New Role, New Pension, High Charges

Tom_Brine

I recently started a new role after moving from Siemens PLC. The benefit package around pensions matches what I had before, up to 10% employer contribution with employee contribution available through salary sacrifice.

The differentiator is the charges, Siemens paid all fees for the platform with the employee only having to pay for the individual fund choices themselves. The new provision however is provided by Scottish Widows and I was a little shocked to see a 0.45% charge levied on top of fund selection choice charges, obviously this is very high in comparison to the rest of the industry.

I have £164,000 in my old pension pot and have requested a breakdown of charges now I have left the scheme as an active employee. If these come back as higher than average I will open another account with another provider and transfer the money. 

For the current pension I have set up a 50% salary sacrifice payment with the 10% employer contribution on top meaning 60% of my earnings are being squirrelled away for the future. However I am aware that after time these charges will eat into my capital at a higher rate than necessary. Does anyone have any experience with transferring money away from an active Scottish Widows employer pension into a different provider with lower fees and better fund selection? Ideally id like to stick it into something like Vanguard Global All Cap.

When I moved to my last employer I simply transferred my previous employer pension into the Siemens one with the great fee structure, however I am reluctant to move money into or keep new payment with Scottish Widows at the rate I am saving.

zagfles

I think it's usual for workplace schemes to allow partial transfers out while remaining an active member, although it's not usually something they advertise.

0.45% does seem high if it's just the platform charge, are you sure it's not the total charge for the default strategy, with perhaps extra charges for some self select funds?

MaxiRobriguez

0.45% isn't "very high" - my platform is 0.5% for the first £50k, 0.4% up to £100k and 0.3% thereafter, so not that much cheaper than yours based on current value.

But yes, partial transfer out should be achievable. 

zagfles

MaxiRobriguez said:

0.45% isn't "very high" - my platform is 0.5% for the first £50k, 0.4% up to £100k and 0.3% thereafter, so not that much cheaper than yours based on current value.

But yes, partial transfer out should be achievable. 

For a workplace scheme? Many/most workplace schemes don't even have a "platform charge" as such, they just have fund charges. There's a cap on the total charge at 0.75% for the default strategy.

Tom_Brine

MaxiRobriguez said:

0.45% isn't "very high" - my platform is 0.5% for the first £50k, 0.4% up to £100k and 0.3% thereafter, so not that much cheaper than yours based on current value.

But yes, partial transfer out should be achievable. 

It’s high compared to Vanguards 0.15% plus fund fees of circa 0.22%. Or Interactive Investors flat £9.99 a month if you’ve more than 22000 in your pot (I will pay in a total of 33000 a year).

Being on a FI journey I want to ensure as much of my money as possible is working for me, if I can save fees it gives me more bang for my buck and more capital to compound on over time. Why pay more for similar service/performance.

MaxiRobriguez

zagfles said:

MaxiRobriguez said:

0.45% isn't "very high" - my platform is 0.5% for the first £50k, 0.4% up to £100k and 0.3% thereafter, so not that much cheaper than yours based on current value.

But yes, partial transfer out should be achievable. 

For a workplace scheme? Many/most workplace schemes don't even have a "platform charge" as such, they just have fund charges. There's a cap on the total charge at 0.75% for the default strategy.

Yes a workplace scheme. 

Not particularly nice for the OP but just wanted to point out it's within a normal(ish) range, but yes if he/she can partial transfer out to a cheaper platform to reduce costs then that makes a lot of sense. 

dunstonh

 The new provision however is provided by Scottish Widows and I was a little shocked to see a 0.45% charge levied on top of fund selection choice charges, obviously this is very high in comparison to the rest of the industry.

0.45% is low.   Yes you can get marginally cheaper but you are being very unrealistic treating 0.45% as high.

It’s high compared to Vanguards 0.15% plus fund fees of circa 0.22%. 

You are not including all the charges.
Vanguard's platform charge is 0.15% and 0.22% is the OCF for the lifestrategy funds but you haven't included TC, OC/IC.    VLS60, for example has a TC of 0.05% and IC & OC of zero.   
So, bottom line for VLS60 with Vanguard is 0.15%+0.22%+0.05% = 0.42%

0.42% is only marginally lower than 0.45%. 

Ideally id like to stick it into something like Vanguard Global All Cap.

So, using Vanguard as the platform, that would be 0.22%,   OCF is 0.23% TC is 0.09% and IC/OC is zero.  A total of 0.54%.  

More than the workplace pension.  

Does anyone have any experience with transferring money away from an active Scottish Widows employer pension into a different provider with lower fees and better fund selection?

SW pensions usually have the state street trackers or the Blackrock trackers available. Does yours?


On £164k, you are looking at a difference of around £49 a year for a 0.03% difference in costs.    Markets move by more than that in a day most days.  You will be out of the market for about a week. Possibly more with administrator controlled workplace pensions.   So, it could cost you a lot more by being out of the market than you would gain in a minuscule cost difference.

MaxiRobriguez

dunstonh said:

SW pensions usually have the state street trackers or the Blackrock trackers available. Does yours?

This is why I haven't moved my money. I'm not on SW but another fairly large provided and I have access to a range of funds that are only 0.06%, so add the platform fee for me which is around 0.4% currently, but will fall to closer to 0.3% with more money invested, then there's not much reason to try and move.

But if I didn't have access to those dirt cheap funds it'd make sense to shift.

Prism

With a Scottish Widows workplace pension that platform charge of 0.45% includes the fund fees of many of the built in Scottish Widows or State Street funds. Some of the external funds do cost a little more.

Albermarle

 I was a little shocked to see a 0.45% charge levied on top of fund selection choice charges, 

Considering the comments above I think you need to check the point in bold very carefully.

For sure it can be confusing as every provider seems to structure the charges a little differently.

For example , I have a SW ex workplace pension but because it was originally a Zurich pension , the charging structure is different from the 'normal ' SW pensions. Also employers often have negotiated their own discounts .

someone

Anyway my understanding that auto enrolment brought charges down for NEW business as there was lots of shopping around happening by employers. Given scenarios like the one detailed below charges for OLD business did not reduce. Case in point Peoples Pension (provided by B&CE) for auto enrolment charges £2.50 /year + 0.5% - [rebate up to 0.3% on pots >£50k].

My Workplace Pension is Scottish Widows. Interestingly it was selected whilst the company was much larger and a plc. We have been though acquisitions, downsizing and pre pack administration. Now as an SME (on the smaller side no less) the people who set the original scheme up long gone. Post administration an incredible amount of effort had to be made just to keep payments going into the scheme (as well as the deductions pre-administration that hadn't yet been applied to employees accounts).

With my Workplace Pension the standard offering (Scottish Widows Pension Portfolio Two Pension) has a Total Annual Fund Charge of 1.00% less employer discount of 0.25% (so 0.75%). Personally I find this to be high however the Telegraph seems to say this is better than most

An annual charge of 1–2% should be considered expensive. Unfortunately, nearly half of UK savers (49%) have annual pension charges of over 1%[4]. https://www.telegraph.co.uk/financial-services/pensions-advice-service/pension-charges/