Alternative to Prufund Growth Series E ?

Joey_Soap

Good afternoon, a good friend in early 60's has just inherited a modest SIPP investment from a close relative. His good fortune, of course. He has asked me to take a look at the possible ways to maximise his good fortune in the short to medium term. The person is kn a modest salary and pays basic rate tax. The SIPP was set up previously by an IFA to consolidate several smaller defined contribution pensions. The owner has sadly passed away in her mid 60's without really benefitting much from it (never drew an income, just a few small capital withdrawals). The IFA put the money into a single fund with Prudential, the Prufund Growth Series E fund. I see it is basically a fairly vanilla multi-asset unitised fund. It won't set the world on fire with performance. But it did suffer somewhat in the covid induced market panic. What really worries me and the new beneficiary of the SIPP is the total charges amount to very nearly 2% of the fund every year. Every month despite no income bring taken units are sold to pay the IFA and to pay Prudential. This is effectively a cancer in the heart of the fund. The IFA seems to have had zero input to the SIPP since setting it up around 5 years ago. IFA just forwards information from Prudential once per year in so. For this, the IFA takes 0.5% in addition to the 3% they initially charged in the first place to set up the SIPP with Prudential. Prudential charges are almost 1.5% on top. Hence the nearly 2% total charges.

I won't be giving "advice" as such but I have suggested that the new beneficiary, who wishes to draw a modest income from the SIPP could consider transferring the SIPP to a retail low cost platform and invest in ITs, REITs and ETFs to keep costs as low as possible. I reckon we could assemble a pretty much hands off portfolio of fairly low volatility that might manage to support a drawdown of maybe 4% or so, with modest risk to capital. To achieve 4% or so, we have to stop this 2% annual fee that's bleeding the investment. The beneficiary is potentially also interested in buying an annuity in future years if as he ages to mid or late 60's (say 5 or 6 years time). He doesn't want to take advantage of a lump sum tax free payment of the entire pot. I think this is about as best we could hope for. Low costs and a collection of up to 10 or a dozen investment trusts, real estate investment trusts and/or ETFs. Thanks for reading.

Comments please?

dunstonh

I won't be giving "advice" as such but I have suggested that the new beneficiary, who wishes to draw a modest income from the SIPP could consider transferring the SIPP to a retail low cost platform and invest in ITs, REITs and ETFs to keep costs as low as possible.

Sounds like you are planning a significant increase in investment risk and fully removing FSCS protection.

The capital security element of the prufund is the reason it costs more.

Low costs and a collection of up to 10 or a dozen investment trusts, real estate investment trusts and/or ETFs.

Is the investor able to run a portfolio  like that?  Multi-asset funds exist for inexperienced investors to have the work done for them.  You are suggesting a portfolio that increases risk and increases workload (portfolio rebalancing for example).

Notepad_Phil

Joey_Soap said:

I won't be giving "advice" as such but I have suggested that the new beneficiary, who wishes to draw a modest income from the SIPP could consider transferring the SIPP to a retail low cost platform and invest in ITs, REITs and ETFs to keep costs as low as possible. I reckon we could assemble a pretty much hands off portfolio of fairly low volatility that might manage to support a drawdown of maybe 4% or so, with modest risk to capital. To achieve 4% or so, we have to stop this 2% annual fee that's bleeding the investment. The beneficiary is potentially also interested in buying an annuity in future years if as he ages to mid or late 60's (say 5 or 6 years time). He doesn't want to take advantage of a lump sum tax free payment of the entire pot. I think this is about as best we could hope for. Low costs and a collection of up to 10 or a dozen investment trusts, real estate investment trusts and/or ETFs. Thanks for reading.

Comments please?

A portfolio like that might be fine for someone experienced with investing but I don't believe from what you've said that your friend is such a person.

If it were left in my hands I'd be more inclined to look towards a simple 60/40 multi-asset fund such as Vanguard LifeStrategy or the HSBC Balanced alternative.

Joey_Soap

Notepad_Phil said:

Joey_Soap said:

I won't be giving "advice" as such but I have suggested that the new beneficiary, who wishes to draw a modest income from the SIPP could consider transferring the SIPP to a retail low cost platform and invest in ITs, REITs and ETFs to keep costs as low as possible. I reckon we could assemble a pretty much hands off portfolio of fairly low volatility that might manage to support a drawdown of maybe 4% or so, with modest risk to capital. To achieve 4% or so, we have to stop this 2% annual fee that's bleeding the investment. The beneficiary is potentially also interested in buying an annuity in future years if as he ages to mid or late 60's (say 5 or 6 years time). He doesn't want to take advantage of a lump sum tax free payment of the entire pot. I think this is about as best we could hope for. Low costs and a collection of up to 10 or a dozen investment trusts, real estate investment trusts and/or ETFs. Thanks for reading.

Comments please?

A portfolio like that might be fine for someone experienced with investing but I don't believe from what you've said that your friend is such a person.

If it were left in my hands I'd be more inclined to look towards a simple 60/40 multi-asset fund such as Vanguard LifeStrategy or the HSBC Balanced alternative.

You are possibly quite right. I intend to look at suitable portfolios  such as you suggest. I am extremely doubtful about 40 per cent weight in bonds though. I intend to point out the possible alternatives along with a visit to the IFA which I will attend with the beneficiary. The IFA is being rather evasive when asked simple questions like "please explain my options to me". Replying like "we will do whatever you want". To a person who has no idea about personal finance issues and has no idea what he could do, let's just say that's less than helpful. Doing nothing might just suit this person. But I have been asked for help and short of me deciding what to do, I will try my best for him. Nobody else is going to to that.

Thanks for the input.

Joey_Soap

dunstonh said:

I won't be giving "advice" as such but I have suggested that the new beneficiary, who wishes to draw a modest income from the SIPP could consider transferring the SIPP to a retail low cost platform and invest in ITs, REITs and ETFs to keep costs as low as possible.

Sounds like you are planning a significant increase in investment risk and fully removing FSCS protection.

The capital security element of the prufund is the reason it costs more.

Low costs and a collection of up to 10 or a dozen investment trusts, real estate investment trusts and/or ETFs.

Is the investor able to run a portfolio  like that?  Multi-asset funds exist for inexperienced investors to have the work done for them.  You are suggesting a portfolio that increases risk and increases workload (portfolio rebalancing for example).

Thanks. I am not really planning anything more than ensuring this person is fully aware of his options and decides what to do from a position if some knowledge rather than complete ignorance. This includes a visit to the IFA to hear what they say is in his best interests. Over the phone, they have so far been very unhelpful. So a visit with me in tow to prompt sensible discussion is essential. If he doesn't feel able to make the kind of drastic changes that I think are required that's fine too. What's very clear to me is that drawing down say 4% and paying 2% charges on top will perhaps leave this person in a not too great position in the longer term.

Phil321

Did you ever get a result on this. Completely different reasons but I am looking to try emulate the Growth Fund. Effectively I like the fund but want other investments too  (eg direct shares, physical gold EFTs, Commodities, Emerging Markets) that aren't available in the Pru SIPP.  I cant split the SIPP because its crystallised so need to transfer it fully. 
So effectively trying to keep the Pru Fund but have a more flexible SIPP. 
Also the one withdrawal per quarter and 28 days notice on the Pru fund are not great features in this current environment so I want to reduce my holding in it. 

Long explanation to try avoid the numerous questions...I am just interested if anyone found a half decent replacement for the Pru Fund (which doesnt have 40% bonds in because the PruFund has reduced those over the years) 

dunstonh

that aren't available in the Pru SIPP.

Pru do not operate a SIPP.  It is a personal pension.   Hence why it doesn't need to comply with MiFID disclosures and has limited functionality and a small fund list.

Long explanation to try avoid the numerous questions...I am just interested if anyone found a half decent replacement for the Pru Fund (which doesnt have 40% bonds in because the PruFund has reduced those over the years) 

It is very easy to build a portfolio spread without the smoothing element.   Your limiting factor is going to be fund availability on the Pru retirement account.  Moving it to a SIPP may be better if you need more funds.

Phil321

dunstonh said:

Long explanation to try avoid the numerous questions...I am just interested if anyone found a half decent replacement for the Pru Fund (which doesnt have 40% bonds in because the PruFund has reduced those over the years) 

It is very easy to build a portfolio spread without the smoothing element.   Your limiting factor is going to be fund availability on the Pru retirement account.  Moving it to a SIPP may be better if you need more funds.

Thx.
Seems to be the conclusion I am coming to.

If I am desperate to keep the PruFund I could go to a SIPP provider that allows access to the PruFund via a Trustee Inv Plan (Curtis Banks, AJ Bell) but that means using an IFA.

Alternatively I can open a Stocktrade account with the Pru...its not an interactive 'trading platform' but I could hold EFTs and Shares in it...bit clunky but would let me diversify. Also the inability to trade online is a bit of a mixed blessing I guess and would make me make decent long term investment decisions on not overeact. Its just at the moment the ability to have a finger on the button might be useful due to such uncertain geopolitics (and indeed financial wobbles like the banks) at the moment. 

I like the Pru Pension to hold the Pru Fund in because it pays big money on cash ie 0.07% below base and its product fee is really low (around 0.15% of the amount held)

Albermarle

Phil321 said:

dunstonh said:

Long explanation to try avoid the numerous questions...I am just interested if anyone found a half decent replacement for the Pru Fund (which doesnt have 40% bonds in because the PruFund has reduced those over the years) 

It is very easy to build a portfolio spread without the smoothing element.   Your limiting factor is going to be fund availability on the Pru retirement account.  Moving it to a SIPP may be better if you need more funds.

Thx.
Seems to be the conclusion I am coming to.

If I am desperate to keep the PruFund I could go to a SIPP provider that allows access to the PruFund via a Trustee Inv Plan (Curtis Banks, AJ Bell) but that means using an IFA.

Alternatively I can open a Stocktrade account with the Pru...its not an interactive 'trading platform' but I could hold EFTs and Shares in it...bit clunky but would let me diversify. Also the inability to trade online is a bit of a mixed blessing I guess and would make me make decent long term investment decisions on not overeact. Its just at the moment the ability to have a finger on the button might be useful due to such uncertain geopolitics (and indeed financial wobbles like the banks) at the moment. 

I like the Pru Pension to hold the Pru Fund in because it pays big money on cash ie 0.07% below base and its product fee is really low (around 0.15% of the amount held)

Maybe one other thing to take into account, is that the Pru has been mentioned on this forum several times due to its apparently non existent customer service/inability to respond to any queries in any reasonable time frame.
To be fair I have not seen any comments very recently and it might have been a Covid/Work from home problem, but worth keeping in mind.

dunstonh

Albermarle said:

Phil321 said:

dunstonh said:

Long explanation to try avoid the numerous questions...I am just interested if anyone found a half decent replacement for the Pru Fund (which doesnt have 40% bonds in because the PruFund has reduced those over the years) 

It is very easy to build a portfolio spread without the smoothing element.   Your limiting factor is going to be fund availability on the Pru retirement account.  Moving it to a SIPP may be better if you need more funds.

Thx.
Seems to be the conclusion I am coming to.

If I am desperate to keep the PruFund I could go to a SIPP provider that allows access to the PruFund via a Trustee Inv Plan (Curtis Banks, AJ Bell) but that means using an IFA.

Alternatively I can open a Stocktrade account with the Pru...its not an interactive 'trading platform' but I could hold EFTs and Shares in it...bit clunky but would let me diversify. Also the inability to trade online is a bit of a mixed blessing I guess and would make me make decent long term investment decisions on not overeact. Its just at the moment the ability to have a finger on the button might be useful due to such uncertain geopolitics (and indeed financial wobbles like the banks) at the moment. 

I like the Pru Pension to hold the Pru Fund in because it pays big money on cash ie 0.07% below base and its product fee is really low (around 0.15% of the amount held)

Maybe one other thing to take into account, is that the Pru has been mentioned on this forum several times due to its apparently non existent customer service/inability to respond to any queries in any reasonable time frame.
To be fair I have not seen any comments very recently and it might have been a Covid/Work from home problem, but worth keeping in mind.

Had some Pru post today for a request for details made just over 3 weeks ago.   Still slow but not as bad as they once were.

Farside71

Most of Prudential's pensions are considered legacy now and are completely mismanaged by one of the worst outsourcing firms there is, and have been for the last 4 years or so.  That explains the rapid disintegration of service levels over the last few years.  Retirement account is more of a Wealth product and has had better service as it was serviced in house, although I am not sure if that is still the case, I think it's mostly done in India now as they got rid of most of the UK staff, but might still technically be 'in house'.