Appropriate Fees for a Pension Pot?

nj2020

Trying to get my head around what annual fees are reasonable for my pension pot. It’s a ReAssure (ex HSBC) World Selection Dynamic Series 01 pension started about 2008. I no longer pay into it to retain my Fixed Protection 2014. I need to move it because it’s inflexible - I can’t do drawdown on it and there would be usurious tax implications for my wife on my death. So, basically, I just want to park it somewhere for say 10 years in say a high-ish (8/10) risk category and leave it. Apart from fund managers doing a good job and an annual update I don’t think I need a lot of frills. AM I MISSING SOMETHING HERE?

My IFA recommends an Old Mutual policy with a 0.5% partnership fee, 0.4% (inc vat) investment management fee, platform fees and fund fees of 0.16% and 0.4-0.5%, totalling 1.5%. What should I be paying, given the above circs? Some insights would be much appreciated.

[Deleted User]

1% is quite damaging to the value of your final pot. 1.5% is unacceptable in my book. Usually you can keep your costs below 0.2%. Below 0.5% is tolerable.  You can do the comparison of the impacts by putting your numbers into any compound interest calculator and comparing them. 

Long term  charges like this become very damaging. Returns are uncertain. Your costs are a certainty so should be minimized.

Albermarle

My IFA recommends an Old Mutual policy with a 0.5% partnership fee, 0.4% (inc vat) investment management fee, platform fees and fund fees of 0.16% and 0.4-0.5%, totalling 1.5%. 

For an IFA run account it is not ridiculously high as you are paying for their advice of course .

However as you have Fixed protection we can assume you are talking about a fund of significant size .

In this case an IFA fee of 0.5% seems normal but not a 'partnership' fee and an 'investment management' fee together of 0.9%

Cus

You ask if you are missing something here.
What do you get for the partnership fee?
If you idea of 'park it and leave it for 10 years' is some simple diversified passive investment then you might be wasting your money on fees and could go DIY at a cheap cost.  You won't beat the market, nor will you lose to it.

However if you are looking to do better than that in returns, then you have to decide whether paying more gets you more after those fees have been paid.

A fee is only damaging if it doesn't assist in making more because of it.  

Lots of opinion on here ranging from helpful IFA's that are (not a criticism) biased towards the benefits of IFA's, to militant DIY anti fee, passive only people, and everything in between.
Each will reply accordingly, you decide. Lots of threads on this if you search.

gm0

TL;DR - my view is it's expensive however you look at it passive or active. Data follows.

If the funds recommended to you look suspiciously like global equities to around 60-80% with a fairly large market cap bias (as would also be found by finding the same megacorp names in the passive top 20 holdings) and a tail to a few thousand.

A non-advised, flat fee (capped) platform and a couple of funds or multi-asset % fund could do *pretty much* the same job in terms of underlying assets for a fraction of the (compounded) costs.  Same underlying assets = same performance. Pre-fees. 

Or properly active with tiny stock list = massive gains. Or massive disappointment.  There may be superb active management to be had (for a price) but I have no idea how to pick it and don't want one big bet anyway.  I guess that puts me instinctively in the diversify and whole of market cheaply "passive" biased crowd.   But I am still working through this myself and looking at my platform choices vs available fund lists.  And whether to take a punt with a % either in the pension or in the ISA world.

Cost comparison

I currently pay 0.07% all in for passive global ethical (legacy fund old non-drawdown scheme) 
I am whinging a bit about this going up when I perhaps transfer to a drawdown featured master trust.  That tracker fund disappears and it's near (no actually exactly) identical twin becomes 0.36% all in with drawdown - non-advised in the drawdown format. (When I say all in I am including drawdown admin, platform, fund management costs but not IFA advice).
Or I can be less ethical but still global equities passive to desired % (70-80%) equities for 0.18% all in.  Better.

I am not getting IFA advice with that so let's allow a perceived market rate of 0.5% for that element and add it back.  Nobody has offered me that advice to use those funds at the price BTW.

So based on my quotation - I'd observe market price for long time horizon (40 year retirement) sensibly aggressive *passive* global equity assets and limited bonds/cash was about ~0.68% advised or 0.18% unadvised. 

For an active comparison - from the same offer - I have a simple collection (a blend wrapper fund of active funds with particular foci under "flexible investment" banner with Threadneedle for 0.55% - which comes in at 0.61% unadvised or 1.1% advised with our notional 0.5% added.

My examples above are not the cheapest out there but fit into the ranges other people have responded with.  I know that if I go to uninsured (SIPP - 85k protection) and ETFs and lowest cost provider then I could likely get these (particularly the passive) numbers down some more.

Albermarle

Or even simpler  but with slightly increased cost .
Low cost multi asset fund + platform cost . From 0.2% to 0.7% . Typically 0.4% to 0.5% .
One point to note is that IFA's do not just advise on investment choices but on other personal/family finance/tax issues. I guess you get better value for money if you get some non investment benefit as well .

Alexland

Even with advice 1.5% looks high for what sounds like a large pot in a multi asset fund. Total costs with advice of under 1% would be more reasonable. You are probably benefiting from an insured fund with unlimited FSCS protection but if going DIY using a standard fund the FSCS protection would be limited to £85k per provider but you could get the costs down to around 0.2% pa. If going DIY with insured funds you would probably be looking at around 0.4% pa.

dunstonh

Even with advice 1.5% looks high for what sounds like a large pot in a multi asset fund.

Its using a DFM (hence the VAT).

ou are probably benefiting from an insured fund with unlimited FSCS protection 

Not with a DFM.  OMW platform has no insured funds on it.

Alexland

dunstonh said:

Not with a DFM.  OMW platform has no insured funds on it.

Interesting, I wonder if the OP was made aware of the limits to the protection?

dunstonh

Alexland said:

dunstonh said:

Not with a DFM.  OMW platform has no insured funds on it.

Interesting, I wonder if the OP was made aware of the limits to the protection?

Probably not as it's not a mandatory point that needs to be covered in conversation.  It will be in the documentation in the minor sections though.

Albermarle

Alexland said:

dunstonh said:

Not with a DFM.  OMW platform has no insured funds on it.

Interesting, I wonder if the OP was made aware of the limits to the protection?

Although to be fair normally on this forum we tend to make light of the chance of this protection for mainstream funds/platforms  ever being needed , so the fact that they are not insured funds is not really an issue that bothers most people?