SIPP & Pension Investment, and Financial Adviser charge

BossHogg

I've had help from Financial Adviser (which I've paid for) to consolidate my various pension pots, and put them into an AJ Bell SIPP, and these have been invested into a Vanguard Fund. I've set up regular contributions of £600/mth from my Ltd Co to be invested.

Problem is, that only £398 is being used each month to buy investmenrts. So a 1/3 of my contributions are going back out to Advisor as his 1% ongoing fees.

Yes... I agreed to the fees, and would have been paying fees on all my original disparate pensions, but seems a huge chunk of my ongoing contributions basically to provide an annual catch up call, with no change to the Vanguard fund.

I was considering if I can take back control of my SIPP, but had impression that Vanguard was only available to me via the Advisor. I note that Vanguard also run their own SIPP so not sure what I'm getting from AJ Bell as I don't really change anything, or swap about between funds.

Am I able to do that... regain control of SIPP, stop the advisor deductions, transfer it all to Vanguard? There must be some pitfalls I'm not seeing?

MX5huggy

How much is in the SIPP? £202 per month on £10k is unreasonable but on £800k is probably OK. 

and whether AJB is better than VG for holding VG funds again depends on total value. 

BossHogg

It is 230K, so 1% is about £192/mth, and must lose a further £10 on like trade or AJ Bell charges.

dunstonh

I've set up regular contributions of £600/mth from my Ltd Co to be invested.

Problem is, that only £398 is being used each month to buy investmenrts.

Advisers are not allowed to take an charge against regular contributions unless it is for the initial charge for setting it up and then typically it's only for a maximum of 12 months.  The fee must be agreed with you at the outset and collected accordingly.  For example, if the fee agreed was £750 for setting it up, then 12 months of £62.50 would be allowed.   You rarely see the fee go on for longer than 12 months due to the consumer credit act.

So a 1/3 of my contributions are going back out to Advisor as his 1% ongoing fees.

So, the fee isn't actually against the regular contributions.  You are taking two unlinked things and trying to link them.

If you were only paying in £20pm the ratio would be worse.  If you were paying in £1200pm the ratio would be better.   However, its irrelevant as the ongoing fee is charged against the fund, not the contribution.

Am I able to do that... regain control of SIPP, stop the advisor deductions, transfer it all to Vanguard? There must be some pitfalls I'm not seeing?

Yes you can. 

Linton

MX5huggy said:

How much is in the SIPP? £202 per month on £10k is unreasonable but on £800k is probably OK. 

and whether AJB is better than VG for holding VG funds again depends on total value. 

A quick calculation - the advisor is getting £200/month which is 1%.  So presumably a total of about £240,000.

Charges are based on the total pot size.  So the comparison with your contributions is not very meaningful.  . If you were contributing nothing would you expect an advisor fee of zero?  £600/month does not seem a very high contribution.

However 1% on a pot of £240,000 seems rather high.  Figures down to 0.5% seem to be quoted on this board for reasonably sized pots.

If you feel you dont need anything more from the IFA and are prepared to manage everything yourself there is no difficulty in transferring your pension elsewhere if your Vanguard account is advisor-only.  Just set up an account with your chosen provider and ask them to transfer-in.

[Deleted User]

The charge should really be compared to expected returns over and above buying an index fund.  Given that the money is invested in an index (or a bunch of indices), the ongoing fee seems to be charged for zero benefit. 

Albermarle

 I note that Vanguard also run their own SIPP so not sure what I'm getting from AJ Bell as I don't really change anything, or swap about between funds.

Both Vanguard platform and AJ Bell are mainstream investment platforms that are used by many contributors to this forum .

The difference is that the Vanguard platform is a little cheaper but you can only buy and hold Vanguard Funds on it .

With AJ Bell you have access to a much wider range of investments ( if you want them ) , including Vanguard funds .

Linton

Deleted_User said:

The charge should really be compared to expected returns over and above buying an index fund.  Given that the money is invested in an index (or a bunch of indices), the ongoing fee seems to be charged for zero benefit. 

Why zero benefit?  Perhaps the OP wants ongoing advice/discussion on any possible changes in circumstances and progress towards the objective and what happens afterwards or some level of hand-holding.  If he doesnt and is happy to completely manage everything himself then it may be considered zero benefit.

BossHogg

You are right... I've conflated the monthly regular contribution, with the monthly advisor fees, but is is still what alerted my to just how much I'm paying for limited ongoing advice and thus benefit.

Albermarle

For clarity can you say which Vanguard fund you are invested in ?

There are a lot of discussions on here about whether an IFA is worth it or not. Like this one ;
Do I really need a Financial Advisor on an ongoing basis? — MoneySavingExpert Forum

Diplodicus

Boss Hog, you are paying a financial adviser £200 per month for nothing. 

You would still be paying Vanguard and AJ Bell a little, just terminate the arrangement with your financial adviser.