Leave it or move it?

dunstonh

 I think I'll give HL a ring and see what they have to offer.

HL's pension has about 30,000 different options.    They won't tell you what you should have as that is something you decide (when you DIY) or something your adviser recommends (if you use an adviser).   A the moment, you are DIY.

. Don't have a problem with talking to Vanguard either.

Vanguard is not whole of market and offer their own range.   So, the fund selection is less.  However, most of their viable options would be cheaper (they also have many funds that would not be viable for you - just like the HL SIPP).

 I don't have a desire to swot up on funds etc and much prefer to pay a little more for a managed fund. 

If you DIY, then you should "swot up" as its you that makes the decisions.   Currently, you have gone DIY but its cost you more.  That is not ideal.  The point of DIY is that a) you know what you are doing and b) you cut out the cost of someone telling you what you should do because you know.      At the moment, you don't know what you are doing (by your own admission) and you haven't cut out the cost of an adviser. Indeed, you are paying more.

Bostonerimus1

degs88 said:

Thanks for the comments and advice. I think I'll give HL a ring and see what they have to offer. Don't have a problem with talking to Vanguard either. I don't have a desire to swot up on funds etc and much prefer to pay a little more for a managed fund. In terms of the money in the HL SIP that the original Q was about I don't have any plans to access the money for a few years at the earliest though it won't be 20 years. I'm in my late 60's.
Thanks again.

H&L or Vanguard won’t give you advice as they are not allowed to and how will you choose the right managed fund if you aren’t prepared to swot up on them. Right now you are DIY without the small amount of knowledge or enthusiasm required and that is a dangerous combination. You have a couple of choices: either take a couple of evenings to do some reading that will allow you to set up an inexpensive portfolio with just a few tracker funds or pay an IFA to do it and lose more of you money each year to their fees.

dunstonh

Bostonerimus1 said:

degs88 said:

Thanks for the comments and advice. I think I'll give HL a ring and see what they have to offer. Don't have a problem with talking to Vanguard either. I don't have a desire to swot up on funds etc and much prefer to pay a little more for a managed fund. In terms of the money in the HL SIP that the original Q was about I don't have any plans to access the money for a few years at the earliest though it won't be 20 years. I'm in my late 60's.
Thanks again.

H&L or Vanguard won’t give you advice as they are not allowed to and how will you choose the right managed fund if you aren’t prepared to swot up on them. Right now you are DIY without the small amount of knowledge or enthusiasm required and that is a dangerous combination. You have a couple of choices: either take a couple of evenings to do some reading that will allow you to set up an inexpensive portfolio with just a few tracker funds or pay an IFA to do it and lose more of you money each year to their fees.

An IFA would be cheaper than what he is currently paying.   So, it would cost more than a low cost DIY solution but less than the current high cost DIY solution.

Bostonerimus1

dunstonh said:

Bostonerimus1 said:

degs88 said:

Thanks for the comments and advice. I think I'll give HL a ring and see what they have to offer. Don't have a problem with talking to Vanguard either. I don't have a desire to swot up on funds etc and much prefer to pay a little more for a managed fund. In terms of the money in the HL SIP that the original Q was about I don't have any plans to access the money for a few years at the earliest though it won't be 20 years. I'm in my late 60's.
Thanks again.

H&L or Vanguard won’t give you advice as they are not allowed to and how will you choose the right managed fund if you aren’t prepared to swot up on them. Right now you are DIY without the small amount of knowledge or enthusiasm required and that is a dangerous combination. You have a couple of choices: either take a couple of evenings to do some reading that will allow you to set up an inexpensive portfolio with just a few tracker funds or pay an IFA to do it and lose more of you money each year to their fees.

An IFA would be cheaper than what he is currently paying.   So, it would cost more than a low cost DIY solution but less than the current high cost DIY solution.

Agreed, my wording was poor. The OP's lack of knowledge has got them into a less then optimal portfolio and add to that the admitted lack of interest in learning about funds and an IFA seems like the way to go...as painful as that is for me to say. ;-)

gm0

The relevant bits from my "choosing and making a DIY plan document"

Advice and DIY pros and cons

If DIY seems daunting – advice is the path forward. You can seriously reduce what you need to learn and time spent. For best results some engagement with the language of pensions and of investment will still be useful to understand the recommendations you are given.

For UK – financial advice is a regulated constrained process not a bespoke private contract. Your provider will have to do certain activities and deliverables whether you feel them to be helpful or not. A good adviser will be able to achieve these compliance goals while helping you with your pension planning and broader financial objectives. Working in an interaction that works for you. Having done it hundreds of times. But advisers won’t take a disclaimer letter from you and “skip” apparently irrelevant or unwanted bits to suit a process you have in your head for what you want to do. Their liability insurers and the regulator take a dim view of that.

It’s not a final decision either way.

You can DIY to start with and take advice later on. As you age, your view could change. Health changes or just evolving preferences. A spouse may lack interest to continue to DIY if you pre-decease them and a family member cannot support them. DIY is easier to run post setup but not trivial. All this needs to be considered. A DIY plan should be documented with research files weeded and separated for clarity so that it can be dealt with when you are no longer around to provide a commentary. Or you can do the opposite - take up front advice (called one off or transactional advice) to set things up get transfers done and then “run” the established pension yourself skipping the ongoing management part.

Advice cost (the elephant in the room)

The key issue of advice alongside appetite to learn to DIY is cost. I view ongoing advice as a luxury good – it’s really quite expensive over the long life of a drawdown plan. Charges of a percentage point or two of the pot value on the way in to set it up and then perhaps 0.5% per annum. A little more if your pot is smaller. Over 40 years this is a number equivalent to around 10-12%+ of the initial pot value. This is a number of very nice holidays or an expensive car on a £500,000 pot. A large but not ridiculous DC sum to be reading this document. Another way to view the 0.5% pa is 10% of a long term average hypothetical 5% return on growth assets.

Advice pros

On the plus side - advice can help you navigate all the pension and investment complexity and avoid learning it. It is insured against being “unsuitable” for your circumstances but nothing more. Bad DIY outcomes could make this cost difference seem trivial.

But moderately effective DIY (or better) will be much harder to beat consistently with the higher cost drag of advice acting cumulatively on returns.

Trust

An advice relationship based on effective communication, professional rapport and earned trust can be good value. The domain knowledge of pensions, the rebalancing of investments, fund research and monitoring, responding to tax code changes and keeping you correctly positioned.

It can support the spouse or partner should the financial planning enthusiast pre-decease them. An adviser may also save you more than they cost you on general family financial planning wrapped into the pension reviews. Or they might not – your affairs may be simple and reasonably in order already and in that case they may just cost you a fairly large amount while doing comparatively little.

There is no answer to this “advice or DIY” question that is correct – just the one that suits you and your family.

Advice offers no guarantee of investment outcome

Worth stating as this is widely misunderstood. What advice definitely won’t do is guarantee you a better investment outcome. You are directed to (offered) investments which are demonstrably “suitable” for your goals, resources and situation. Appropriate to the goals and personal circumstances you declared i.e. the broad category you fit into. We are not all special unicorn princesses. Adjusted for your capacity in £ to take risk in retirement and your attitude to risk (loss aversion).

If you then agree with the recommended investments then how the chosen investments perform relative to their investment risks is a separate question entirely. No promises are made about that. This is why holding similar mainstream investments at a similar (still appropriate) risk level without advice likely wins the long term returns game by the value of the advice charges – cumulative, rolled up for 30-40 years.

You have cause for (compensated) complaint against advice if you were directed to investments which were manifestly unsuitable for your age, health, goals, resources and needs. Most advisers aren’t stupid enough to get it that badly wrong or to leave it undocumented. In a larger firm they have a compliance owl sat on their shoulder making sure the paperwork is in order for the regulator should you complain later. This creates a clear incentive for them to lead the conversation to a well understood and widely used “category” that is similar to other clients of similar wealth and risk attitude. And to recommend the mainstream portfolio and provider that matches up with that. And similar risk tiered portfolios are readily available DIY.

This is screamingly obvious and yet still a key point to make

Example for a global equities portfolio – whole of market passive index tracker. Or the same short list of active funds covering the markets from major fund managers. The advice route is more expensive by the advice fee and the net returns to you are less by that amount. It cannot be otherwise. All other comparisons of advice vs DIY will be portfolio A vs B. Different assets. Different risks. Wealth managers (tied to product FAs) love it when you take a bit more risk - your disappointment at middling returns net fees is mild enough and you don’t leave. Maximum Milk. Minimum Moo.

The takeaway is that the value of the advice is not the investment destination per se but rather the process of getting to it informed by your circumstances and the rules at the time. If you learn to DIY you do it once. And it is an effort you choose to make or not. 

The adviser does hundreds of cases per year. Nonetheless the value to you is mostly external to the portfolio and platform selected – it’s in helping you choose sensibly how to access your pension to meet your goals, how to use the freedoms options intelligently so that they don’t have hidden tax traps, and to help you avoid mistakes by picking a poor pre-assembled product or creating a particularly badly structured portfolio yourself. So advice is NOT about whether the “investment risks” that you took actually paid off – it about whether they were reasonable risks for someone in your position and risk category to take. A very civil service definition.

While this aspect sometimes surprises people and feels wrong. 10% of my initial money for what ?. Actually it could not be otherwise. Imagine if downside investment risk was covered by advice guarantees - we could all take advice and set our investment risk to the absolute maximum happily insured and knowing that we win big or get a guaranteed consolation outcome anyway.

This is a wishful thinking concept applied to pension investment. A product that lets you keep a lot more of the potential upside of risky asset markets without all the inconvenient volatility and downside risks attendant on being invested in them.

No magic beans to be had.

Learn to DIY.  Find a trusted adviser.  Tick 1

Bostonerimus1

Another way to think about fees is as a percentage of your initial income drawdown. If we have fund and platform fees of 0.5% and IFA fee of 0.5% (it could easily be more) that adds up to 1% which is 25% of a 4% drawdown. So in the early years of retirement a quarter of a retirees income will be spent on financial fees. I think that's ridiculous.

degs88

Thanks for all the advice/comments. Just to clarify the purpose of the SIP was to get back some income tax. After that it just sat there and until Mr P went Tonto (Mr Wallace's words I think) everything was OK though I accept fees were still being incurred. I was/am under the impression that if I bought into some sort of managed fund all I had to do was identify my risk appetite (aka VLS20, 40, 60 etc) which I did. I'm sure I did my research at the time. I have the greatest of respect for good IFA'S but worry about finding one, hence me sticking with the HL SIP managed fund but I now realise the fees are too high. Is it worth simply cashing in the SIP and moving the money into a similar managed fund with HL or even into a VLS ISA with Vanguard (split between my and my wife).

dunstonh

degs88 said:

Thanks for all the advice/comments. Just to clarify the purpose of the SIP was to get back some income tax. After that it just sat there and until Mr P went Tonto (Mr Wallace's words I think) everything was OK though I accept fees were still being incurred. I was/am under the impression that if I bought into some sort of managed fund all I had to do was identify my risk appetite (aka VLS20, 40, 60 etc) which I did. I'm sure I did my research at the time. I have the greatest of respect for good IFA'S but worry about finding one, hence me sticking with the HL SIP managed fund but I now realise the fees are too high. 

You may wish to read a thread in the savings section
https://forums.moneysavingexpert.com/discussion/6471819/paralysis-tracker-and-gilts-v-one-fund-or-do-i-need-an-ifa#latest

Difference in scenario but it highlights how you some people get hooked into certain providers and because of that, allow them to consider moving from a good option to a worse one because of marketing and brand awareness.    The options do not just revolve around one or two providers/fund houses.

It also discusses how objectives for the money should be considered and then you look at solutions/options. 

Is it worth simply cashing in the SIP and moving the money into a similar managed fund with HL or even into a VLS ISA with Vanguard (split between my and my wife).

Why would you cash in the SIPP?   For most people, that is the most tax efficient option.    Drawing it out to put in an ISA would not be a good idea unless you have excess personal allowance available.

If you acknowledge that HL is a very expensive option, then why would you continue to use it?

degs88

Thanks again for your input (I know you guys get touchy if I call it advice ;-))
If by excess personal allowance you mean the annual 30k for ISA's then yes, we have two ISA's with Vanguard, both of which have had zero input this year so would be able to accomodate all of my SIP once tax has been deducted. Bear in mind the SIP doesn't have any input anymore. I'm drawing my LGPS pension and state pension. 
I don't understand your last paragraph in relation to the previous one.

QrizB

degs88 said:

If by excess personal allowance you mean the annual 30k for ISA's

We're talking about income tax.

If you withdraw your entire SIPP, 25% of it will be tax-free but the rest will be taxable income.

If you're already in receipt of your SP and a LGPS pension, you'll probably have used up your personal allowance and will pay at least 20% on the rest. You might even enter the hogher-rate tax band.