Pension charges - !!!!!!!

[Deleted User]

Vanguard is a typical example of pile it high, sell it cheap, which they can afford because of scale. When you have trillions under management, 0.05% is still a lot of money.  They get extra income by lending shares from ETFs and other similar practices. Any profit they make is returned to the funds. 

bostonerimus

dunstonh said:

US Vanguard charge nothing in transaction fees on Vanguard funds and have low fund fees. They make their money on those fees and transaction fees on the brokerage side for non-Vanguard stocks and funds.

They must be getting transaction charges internally when they buy and sell things.   In the EU/UK, the cost of those is calculated and included in the costs disclosure to consumers even though that bit is implicit rather than eplicit

 They make most of their money on people who trade shares a lot and hold cash in trading accounts as well as on people who trade on margin. If you trade on margin they charge interest and lend your shares. Their costs are low; things are different from the way investing was done in the 20th century. Also, brokerages cross-sell financial products, such as currency exchange, mortgages, etc.  Most are banks. They have revenue and solid profit margins. 

The EU doesn't like that sort of cross subsidy in retail distribution.

US Vanguard has fund minimum amounts (often $3k) to get the lowest fund fees. There are no transaction fees or 12b-1 fees.  As an example for the US Admiral Stock Index Fund the annual management fee is 0.04% and the tracking error with its benchmark is -0.02%

dunstonh

US Vanguard has fund minimum amounts (often $3k) to get the lowest fund fees. There are no transaction fees or 12b-1 fees.  As an example for the US Admiral Stock Index Fund the annual management fee is 0.04% and the tracking error with its benchmark is -0.02%

So Vanguard are able to trade shares in the US without incurring any dealing costs?  That isn't the case in the EU/UK

The UK used to have just the AMC as the disclosure.  Then came the TER which included some things not covered by the AMC.  Then came OCF which included a few more things.  Then came the OCF+TC+IC disclosure.     The OCF & TC & IC are not extra layers of charges that didn't exist before.  They just were not disclosed

Vanguard in the UK are not that cheap.   Fidelity and HSBC turn up around 0.06%  Vanguard tends to be around 0.1x for OCFs  and 0.01% for transaction charges and zero for incidental charges (most funds are zero for incidental)

zagfles

dunstonh said:

US Vanguard has fund minimum amounts (often $3k) to get the lowest fund fees. There are no transaction fees or 12b-1 fees.  As an example for the US Admiral Stock Index Fund the annual management fee is 0.04% and the tracking error with its benchmark is -0.02%

So Vanguard are able to trade shares in the US without incurring any dealing costs?  That isn't the case in the EU/UK

The UK used to have just the AMC as the disclosure.  Then came the TER which included some things not covered by the AMC.  Then came OCF which included a few more things.  Then came the OCF+TC+IC disclosure.     The OCF & TC & IC are not extra layers of charges that didn't exist before.  They just were not disclosed

Vanguard in the UK are not that cheap.   Fidelity and HSBC turn up around 0.06%  Vanguard tends to be around 0.1x for OCFs  and 0.01% for transaction charges and zero for incidental charges (most funds are zero for incidental)

Well they're massively cheaper than the 2.1% the OP is paying!

bostonerimus

dunstonh said:

US Vanguard has fund minimum amounts (often $3k) to get the lowest fund fees. There are no transaction fees or 12b-1 fees.  As an example for the US Admiral Stock Index Fund the annual management fee is 0.04% and the tracking error with its benchmark is -0.02%

So Vanguard are able to trade shares in the US without incurring any dealing costs?  That isn't the case in the EU/UK

The UK used to have just the AMC as the disclosure.  Then came the TER which included some things not covered by the AMC.  Then came OCF which included a few more things.  Then came the OCF+TC+IC disclosure.     The OCF & TC & IC are not extra layers of charges that didn't exist before.  They just were not disclosed

Vanguard in the UK are not that cheap.   Fidelity and HSBC turn up around 0.06%  Vanguard tends to be around 0.1x for OCFs  and 0.01% for transaction charges and zero for incidental charges (most funds are zero for incidental)

No, Vanguard charges dealing costs on everything apart from their own funds.

Malthusian

Bobby_Applejuice said:

It does clearly state 'We deduct 2.10% of the fund value each year. As you have more than one investment fund, the figure shown here represents the highest AMC of all your funds'

That's like Sainsbury's telling me that they charged me £21 for a bag of onions because "as you bought more than one item, the figure represents the bottle of Dead Man's Fingers rum that was the most expensive thing in the trolley".

The only way such a daft way of disclosing charges could make it into the wild is that Clerical Medical know that hardly anybody is going to read that line. And of the few that do, many of them will come to MSE or an adviser and be given a proper answer at somebody else's expense.

[Deleted User]

dunstonh said:

US Vanguard has fund minimum amounts (often $3k) to get the lowest fund fees. There are no transaction fees or 12b-1 fees.  As an example for the US Admiral Stock Index Fund the annual management fee is 0.04% and the tracking error with its benchmark is -0.02%

So Vanguard are able to trade shares in the US without incurring any dealing costs?  That isn't the case in the EU/UK

The UK used to have just the AMC as the disclosure.  Then came the TER which included some things not covered by the AMC.  Then came OCF which included a few more things.  Then came the OCF+TC+IC disclosure.     The OCF & TC & IC are not extra layers of charges that didn't exist before.  They just were not disclosed

Vanguard in the UK are not that cheap.   Fidelity and HSBC turn up around 0.06%  Vanguard tends to be around 0.1x for OCFs  and 0.01% for transaction charges and zero for incidental charges (most funds are zero for incidental)

They seem cheap by UK standards for people with SIPPs under 100K.  Platform charge is 0.15%. You can trade their ETFs with zero transaction costs on their platform.  ETF charges for developed countries are at 0.1% or less. HSBC funds charging around 0.06% seem to have fewer companies/no small companies so not a direct comparison. They don’t charge for withdrawals, closing account, etc.  I can’t find anything cheaper for small pensions on U.K platforms.  But to Zagflies point, once you start comparing 0.1% and 0.05%, the impact is negligible.  Very different from charges at 1% and over. 

On a side note, its very hard to find information on withholding taxes for UK-based funds.  These can be quite a bit higher than the numbers listed above and, depending on how the shares are held, costs can vary even for the same equity. 

AlanP_2

Must confess the fact that the US and Canada have lower costs than the UK for investments is about as much use to me as knowing that housing and food is cheaper in Moldova.

It has no relevance to what a UK investor can make use of.

dunstonh

Must confess the fact that the US and Canada have lower costs than the UK for investments is about as much use to me as knowing that housing and food is cheaper in Moldova.

Fair point.  Although I don't think they do have it that much cheaper.   In my experience investors that have had US investments, they have their expensive distributions and their cheap ones.

I also suspect that there is an element of disclosure differences as well.      In the UK/EU, the charges include internal charges that the fund pays to exist.   From the comments on the thread, I am not sure those disclosures exist in the US.   It seems to be the likes of Vanguard can operate a fund without incurring any costs in the US but can't in the EU, but that doesn't sound feasible.  If a cost is not disclosed it doesn't mean that cost isn't happening.  e.g. AMC vs TER vs OCF vs post MiFIDII disclosures of OCF+TC+IC.  What level of disclosure is there in the US and which of those does it equate to?

If US disclosure is comparable to AMC then it's not that UK charges are higher but US is not as transparent.

All of this though is just technical discussion and not of any interest to the vast majority posting here.

[Deleted User]

AlanP_2 said:

Must confess the fact that the US and Canada have lower costs than the UK for investments is about as much use to me as knowing that housing and food is cheaper in Moldova.

It has no relevance to what a UK investor can make use of.

Your question was answered multiple times. Your costs are way, way too high given what’s available in the UK.