Wow, HL SIPP charges are something else!

fronty

I use HL for my ISA, really happy with the platform although I know it's not the cheapest out there (in fact it may be the most expensive for all I know). Anyway, I just checked to see how much it would cost to hold a SIPP with them, based on a valuation of 380K, it would cost me £120 PER MONTH!!! (£1,450 per year)

Wow! Unless I have misunderstood their charges that seems like a ridiculous amount to pay.

I have signed up to II's SIPP as I don't like % fees, but I was just interested to see how much they would charge.

There must be a lot of people out there paying well over the odds.

NedS

It depends what you hold in your portfolio. If it's mostly funds, then yes there is a 0.45% fee, but shares, ITs and ETFs are capped at £200 per year, so on a £380K portfolio that works out at around 0.0525% which seems pretty good to me.

westv

Why is it cheaper to hold shares rather than funds? Is it because you are more likely to what to sell/buy and incur fees with shares than you are with funds?

fronty

NedS wrote: »

It depends what you hold in your portfolio. If it's mostly funds, then yes there is a 0.45% fee, but shares, ITs and ETFs are capped at £200 per year, so on a £380K portfolio that works out at around 0.0525% which seems pretty good to me.

Just funds in my pension.

Albermarle

Why is it cheaper to hold shares rather than funds? Is it because you are more likely to what to sell/buy and incur fees with shares than you are with funds?

I have asked the same question myself and the answer seems to be mainly pricing for different types of customers and competition .
The bulk of investors own funds/OEICS and are not so price sensitive, and just want things easy.
So HL ( for example ) make it easy ( no charges for buying or selling funds) and charge 0.45% .
However they are aware larger more savvy investors will not pay , when they can get lower charges elsewhere. Also these type of investors are more likely to be investing in shares/IT's/ ETF's so they cap the charges for these , although they charge for each trade. Also the 0.45% drops to 0.2%? if you have more than £250K.
Fidelity and A J Bell do something very similar and they are a bit cheaper than HL anyway .

I have signed up to II's SIPP as I don't like % fees

For the majority of investors with larger funds the fixed fee platforms work out cheaper, but they do tend to have more extra charges (for drawdown for example ) whereas HL and Fidelity regular charges cover almost everything else, apart from trades. If you hold mainly ETF's/IT's/shares with these two % based platforms , then the charges are very competitive , especially in the drawdown/decumulation phase.

EdSwippet

westv wrote: »

Why is it cheaper to hold shares rather than funds? Is it because you are more likely to what to sell/buy and incur fees with shares than you are with funds?

I think the honest answer to this is, because they can get away with it.

In the 'old days', before the retail distribution review (RDR), holding funds on a platform was generally free, both of annual charges and of any trading fees. This was because the platforms lived off a sizeable backhander from the fund managers, perhaps as much as 1/3 of the then-average 1.5% or so annual management charge for funds.

The FSA cleared things up with the RDR, by disallowing these backhanders. As a result, the annual charge for most actively managed funds dropped by around 0.5% or so. But the platforms had to make up the shortfall. Some did this by introducing modest across-the-board charges, but some did it by leaving IT and share investors unscathed and recouping everything specifically from fund investors. Arguably this might have left everyone in more or less the same position as before, except for ...

Caught in the crossfire were folk who held cheap trackers. If you're only paying 0.5% or less for a fund, the removal of any backhander might see your charge drop to 0.3% or so but cannot compensate for a 0.45% added platform charge. Gradually, platforms have settled into percentage-fee and flat-fee models. And gradually, fund charges have been trimmed further so that fees such as HL's inflated 0.45% may now be as much as six or seven times the 0.06% or so you might pay a tracker fund manager for doing the actual work.

Personally, I find percentage-fee models for platforms distasteful. It simply cannot cost HL more than ten times as much to manage fund holdings than to manage shares and ITs(*), so seven years after the RDR it's clearly now just a case of treating fund investors as cash cows.


(*) If HL's internal costs for managing fund holdings really are that high, they should just outsource this part of their business to somebody else. Interactive Investor, perhaps.

[Deleted User]

EdSwippet wrote: »

I think the honest answer to this is, because they can get away with it.

Sounds right.

El_Torro

fronty wrote: »

I use HL for my ISA, really happy with the platform although I know it's not the cheapest out there (in fact it may be the most expensive for all I know). Anyway, I just checked to see how much it would cost to hold a SIPP with them, based on a valuation of 380K, it would cost me £120 PER MONTH!!! (£1,450 per year)

Wow! Unless I have misunderstood their charges that seems like a ridiculous amount to pay.

I have signed up to II's SIPP as I don't like % fees, but I was just interested to see how much they would charge.

There must be a lot of people out there paying well over the odds.

As you've discovered if you have a large SIPP, invested 100% in funds, then HL is a very expensive place to put it all.

HL do have their advantages. They're a large, well established company. Their profits are very healthy, which is more than I can say for many of the other platforms. For this reason they're unlikely to go anywhere. Their customer service has a good reputation and their website is well laid out and easy to understand.

Also it's prudent to have more than one platform when you have a large SIPP. If you put it all in one and the platform goes bust then it's likely that you'll get your money back. How long will that take though? Having more than one SIPP means more admin for you, but it should also mean that you have access to money when you need it, once you start drawing down.

HL could be considered as one of your platforms. Ultimately though if you're looking for the cheapest options then HL probably won't be on your short list.

fronty

Is it possible to split a SIPP in two?

ffacoffipawb

fronty wrote: »

Is it possible to split a SIPP in two?

Yes, just do a partial transfer from one pension to another.

You can do a partial transfer in from any other pension into Hargreaves Lansdown. I have done this myself (a few times).

fronty

Interesting, I didn't realise you could do that, I've kicked off a 100% transfer from SL Wrap to II on Friday, maybe once I've got it all into II I'll consider transferring 50% into another SIPP.

Although TBH, even if the SIPP provider goes bust, the underlying investments will be safe won't they (unless the fund manager goes bust, but even then again the investments should be ring fenced?) So is there really any need to have multiple SIPP providers?

It looks like you might be referring to when in drawdown. Actually I'm 10-15 years away from that, so I guess I can always transfer into another/multiple schemes nearer the time.