5 risk levels . When you pick a risk level it then offers you two multi asset fund options 1) Actively managed 1.2% charge ;2) Low cost at 0.25% charge .
I have checked the performance of both and they are almost exactly the same .
So if you went down the low cost route , and did it your self without an IFA , the total cost would be 0.6% per year for a typical multi asset fund used by many investors in their pension.
You could have the same with other SIPP providers than Fidelity , maybe even a bit cheaper still .
FYI Fidelity , offer to pay any exit charges if you transfer to them and are currently offering cashback as well ( as are some others )

SonOf

Do all of these forms (and related costs) add any real value for the end consumer?

If an IFA is doing the job correctly, then a good number of the audit trail documents are the sort that many would consider a waste of time. Many people will be able to relate to that in their own occupation. They are effectively there to support every bit of the process. This includes backside protecting as well as consumer protection.

You mean they are doing something they shouldn't be doing and are likely to get caught out.

I can't see how what I said could be interpreted as that. It is a more advanced area where the potential for doing something wrong is higher than say a simple S&S ISA or term assurance. The PI insurers and the FCA take a greater interest in higher risk areas and tend to not focus on the low risk areas.

The only reason this arrangement is continuing is so the IFA can line his own pockets. Pretty standard for IFAs in my experience.

The only reason this arrangement is continuing is because the individual is employing someone to do the work for them. So, in that respect, they have every right to be paid. Now, if the person can DIY and do it well and wants to do it then you may well question why are they paying someone to do it for them.

zagfles

kennetrunner wrote: »

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.

Doesn't look you are though, and not surprising with the difference in charges.

It's not usual to move a workplace pension to a SIPP periodically. Did the IFA give vague promises of better performance?