Clueless - simple questions about SIPP

NannaH

You will pay the .6% fund charge plus HL’s own fee of .45%

So 1.05% in total.

For my VLS80, I pay .22% fund charge + .45% platform fee, so .62% in total.
I also have Baillie Gifford Global income growth at .53%. 

jamesd

travelodger said:

Albermarle said:

My SIPP is entirely invested in HL MULTI-MANAGER BALANCED MANAGED TRUST CLASS A - ACCUMULATION.

I am thinking this will be quite expensive - 1.5% pa ?

For info most investors on this forum are paying around 0.2% to maybe 0.7% at most for their investments .

Thank you.

What's a quick way of finding the funds that only charge 0.2% to 0.7%, please?

It's unlikely that most here are paying total charges at the range mentioned. That appears to assume that the individuals being thought about are using only passive tracker investments and that's not anything like universal. At Hargreaves Lansdown it's simply impossible to pay less than 0.45% if you use funds for the value you have because that's the platform charge that you pay whatever else you have. Other platforms vary and some have fixed charges of a few hundred Ponds a year or 0.25% or 0.35% or similar. Plus investment costs.

I have a very cheap deal at another place - a 0.75% discount - and am still paying over 0.8% on average for the funds I use there, including the passive one.

What that fund cost range does is simple: it tells you to only buy passive funds, because active funds are going to cost more than that. And that's not something you should be told to do by stealth with a price range that doesn't really tell you what it's suggesting.

Fund selection isn't about just price. It's about price and performance. For UK investors using UK-based investments the active funds are likely to outperform the passive ones, after fees, except in the largest markets, like the US.

travelodger said:

PS I just invested £100 in this:

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hsbc-ftse-all-world-index-class-c-accumulation

That's an entirely reasonable global equity tracker fund for which you will be paying 0.58% including platform fee at HL. It's the sort of thing that's an excellent core holding until or unless you want to add more emphasis somewhere else, perhaps seeking the historic higher performance of managed small cap funds. As a global tracker with a high US component it's one where there is likely to be reduced value in active management, though there are certainly exceptions if you want higher performance from a global managed fund.

Have a look at:

https://webfund6.financialexpress.net/clients/Hargreaves/chartbuilder.aspx?codes=FKLDQ,NSMXX,FLSX6,FSTUKSM,F0OB8&color=f65d1a,1a83f6,efd715,53e166,8aa3d8&hide=&span=60&totalReturn=true

Red (first) is the HSBC fund you just mentioned. Yellow (third) is Fundsmith Equity I Acc, a popular actively managed global fund. Naturally, the active fund charges more but the performance of both is after the fund charges have been deducted, though not the platform charge. Had you put money into the Fundsmith fund instead of the global index tracker it'd have grown by 135% instead of 88%.

Blue (second) is FTSE Small Cap ex Inv Co, a UK small cap tracker index, not a fund, so better than a fund tracking that index could achieve. Green (fourth) is ASI UK Smaller Companies Ret Acc GBP an actively managed UK small cap fund and Pale blue/grey is ASI Global Smaller Companies Ret Acc GBP an actively managed global small cap fund. Over five years total returns after fund costs for those three have been 69%, 126% and 139%.

I've held both of the small cap funds mentioned in this post for well over five years. They were outperformers when I bought them and they are outperformers now. Given a free choice it's not that hard to pick funds with good teams who stick to what they are doing and continue to do well, nor to leave the fund if any of that (human manager, company or type of investing being done) changes. Never stick around when any of the three mentioned things changes, it's a clue that there will be a change in performance, more likely down than up. Not one of the three actively managed funds I mentioned would have been hard to pick as a likely good performer five years ago. But to pick them and stay with them you do need to pay attention. It's not something you should do if you want to just sit and ignore things. there's a price to pay for that but sit and ignore is where trackers come into their own.

jamesd

Is there anyone on here who could give me the "heads-up" on a good fund/a few good funds to invest in? To me it's just a bewildering array and I don't know which to pick. I could just stick with what I have, but I don't want to be missing out. I noticed HL front page has a "best funds" article to I shall go and read that for now.

Use trackers until you have some ideas of your own.

While I did name three that I think are excellent that doesn't mean that they are right for you. For example, the smaller companies funds tend to jump up and down in value more, so are expected to drop more during a bear market, something you might not be comfortable with. And while they are excellent IMO that doesn't necessarily mean best performance over any particular time period, in part because that's not always what I'm looking for, which might be some blend of that, consistency and lower drop potential, for example. Or I might have a restricted fund choice to pick from where the money involved happens to be.

MK62

travelodger said:

Thank you Huggy for weighing in!

To answer your queries:

1. It's £11 and various amounts of pennies, different each month.
2. My SIPP is entirely invested in HL MULTI-MANAGER BALANCED MANAGED TRUST CLASS A - ACCUMULATION.
3. I have never withdrawn any money from my SIPP. There's £32,000 in it now.

I also have £10k invested in a Fund and Share Account. Should/can I transfer all this over to my SIPP?

My annual income is about £19k.

Many thanks
TL

The £11.xx you are paying each month is HL's 0.45%pa platform charge (which equates to about 0.037% per month)......£32000x0.037%=£11.84.

The fund charges are on top of that, but you never see them broken out, as they are taken directly from the fund itself......the fund you have is relatively expensive in the grand scheme.....it's a fund of funds (ie the fund itself invests in other funds rather than directly in shares of underlying companies), which is costing you 1.35%pa altogether or about £432pa......this is taken directly from the fund itself....as I said, you never see it broken out as separate charge.

It's a little bit more involved/complicated than this in truth, but effectively, if your fund made £1000 in growth, you'd only get £568 added to the fund value....the other £432 is taken in charges. A fund getting the same £1000 growth, but with a 0.25% charge, would see £920 added - so you can see the drag over time from higher charges can be significant.

In your shoes, I'd open another SIPP at Vanguard (whose platform fee is 0.15%), and place all new money there (as well as what is in your "Fund and Share Account")....probably in something like Vanguard LifeStrategy 80......and then simply tell Vanguard you wish to transfer your HL SIPP to them......it's fairly painless, involving little more than giving them the details of your HL SIPP and signing a transfer form (and then waiting for it to happen.....it would need to be a cash transfer (which are faster anyway), as your current fund only exists on the HL platform so can't be transferred as is (in-specie) to Vanguard - this does mean you would be out of the market for a while during the transfer process, but this could work either for or against you, depending on whether the market falls or rises during the transfer).

By way of comparison, on a balance of £32000, this would cost you around £128pa in charges altogether (£48 platform, £80 fund).....you are currently paying about £576 (£144 platform, £432 fund), and while there is no guarantee for the future, VLS80 has performed a fair bit better than your current fund over the last 5 years.......and as the balance rises, so do the savings.

travelodger

MK62 - I am EXTREMELY grateful for the time and effort you have put into explaining all this to me. This is just the sort of improvement in my investing that I need to be making, but I am so ignorant about what else is out there.

 I had zero idea that my SIPP is so expensive! I will definitely change to Vanguard. I shall try to open an account today, with the minimum investment, then tell them to transfer my HL SIPP to them. 

I have already arranged to sell all my funds in the Fund and Share account, so will start the new SIPP with about £10k.

I also have a large amount in my ISA (I didn't mention it before because it was irrelevant to my queries about my SIPP). This is doing very well, I think. Spread across 9 funds, the money has gained between 12% and 60% over 5 years. So I guess that should all be left as it is.

Many thanks once again.

travelodger

mk62 

I invested in LifeStrategy 80% (is that the correct one?) the charges are 0.22%.

MK62

We could debate on here until the cows come home about which platform and fund(s) you should use, and opinions will vary...sometimes a little, sometimes a lot. You just have to accept that in reality nobody knows today.....and unfortunately we can't invest using hindsight, so in the end you just have to bite the bullet. However, what we can say is that the Vanguard option will definitely save you money on charges, and while there is no guarantee on the future fund performance vs your current HL fund, VLS80 has outperformed it significantly over the past 5 years......I cannot say that will continue, but with the performance drag on the HL fund such a hefty fund fee brings with it, the chances are good. I did only mention VLS80 as a possibility as it has a similar split between equities and bonds to your HL fund, but only you can decide if that split is right for you....what I would say is that it's a reasonable starting point, and switching funds in the future is free and fairly straightforward, if you feel you need/want to switch. One of my pensions is a Vanguard SIPP, and so far I've had no issues at all.....the platform lacks some of the bells and whistles which HL have, but I don't need them really, and the lower fee makes up for that.

MK62

As to your Stocks and Shares ISA, if you are happy with the platform it's currently on, and you feel the funds in it have done well for you, then I would be in no rush to move it tbh, but I would take some time to research more about it and the funds in it.

travelodger

MK62 now I am in with Vanguard I can explore if there is a better fund than the 80. I'm happy with fairly high risk because I have a massive amount in the Stocks & Shares ISA that (feel) is very secure.

MK62

If you are happy with higher risk, then you could also check out VLS100, one of VLS80's sister funds.....now all equities, no bonds, and with a similar equity regional split  (with the UK bias) ......as well as perhaps Vanguard FTSE Global All Cap, FTSE Developed World, and as an extra holding to a core fund, perhaps Global Small Cap.........take your pick, and while a single fund keeps things simpler, you can mix and match if you want.....but, at least at first, I'd probably stick to a global fund.....you could also, for instance, have equal holdings in say VLS80 and VLS100, effectively giving you VLS90 if you decided that equity/bond split was right for you......or put say 75% into VLS80 and 25% into Global Small Cap.......the choice is yours