Difference between a Robo SIPP and an Investment Pathway Pension?

DaveO

That is the question!?

From what I can tell both are packaged solutions to providing a pension and I think it’s generally true that the charges for an Investment Pathway are very low and cheaper than a robo-SIPP by around 0.5%.

However would it be true to say a Robo SIPP as offered by the likes of Nuttmeg can be less conservative (and so more risky) in its investment choices?

Are there any other differences?  For example can you set up a robo- SIPP and transfer pensions into it without seeking financial advice  can with an Investment Pathway?

Thanks in advance for any replies.

dunstonh

Difference between a Robo SIPP and an Investment Pathway Pension?

I am not aware of any robo-SIPPs.  Indeed, it would be pointless being a robo and offering a SIPP.  Indeed, it is a contradiction.

rom what I can tell both are packaged solutions to providing a pension and I think it’s generally true that the charges for an Investment Pathway are very low and cheaper than a robo-SIPP by around 0.5%.

robo providers are not known for being cheap.   They generally cater for smaller value pensions and don't have the scale to offer low charges unless they run at a loss.

However would it be true to say a Robo SIPP as offered by the likes of Nuttmeg can be less conservative (and so more risky) in its investment choices?

Nutmeg do not offer a SIPP.  Not its not true.  They offer portfolios to cater for most risk profiles.

Are there any other differences?  For example can you set up a robo- SIPP and transfer pensions into it without seeking financial advice  can with an Investment Pathway?

yes.

Albermarle

Firstly Investment pathways are geared  for when you what to take money from a pension/ have stopped contributing ( or are approaching/thinking about these issues) They were introduced as a way to try and stop retirees, cashing in all their pension at once , or keeping it all in the pension in cash . Normally neither of which is a good idea and these pathways are there to enable inexperienced investors make a simple choice from 4 options 
A Robo adviser is for any stage of the pension although seems to be  mainly aimed at the accumulation phase, and I am sure they would say they offer a more bespoke service.

DaveO

@dunstonh I was referring to the options offered by the robo SIPP platforms mentioned  to at the bottom of this page: https://www.moneysavingexpert.com/savings/cheap-sipps/

They appear to offer the ability to transfer pension pots to them and provide a drawdown ability.

Having had initial discussions with financial advisors who both want to sell me their wealth management services which cost an arm and a leg and more than double the charges these robo SIPP platforms seem to charge I was wondering if they were a better alternative than what seems to be the cheapest draw down option of an Investment Pathway (if you don’t want to actively manage your own pension investments).

dunstonh

@dunstonh I was referring to the options offered by the robo SIPP platforms mentioned  to at the bottom of this page: https://www.moneysavingexpert.com/savings/cheap-sipps/

That is an MSE mistake then.  None of those robo-providers offers a SIPP.

Having had initial discussions with financial advisors who both want to sell me their wealth management services which cost an arm and a leg and more than double the charges these robo SIPP platforms seem to charge I was wondering if they were a better alternative than what seems to be the cheapest draw down option of an Investment Pathway (if you don’t want to actively manage your own pension investments).

You should avoid wealth managers/FAs.   They are the expensive side of distribution.   If you use an adviser, it should be an IFA.

Remember that an advised service is different to DIY.   The robo-providers will handle your transactions but you still need to decide the methods and do the work for transactions.   And jump through their hoops in drawdown. Some have few hoops. Some have a lot.   An advised service for a regular client has far less work to do. The adviser controls the methods, the cash float, the investments etc.  However, that convenience and having someone do it all for you comes at a cost.  Although not much more than the robo-providers in all but smaller values.

if you are happy to DIY, then a SIPP with a multi-asset fund is likely to be the cheapest option (assuming you are cost-focused).  Not a robo-rpvider.

Notepad_Phil

DaveO said:

@dunstonh I was referring to the options offered by the robo SIPP platforms mentioned  to at the bottom of this page: https://www.moneysavingexpert.com/savings/cheap-sipps/

Hi DaveO, in case you're confused, here's what nutmeg themselves say on https://www.nutmeg.com/pensions/pension-faq#does-nutmeg-have-a-sipp  "... a Nutmeg personal pension is slightly different to a SIPP (or self-invested personal pension). A SIPP allows you to make decisions about how the money in your pension is invested. Whereas if you have chosen to take out a Nutmeg pension then you have chosen to have Nutmeg make the investment decisions on your behalf."

Albermarle

As another example, Vanguard call theirs a SIPP, and a personal pension at the same time.
Although they do not make investment decisions on your behalf, they do restrict you to their own funds, so it is more akin to a personal pension with a traditional provider like Standard Life or Scottish Widows, rather than a SIPP that can have a very wide range of investments available.

However to add to the confusion, the traditional providers now also offer SIPP's, in some cases 'whole of market' and in some cases only offering their own funds

For whatever reason pensions called SIPP's seem to more attractive to consumers, so partly for marketing reasons the edges between personal pension and SIPP's gets blurred.

zagfles

dunstonh said:

@dunstonh I was referring to the options offered by the robo SIPP platforms mentioned  to at the bottom of this page: https://www.moneysavingexpert.com/savings/cheap-sipps/

That is an MSE mistake then.  None of those robo-providers offers a SIPP.

Having had initial discussions with financial advisors who both want to sell me their wealth management services which cost an arm and a leg and more than double the charges these robo SIPP platforms seem to charge I was wondering if they were a better alternative than what seems to be the cheapest draw down option of an Investment Pathway (if you don’t want to actively manage your own pension investments).

You should avoid wealth managers/FAs.   They are the expensive side of distribution.   If you use an adviser, it should be an IFA.

Remember that an advised service is different to DIY.   The robo-providers will handle your transactions but you still need to decide the methods and do the work for transactions.   And jump through their hoops in drawdown. Some have few hoops. Some have a lot.  

Don't be put off by this - the "hoops" are straightforwards and they're generally just a bunch of questions to make sure you've considered all options, plus perhaps a chat with the provider or pensionwise. You generally only need to do it when you put the fund or a part of the fund into drawdown, which may only be once or it may be a few times if you crystallise in chunks. But they're nothing to worry about. Certainly there's no need to pay an adviser just for this!

If you do use an adviser a quick check worth doing is whether they have any FO decisions against them (most have none so if they have some it could be a warning sign): https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions

DaveO

Notepad_Phil said:

DaveO said:

@dunstonh I was referring to the options offered by the robo SIPP platforms mentioned  to at the bottom of this page: https://www.moneysavingexpert.com/savings/cheap-sipps/

Hi DaveO, in case you're confused, here's what nutmeg themselves say on https://www.nutmeg.com/pensions/pension-faq#does-nutmeg-have-a-sipp  "... a Nutmeg personal pension is slightly different to a SIPP (or self-invested personal pension). A SIPP allows you to make decisions about how the money in your pension is invested. Whereas if you have chosen to take out a Nutmeg pension then you have chosen to have Nutmeg make the investment decisions on your behalf."

That is what I thought and the confusion stems from the fact Nutmeg and Weathify are referred to on the MSE web site on the SIPP page I linked to.  So they aren't SIPP's obviously and from other replies it seems the likes of Vanguard add to the confusion.

Apart from avoiding the high fees charged by the wealth managers I have spoken to what I am trying to do is combine three pensions into one so I can retire probably at the start of next year and start drawing down.  Two of them need to be moved as they don't allow drawdown directly due to being "old" and the policies just don't have that facility.

So far the alternatives put to me have been the wealth management idea with those high chargers which seem to be for nothing more than a quarterly rebalancing of the funds or a less active (and less costly) approach where the IFA and reviews the pension once a year.

I was myself aware of the Investment Pathway option and so "Investment pathway 3 – I plan to start taking my money as long-term income in the next five years" is the applicable one however the providers I have looked at so far seem to offer one option using this pathway as regards attitude to risk.  The investment pathway seems a bit restrictive in this regard (probably by design).

Therefore I started looking at the options provided by Nutmeg and Wealthily as a kind of half way house between manging the pension investments completely myself and an Investment Pathway.  That is I could use one of the pension products proved by these companies to match my attitude to risk and let them balance the investment accordingly.

So the questions is whether or not there is any great difference between a pension product from these companies and an Investment Pathway from such as Aviva. 

Albermarle

To some extent you have answered your own question. The robo advisor portfolio will be more individually suited to your needs/risk outlook , probably at a higher cost than the pathway.
Whether one will produce a better result than the other, only time will tell. 

So far the alternatives put to me have been the wealth management idea with those high chargers which seem to be for nothing more than a quarterly rebalancing of the funds or a less active (and less costly) approach where the IFA and reviews the pension once a year.

I think a good IFA will actively monitor your portfolio and if the situation demands it, they will suggest changes, regardless of whether it is 'annual review time' or not.
Also with an IFA you will get the benefit of wider advice about tax planning, family finance matters etc and not just about investments.
They should work out cheaper at about 1.2% to 1.5% whereas a typical wealth manager is usually costing more like 2%.
The robo advisor will probably be around 0.8%. I would guess that Aviva pathway would be marginally cheaper ?

I looked at a couple of SIPP providers ( real ones !) and they suggest funds costing 0.25% % to 0.4% + platform fees of 0.15% to 0.45%

dunstonh

Albermarle said:

As another example, Vanguard call theirs a SIPP, and a personal pension at the same time.
<snip>

However to add to the confusion, the traditional providers now also offer SIPP's, in some cases 'whole of market' and in some cases only offering their own funds

For whatever reason pensions called SIPP's seem to more attractive to consumers, so partly for marketing reasons the edges between personal pension and SIPP's gets blurred.

And some of those traditional providers refer to their SIPP as a personal pension or some other marketing name.

SIPP has become fashionable in the DIY world.   We have seen a number of times on here that people go shopping for a SIPP thinking that is what they need to have.    So, it is inevitable that non-SIPP providers decide to market their non-SIPP as a SIPP.

I looked at a couple of SIPP providers ( real ones !) and they suggest funds costing 0.25% % to 0.4% + platform fees of 0.15% to 0.45%

SIPPs, being whole of market (real ones that is!) offer funds from 0.05% upwards. 

SIPP providers make no recommendations on funds.  Although several have marketing lists where they may promote certain funds.

If you wanted a simple option then you would pick a multi-asset fund as they are effectively what most pathways are.  So, one of the biggest sellers is 0.18% OCF and a typical platform charge of 0.25% is a total of 0.43%