Interactive Investor SIPP question

MetaPhysical

I note there is a fee of 12.99 per month.  Is this the II "platform fee"?  You also have to pay a percentage fee - albeit smallish generally around the 0.2% mark - for the various funds that you decide to invest in???
Trying to do the numbers.  My workplace pension offers a fee of 0.3% so by the time the platform fee and fund fee at II are added together it doesn't seem such a good deal.  Am I missing something?

I am not sure if my current pension savings vehicle at my Aviva fund offers UFPLS.  if it doesn't - I will call them to check - then it may be the right time to move the fund now to II.

MallyGirl

is that the platform fee or the funds fee?
workplace pensions often have discounted fees.
whether the fixed fee with II is better than a percentage fee will depend on how much you have in there.

I have a SIPP with II and also an L&G workplace pension. The management charge for the workplace one is about the same as the II fee but the pot value is different. L&G is cheaper but my choice of funds is limited and I may have to transfer out to get the retirement functionality I want so I am happy with my setup.

Linton

MetaPhysical said:

I note there is a fee of 12.99 per month.  Is this the II "platform fee"?  You also have to pay a percentage fee - albeit smallish generally around the 0.2% mark - for the various funds that you decide to invest in???
Trying to do the numbers.  My workplace pension offers a fee of 0.3% so by the time the platform fee and fund fee at II are added together it doesn't seem such a good deal.  Am I missing something?

I am not sure if my current pension savings vehicle at my Aviva fund offers UFPLS.  if it doesn't - I will call them to check - then it may be the right time to move the fund now to II.

See https://www.ii.co.uk/our-charges

Assuming you are a new customer an II SIPP will incur a fixed platform fee charge depending on your portfolio size of £5.99/month (<£50K portfolio) or £12.99 (>£50K).  There is no additional % based charging.  This makes II a good choice for large portfolios.

The fund charge is determined by the fund manager.

MetaPhysical

I think I see how it works.  Can you sanity check me please.... The funds themselves - you could have a load of them in your SIPP wrapper -  each take a small percentage cut invisibly for running their own fund.  And then II for providing the means and the platform to access those funds charge the platform fee of 5.99/12.99 ?  Does that sum it up?

Do II also send you a P60 tax return for the tax they withhold if you make UFPLS/drawdown withdrawals?

MallyGirl

the fund costs are wrapped up inside the fund - an expensive fund has to perform better to see growth than a cheaper one would. You don't see this.
You only see the ii fee for providing the service

MetaPhysical

Thanks MallyGirl, got it.

So in terms of ISA with a SIPP.  Bare with me with my simplistic questioning....  An ISA with more than 50k costs 11.99 per month.  I can get 4.25% in a cash ISA at zero risk.  I am right in saying that the stocks and shares ISA's have got to perform well to beat that and cover the 11.99 fee and fund charges?

MallyGirl

over time S&S do outperform cash. Cash interest rates have not been at the current rate for very long and probably won't stay this high - S&S the general trend over time is up (with downs and ups and downs along the way)

Pat38493

MetaPhysical said:

Thanks MallyGirl, got it.

So in terms of ISA with a SIPP.  Bare with me with my simplistic questioning....  An ISA with more than 50k costs 11.99 per month.  I can get 4.25% in a cash ISA at zero risk.  I am right in saying that the stocks and shares ISA's have got to perform well to beat that and cover the 11.99 fee and fund charges?

For these type of investments you generally need to look out to the long term over decades.  At this precise moment in time, unusually, bank savings interest rates and money market fund rates are paying out around 5% or so, and are paying more than the current rate of inflation.  This is quite an usual situation historically and doesn't happen very often.

Also - stocks and shares generally (for example global market index trackers) have gained a lot more than 5% in the last year, but are pretty volatile so you need to determine an investment strategy based on your risk attitude and how long you are investing the money for.

Albermarle

MetaPhysical said:

Thanks MallyGirl, got it.

So in terms of ISA with a SIPP.  Bare with me with my simplistic questioning....  An ISA with more than 50k costs 11.99 per month.  I can get 4.25% in a cash ISA at zero risk.  I am right in saying that the stocks and shares ISA's have got to perform well to beat that and cover the 11.99 fee and fund charges?

Currently cash interest rates are getting ahead of inflation ( as this keeps dropping)
So you can beat inflation and your money is 100% safe.
So why invest instead?
Investing is a long term game and long term you would expect to beat cash savings, with some ups and downs on the way.
In the current situation it is tempting to stick with cash, but long term will most likely not give the best result.
Many like to compromise with a mixture of cash savings and investments. It does not have to be all or nothing.

MetaPhysical

Many thanks folks for answering.

Linton

MetaPhysical said:

Thanks MallyGirl, got it.

So in terms of ISA with a SIPP.  Bare with me with my simplistic questioning....  An ISA with more than 50k costs 11.99 per month.  I can get 4.25% in a cash ISA at zero risk.  I am right in saying that the stocks and shares ISA's have got to perform well to beat that and cover the 11.99 fee and fund charges?

Stocks and shares dont need to perform extraordinarily well to cover the monthly fee or costs.  Say you have £100K invested  and it has undemanding returns of 5%, slighly better than a cash ISA.  That means a gain of £5K in a year.  The II cost would be £11.99X12=£144, so small compared with the investment gain.

As to fund costs:
1) They are already included in the performance calculation, they are not an added extra.  They could be seen as the gain of the underlying investments minus the staff employment costs and the other costs of running the fund management as a business. But if you didnt have the staff and a viable management business the fund would not exist.

Clearly though the fund management should operate as efficiently as possible - the fund charges give you an indication.

2) Cash ISA accounts also have fund costs - the bank's staff also need to be paid.  And they have platform costs since the online system and bank accounting systems need to be paid for.  The difference between Cash ISAs and stock investments is that the Cash ISA supplier is not required to tell you what those costs are.