Charges

johnnyren

Hi  I’ve just received a document giving me a thorough update on my pension performance ,  it’s currently sitting at around 430 000 and is invested through fidelity and is 3 cautious funds .
as usual  the first thing that jumped out was the charges, all in I was just over 7000 for the year,    That’s for everything .does that seem a lot or pretty normal ?

I could breakdown the charges in more detail if would help get an idea whats what  

booneruk

1.6% or so - is that just the platform charge, or all charges (including charges wrapped into the funds, OCR etc). How are those funds set up, passive/active or a mixture of both?

Generally I'd say 1.6% would be on the highish end. Active funds may outperform passive, but that's not really the picture over the long term. If you were purely invested in passive funds on a low cost platform I'd expect no higher than 0.45%.

johnnyren

My fees are going on as follows 
service fee £865
ongoing charges to figures £3.329
ongoing transaction costs £878
advisor ongoing fees £2.164

wjr4

Looks about right for an actively managed portfolio, could get it for less if a passive portfolio 

dunstonh

the first thing that jumped out was the charges, all in I was just over 7000 for the year,    That’s for everything .does that seem a lot or pretty normal ?

Its normal if you have an adviser AND managed funds are being used.     Its double the cost if you have an adviser and index trackers are being used.     

If you don't have an adviser, then it is very high.   An adviser should be around 0.5-0.75% on that value.  So, take the case I have just finished this morning:
Adviser 0.50%
platform 0.15%
funds 0.18%
Total 0.83%
(if there are transaction charges, these are typically ignored. They have to be disclosed but its a synthetic figure and flawed and ignored by most.   Transaction charges are often around 0.0x%)

I could breakdown the charges in more detail if would help get an idea whats what  

It would

Beddie

johnnyren said:

My fees are going on as follows 
service fee £865
ongoing charges to figures £3.329
ongoing transaction costs £878
advisor ongoing fees £2.164

Do you value the adviser? What do they do each year for their £2,164? You can stop paying that and only pay one-off fees for future advice as needed. But if you feel it's worthwhile that is fine.

Bostonerimus1

Investment costs and fees are going to depend on the platform you use, how much you buy and sell, the type of fund you own, eg active vs passive, investment trust, open ended or ETFs etc etc and other charges like if you pay an advisor. 1.6% sounds high to me, but I DIY in the USA and my only cost is my fund fees and they average out to 0.07%. Whether 1.6% is good value for money really depends on what services you are getting.

dunstonh

johnnyren said:

My fees are going on as follows 
service fee £865
ongoing charges to figures £3.329
ongoing transaction costs £878
advisor ongoing fees £2.164

The transaction costs can be ignored.   
Ongoing charges are around 0.77% which indicates managed funds.   Managed funds are always more expensive than passive funds. (passive is around 0.1x% from a spread)
Adviser charge of 0.50% is where you would expect it to be.
platform charge of 0.20% is not bad.   Others are now coming in cheaper but its in the expected ballpark.

Overall, exactly what you would expected when managed funds are used.   You could ask the adviser to limit the portfolio to passive funds and that will reduce charges.  It may or may not reduce returns but if you are "cost focused" rather than "returns focused" then passive is the way to go.

MetaPhysical

I recently moved out £70000 out of a passive zombie fund when it was charging me 1.2%.  I then closed it.  That was with Utmost and I moved it to Aviva where I am charged 0.3% all-in at my employer discounted rates.

Depending on how old you are charges that high could make a huge difference to your eventual pension pot size.  I suggest you investigate this as a matter of some urgency and if need be move out.

johnnyren

MetaPhysical said:

I recently moved out £70000 out of a passive zombie fund when it was charging me 1.2%.  I then closed it.  That was with Utmost and I moved it to Aviva where I am charged 0.3% all-in at my employer discounted rates.

Depending on how old you are charges that high could make a huge difference to your eventual pension pot size.  I suggest you investigate this as a matter of some urgency and if need be move out.

Thanks for all replies ,     Yes this was what was concerning me slightly ,   I’m coming up for 60 ,   I’ve retired and went part time ,    I’m taking a drawdown of 17 000 a year.      I’ll get full state pension at 67.     But that’s a fair amount going out each year till then and beyond 

More_complicated_than_that

johnnyren said:

... it’s currently sitting at around 430 000 and is invested through fidelity and is 3 cautious funds .
... the charges, all in I was just over 7000 for the year,  

johnnyren said:

Thanks for all replies ,     Yes this was what was concerning me slightly ,   I’m coming up for 60 ,   I’ve retired and went part time ,    I’m taking a drawdown of 17 000 a year.      I’ll get full state pension at 67.     But that’s a fair amount going out each year till then and beyond 

Wow! So you basically take £24,000 out of the pension each year and you only keep 70% of that!!!!!!!! And tthat's before tax. I just did a quick google for an online calculator and came with this as one of the first: https://moneyed.co.uk/calculators/fees It's not the best one in the world but chuck in £430,000, no monthly contributions and your 1.6% and compare that to an alternative fee of, say, 0.3% (e.g. a low cost platform with low-cost index funds). You can find better calculators that show graphs with different fee levels. This one does it a bit but is less personalisable: https://www.pensionworks.co.uk/pension-calculator/