Wealth Management to DIY SIPP

AltaNate

A long time lurker absorbing information with apologies as another wealth management to DIY thread!

I currently have a £210k SIPP under a discretionary investment service with a wealth management company that provides pension  management for employer’s obligations to its staff. About five years ago I transferred a previous pension into their managed SIPP but with no further contributions to it. My other workplace pension is not managed by them.

Thanks to this forum and other online resources, I’ve a much a better understanding of investing and pensions than I did five years ago. 

Recently digging into the charges made me consider ongoing costs and the impact on future value. Charges over the past five years have been about £1k pa, but they recently introduced ongoing advice charge. Annual charges now run at just over £2400. 

• Pension scheme charge 0.12%
• Ongoing advice charge 0.85%
• Investment services charges 0.2%

It’s invested in two in house funds 50/50 to achieve a risk rating of 6/9 each with OCF of 1.25%. The total return over the past five years is 13% based on difference between starting investment and latest valuation and accounts for all costs as units sold to pay charges.

Now comparing apples and oranges… I have a S&S ISA inside fixed fee platform invested in HSBC GS Balanced (OCF 0.17%) which calculates a return of about 27% over the exact same timeframe. Appreciate past returns are no guarantee of future performance.

Not planning on touching the SIPP for at least another 10 years. Unsure whether the charges are reasonable, but the thought of potentially north of £25k of fees over this timeframe with historical performance is quite unappealing.

My question and proposal is to transfer to low cost platform possibly ii with their low fixed fee Pension Builder plan SIPP and invest initially into a mainstream multi asset fund such as Global Strategy, Life Strategy, MyMap or similar.

Thoughts/sanity check please and hoping the usual suspects can pitch in! Thanks for getting this far.

dunstonh

Recently digging into the charges made me consider ongoing costs and the impact on future value. Charges over the past five years have been about £1k pa, but they recently introduced ongoing advice charge. Annual charges now run at just over £2400. 

• Pension scheme charge 0.12%

• Ongoing advice charge 0.85%

• Investment services charges 0.2%

Ongoing advice charges are optional.  If you dont want it, then the firm must turn it off.

Now comparing apples and oranges… I have a S&S ISA inside fixed fee platform invested in HSBC GS Balanced (OCF 0.17%) which calculates a return of about 27% over the exact same timeframe. Appreciate past returns are no guarantee of future performance.

The key difference in returns is likely to be asset mix and risk.   Are they aligned?

Bostonerimus1

I don't see what value you are getting from this ongoing charge so it seems sensible to drop it. You seem to have a simple portfolio (which is good IMO) and as long as you have the sense to manage your portfolio through market cycles then I think DIY is a good option for you. FYI I DIY and have set my asset allocation so that I don't have to do any active management of my portfolio, I just let it ride the ups and downs on its own.

barnstar2077

It does seem like you are paying extra for services you don't need at the moment.  DIYing with a globally diversified fund could be the way to go.

I DIY my SIPP with Vanguard and invest in their FTSE Globally All Cap index fund.  I am happy to leave it in there for another 11 years until I retire, but I am flexible on when I take it, which means a dip ten years from now won't give me too much of a headache.

If you DIY and there is a big dip a few years from now, are you the sort of person who will hold the course, or would you prefer to have someone on the other end of the phone that can reassure you?  Personally I think these forums are worth their weight in gold for stopping me from doing anything too stupid! :  )

Albermarle

• Pension scheme charge 0.12%
• Ongoing advice charge 0.85%
• Investment services charges 0.2%

It’s invested in two in house funds 50/50 to achieve a risk rating of 6/9 each with OCF of 1.25%

So you are paying over 2.4% in total ?

AltaNate

The key difference in returns is likely to be asset mix and risk.   Are they aligned?

To me they are similar:

Latest asset allocations (50:50 split Fund A & B )

Fund A 52% equities; 19% bonds; 12% cash; 9% Property & Infrastructure; 5% Gold; 3% Alternatives

Fund B 65% equities; 13% bonds; 7% cash; 8% Property & Infrastructure; 4% Gold; 3% Alternatives

GS Bal 54% equities; 38% bonds; 2% cash; 6% Property

KIID show risk 5/7 for both funds whereas HSBC GS Balanced at 4/7

Albermarle

KIID show risk 5/7 for both funds whereas HSBC GS Balanced at 4/7

Estimating risk levels is not an exact science, these numbers are just a rough guideline.

Some systems use a 1 to 10 range.

AltaNate

So you are paying over 2.4% in total ?

Yep with the OCF which if the returns were better maybe that would be OK.
But they’re not! 

Annualised performance is 2.5% and 3% over 5 years and going forward 1.17% in direct charges.

AltaNate

Bostonerimus1 said:

I don't see what value you are getting from this ongoing charge so it seems sensible to drop it. You seem to have a simple portfolio (which is good IMO) and as long as you have the sense to manage your portfolio through market cycles then I think DIY is a good option for you. FYI I DIY and have set my asset allocation so that I don't have to do any active management of my portfolio, I just let it ride the ups and downs on its own.

Didn’t blink through Covid which might not have been a huge correction however. I have cash reserve to ride out and not sell at a loss.

barnstar2077 said:

It does seem like you are paying extra for services you don't need at the moment.  DIYing with a globally diversified fund could be the way to go.

I DIY my SIPP with Vanguard and invest in their FTSE Globally All Cap index fund.  I am happy to leave it in there for another 11 years until I retire, but I am flexible on when I take it, which means a dip ten years from now won't give me too much of a headache.

If you DIY and there is a big dip a few years from now, are you the sort of person who will hold the course, or would you prefer to have someone on the other end of the phone that can reassure you?  Personally I think these forums are worth their weight in gold for stopping me from doing anything too stupid! :  )

I can hold the course… a cash reserve and research has given me a better knowledge. I wish I’d had it much earlier!

Albermarle

AltaNate said:

So you are paying over 2.4% in total ?

Yep with the OCF which if the returns were better maybe that would be OK.
But they’re not! 

Annualised performance is 2.5% and 3% over 5 years and going forward 1.17% in direct charges.

2.4% is very high.
A typical IFA overall charge would be in the region 1.2% to 1.8%
A DIY charge using  active funds would be say 0.7% to 1.2%
A DIY charge using just passive trackers on a low cost platform could be as low as 0.2%to 0.4%
Perhaps a more typical DIY charge/workplace pension charge would be in the 0.4% to 0.7 %

AltaNate

Albermarle said:

Estimating risk levels is not an exact science, these numbers are just a rough guideline.

Some systems use a 1 to 10 range.

Surely all in the ballpark though and given GS Balanced is actually lower.

When I went through the risk survey I originally had no idea about the large corrections and what I’d do in that situation, but have a better idea now.