Lowest fees for workplace pension pots after leaving work?

rhedyn

I left work some years ago and now I have two UK workplace pension pots of small to moderate size, one currently with Royal London and one with Aviva.  I also have a Vanguard 401k in the USA (I am a UK/USA dual citizen residing permanently in the UK).  Compared to the Vanguard USA 401k over the past five years, Royal London and Aviva have terrible performance and high fees.  To be fair I understand the performance difference may just be as expected for the past five years in the UK, but I still resent the fees.  Is there anything I can do to optimise those funds, either by consolidation or transferring to new provider, or choosing different fund options within providers?  Unfortunately I cannot have a Vanguard UK account because I am a US citizen, and that may be a restriction for opening new accounts with some other UK financial providers as well.  Thanks for any advice.

Albermarle

To be fair I understand the performance difference may just be as expected for the past five years in the UK, but I still resent the fees.  

Normally an investment fund in a UK pension fund will not be 100% invested in UK. It can typically be anything between 5% and 50%. There might be other reasons that the investments have performed differently, but without details it is impossible to comment.

I believe investment fees are higher in UK that US, but without details of what fees you are paying it is not possible to see if they are competitive for UK or not.

Is there anything I can do to optimise those funds, either by consolidation or transferring to new provider, or choosing different fund options within providers?

You should be able to change investment funds easily with the current providers. There should be a full list of investments available on their websites. However in both cases there will be a restricted range.

rhedyn

Thanks Albermarle.  To provide more detail, the Total Expense Ratio for the Royal London pot is 1.0% and it has lost 25% of its value since 2019 (this time last year it was up 12% from 2019).  The TER for the Aviva pot is 0.8% and it has lost 18% of its value since 2019 (this time last year it was up 17% from 2019).  For comparison, the USA Vanguard 401k is down 2% since last year but has gained 51% in value since 2019, and it charges only individual transaction fees which are negligible (each one is pennies, I think it would amount to a Total Expense Ratio of something like 0.001%). 

Albermarle

The  losses on the Royal London and Aviva pots are not typical.
A typical UK based medium risk multi asset fund would be around 10% up from mid 2019.
What are the investments you hold with these pension providers? I suspect they maybe be funds of government bonds, which have done particularly badly.
On the other hand a 50% rise must mean the Vanguard 401 is invested 100% in US equities.

So you are comparing apples with pears. For some reason it looks like you have chosen totally different types of investments for the UK and US ones. Although without the details it is difficult to be sure what is going on.

Regarding the fees, more than likely the Royal London at least will have some discounts based on fund size, and it will not actually be 1 %;

rhedyn

I've done no choosing on any of these, they are as whatever they defaulted to when I left work.  These are basically leftover fragments of my retirement savings and I haven't paid them much attention so far as they are just fragments, but now I'd like to tidy them up.  The Vanguard 401k is in a sensible spread of index trusts with global coverage, reflecting the fact that Vanguard's default set up is good, whereas Royal London and Aviva appear to have defaulted to something predatory and idiotic.

In any case, after some more hours of research it looks to me like a SIPP with AJBell or possibly their subsidiary Dodl, basically just wrapping a Vanguard index such as the Europe ExUK one Dodl offers, is my best bet.  It seems my dual citizenship allows a SIPP and AJBell will support.  All I want is to put it in a sensible passive index and leave it there, so Dodl 0.15 plus 0.12 for the fund making 0.27 charges is a hell of a lot better than anything Royal London or Aviva offers, unless I'm badly misunderstanding something.

Albermarle

I've done no choosing on any of these, they are as whatever they defaulted to when I left work.

When these pensions were started you would have been informed about choices. However > 95% make no choice/throw the letter in the bin/have no idea what it means , so it goes to the default. I still find it hard to believe they dropped so much though, although without knowing the actual funds involved it is difficult to be sure.

Dodl is fine and cheap if you are happy with the limited choice ( compared to A J Bell main platform)

rhedyn

Originally they were one pot from one employer, started when I was in work, and no doubt I made some choices then, but that was 15 years ago.  Sometime after I left work the original provider was bought out and for unknown reasons my pot was split in two unequal parts and landed with different providers, who seemingly assigned them to some default choices of their own.  Which I wrongly assumed would be reasonable choices.  The Royal London pot is in RLP/BlackRock Over 5 years Index Linked Gilt Index;  Aviva's web interface is down at the moment so I can't conveniently check what that fund is.

Thanks for confirming Dodl, it does seem to be the best available approximation to suit my needs.

dunstonh

Compared to the Vanguard USA 401k over the past five years, Royal London and Aviva have terrible performance and high fees

How do the investments compare?    That is more likely to be the main difference rather than a very small difference in charges.

Thanks Albermarle.  To provide more detail, the Total Expense Ratio for the Royal London pot is 1.0% and it has lost 25% of its value since 2019 (this time last year it was up 12% from 2019). 

Is that charge before or after you apply the fund based discounts that RL have on all their modern plans?

For comparison, the USA Vanguard 401k is down 2% since last year but has gained 51% in value since 2019, and it charges only individual transaction fees which are negligible (each one is pennies, I think it would amount to a Total Expense Ratio of something like 0.001%). 

You cannot directly compare US charges with UK as they are not like for like.  However, you expect the cheapest US options be slightly better than the cheapest UK option due to economies of scale.  However, the US also has plenty of high charged optins that are comparable the high charged options here.

The Royal London pot is in RLP/BlackRock Over 5 years Index Linked Gilt Index;  Aviva's web interface is down at the moment so I can't conveniently check what that fund is.

So, it really has very little to do with charges but your investment choices.

Albermarle

What are the investments you hold with these pension providers? I suspect they maybe be funds of government bonds, which have done particularly badly

The Royal London pot is in RLP/BlackRock Over 5 years Index Linked Gilt Index; 

So my guess was right for the RL pension pot anyway . This is strange for a default option, which are normally a mix of equities and binds, unless you are in some kind of annuity lifestyle fund and you are close to your retirement age ?

Bob_8472

rhedyn said:

I've done no choosing on any of these, they are as whatever they defaulted to when I left work.  These are basically leftover fragments of my retirement savings and I haven't paid them much attention so far as they are just fragments, but now I'd like to tidy them up.  The Vanguard 401k is in a sensible spread of index trusts with global coverage, reflecting the fact that Vanguard's default set up is good, whereas Royal London and Aviva appear to have defaulted to something predatory and idiotic.

In any case, after some more hours of research it looks to me like a SIPP with AJBell or possibly their subsidiary Dodl, basically just wrapping a Vanguard index such as the Europe ExUK one Dodl offers, is my best bet.  It seems my dual citizenship allows a SIPP and AJBell will support.  All I want is to put it in a sensible passive index and leave it there, so Dodl 0.15 plus 0.12 for the fund making 0.27 charges is a hell of a lot better than anything Royal London or Aviva offers, unless I'm badly misunderstanding something.

I'm also looking at moving my pension and I've been looking at the ii SIPP - I like the fact that they just charge a flat fee plus trading fees for the platform (plus fund fees of course).  Currently I am paying 0.28% plus fund fees and I get very little for the 0.28%.  Not made any decisions yet, I want to look at the options properly before I move.

Prism

rhedyn said:
The Royal London pot is in RLP/BlackRock Over 5 years Index Linked Gilt Index;  Aviva's web interface is down at the moment so I can't conveniently check what that fund is.

That fund will have done very well over the preceding years, just not over the last year.