Is Your SIPP Pension Making Any Money?

Dazed_and_C0nfused

mad1_2 said:

JohnWinder said:

If you're taking first steps to understanding your investments I'd say your asset mix isn't terrible. Important to remember that start and end dates used for calculating returns can have a big effect; a 2% fall on one day at the start or end can change a 10% return into 12% or 8% if you change the start or end date by one day. We also have no idea what effect fees had on your return. While your assets don't seem to have done well recently they might do better than the rest of our mixes over the next six months. Short time periods are like that.

We don't know how 'smart' you are with personal investing, but you can judge by scanning the contents or reading sections in 'google books' of Tim Hale's book Smarter Investing. You'll then know of you should borrow it from your local library, as it will put you on an equal footing with your adviser.

Although the performance of your portfolio over a short period should not be used to judge it there are bits to question.

How does it help you to have <1% in property or index linked bonds? Diversification of assets is good, but those assets can do better than the others by only 1-15%/year for a short time. A 15% outperformance by property would boost your returns by < one hundredth of that ie 0.15%/year. If you were managing your own investments you simply wouldn't bother, so ask yourself and your adviser why they chose those for you. If you can find a reason other than it makes investing look too complicated for anyone but a professional, report back and tell us. And if you can't get a cogent reason, you've taken one step towards doing better yourself.

You also ought to be familiar with all the fees you're paying, directly and indirectly in fund management fees, and reduce those you can. Over the short term it's less important, but compounding means that if you're investing for another twenty years which you might be, fees are very important.

Thank you all for your comments - and to JohnWinder for a very helpful post.

I am currently paying a total annual charge of 1.93% to the financial advisors' company who invest my pension. This includes the use of the Quilter platform and their own fees.

I am not in any way 'smart' and would not consider investing my own pension. I am in awe of those who do this, but I think I would do more harm than good to my pension pot.

JohnWinder  I will ask the question about property and index linked bonds - thank you for pointing this out.

Just to clarify - I am not necessarily 'judging' the performance of my pension over such a short period of time. I am looking for a benchmark with others experience over this same time period. I am concerned that my pension has not grown at all over this time period and at some periods it was actually in a negative balance.

Thanks to all for your help so far.

It seems like you could well have chosen a firm of financial advisors (sometimes referred to as salesmen/women on this board).

Any reason you didn't go for an independent financial advisor?

OldScientist

With £185k in your account and a charge of 1.93%, you are paying nearly £3.6k per year to your advisers. Your 'profit' of 0.8% was about £1.4k.

While not everyone is happy to DIY, at the simplest level (one, two or possibly three index funds) it is not too difficult and is likely to produce good enough results in the long term. I note that even the most expensive platforms would cost you no more than about £800 per year in fees and there are others that would be much cheaper.

If you really don't want to DIY, then using an IFA would enable you to reduce the amount of fees you are paying.

ARFURCHANCE

Addressing your specific post - I am in a cautious Governed portfolio with RL.
During the period you mention I have neither added nor taken money out of the pot.

Since Feb 23 to end of Jun 24 - my value has risen 9.3% after IFA/RL fees of 0.7%

During that period I have annotated on my spreadsheet 2 world events that have negatively affected my pension - Israel/Palestine (Oct 23) and Israel/Iran (Apr24).
July to date is also down by 0.7%.
Hope this helps

Roger175

mad1_2 said:

Thank you all for your comments - and to JohnWinder for a very helpful post.

I am currently paying a total annual charge of 1.93% to the financial advisors' company who invest my pension. This includes the use of the Quilter platform and their own fees.

I am not in any way 'smart' and would not consider investing my own pension. I am in awe of those who do this, but I think I would do more harm than good to my pension pot.

JohnWinder  I will ask the question about property and index linked bonds - thank you for pointing this out.

Just to clarify - I am not necessarily 'judging' the performance of my pension over such a short period of time. I am looking for a benchmark with others experience over this same time period. I am concerned that my pension has not grown at all over this time period and at some periods it was actually in a negative balance.

Thanks to all for your help so far.

Mad1_2  Let me just throw this thought out to you.  You are paying for advice at 1.93%, that’s costing you £3,570 per year or £5,050 over the 17month period you have disclosed. That’s just for the advisor/platform fees and for all we know, some if not all of those funds could be managed funds with their own high cost (as opposed to low-cost tracker funds). The performance of 0.86% over that same period has earnt you around £1,500.

You say ‘I am are not in any way 'smart' and would not consider investing my own pension’, but surely you can see what this is costing you.

I have previously said that I use A J Bell (many others available), and with them, a SIPP of £185k would cost £470 per year to hold (0.25% and say 5 deals at £1.50 per year) see here:-https://www.ajbell.co.uk/charges-and-rates

So, you could afford to make £3,000 worth of mistakes a year and be no worse off! If you stuck to a few simple funds, I bet you wouldn’t go far wrong.

One of the reasons why I decided to start doing it myself around 20 years ago was this – I had been using a very helpful IFA who set up the company pension scheme that I used to be in and I just stuck with him. I used to invest a lump sum each year to offset any higher rate tax and one year he wrote to me making a recommendation to spread this over 5 funds. Two days later an almost identical letter arrived but with a different list of funds, only one of them was the same as in the first letter. When I phoned him to seek an explanation, he apologised, saying he had dictated me a letter but forgotten he had done it and then dictated another letter a couple of days later. When I enquired why he had recommended a completely different set of funds, only two days apart, he was very embarrassed and just said it was all just pot luck. I was quite shocked by this as I don’t believe that for one minute, but he clearly didn’t have a clue and I realised there and then that I couldn’t possibly make a worse job. Over the 20 years since then, I like to think I have made a pretty decent job of things, albeit, I know I have also made some terrible mistakes (mainly on individual shares rather than funds), but the cost of these has been more than offset by the fees I’ve saved.    

michaels

You are paying your financial advisor £100k over the next 30 years that you could spend instead yourself. Sounds expensive.

I have 3 funds. Global international equity, global international bonds, money market (effectively a savings account), total fees a year on 185k would be about £300. I am not at risk of a financial advisor buying the wrong funds to boost their commission.

LHW99

While what is being said on fees is very true, if the OP needs / wants hand holding (even if just at the start, while he investigates things a bit more), an IFA would surely be able to halve that %, reducing the fees by the same proportion.

dunstonh

I am currently paying a total annual charge of 1.93% to the financial advisors' company who invest my pension. This includes the use of the Quilter platform and their own fees.

As others have mentioned, that is a lot.   Using agents of the company is often expensive.  There can be expensive IFAs as well as low cost ones but FAs are nearly always more expensive.

While what is being said on fees is very true, if the OP needs / wants hand holding (even if just at the start, while he investigates things a bit more), an IFA would surely be able to halve that %, reducing the fees by the same proportion.

About 0.83%  could be the ballpark  (0.15% platform, 0.5% IFA, 0.18% investments).  I suspect many IFAs may have their charge higher than 0.5% on the value of the OP.  But even if you moved it to 0.75%, it's still nearly half the cost.

The OP needs some training as well.  Knowledge and understanding makes investing more comfortable.   The first big negative event is always hard for people but it gets easier after each negative period experienced.    

Albermarle

Bianchiintenso said:

Like the others mine is up 8% since I self invested in December last year, I keep it as simple as possible, just 2 funds With AJBell. 

Although when assessing investment performance, the exact time period is important.
Mine have improved significantly this year, However if I go back to November 2021 to today it still looks rather unexciting.

mad1_2

Just to say a big thank you to all who have posted - I really appreciate your thoughts.

The company who manage my pension are Independent Financial Advisers.

When I decided to move my pension (consolidating a very old Defined Benefits Pension with my private pension) to a single pot I approached three firms of financial advisers. ALL of them showed my graphs and other supporting information of how their pension funds had performed over the last 15 years+, including the financial crisis of 2008, and their funds had shown growth during this time. They also compared it with my former fund to show how it was underperforming.

The problem for people like me is that it is very difficult to make an objective decision when you are presented with very similar information from IFA's. I am probably going to face the same dilemma if I decide to move again. I have no investment knowledge and have never managed funds beyond savings accounts and ISA's.

I have been told by the current company that over the time period I have specified high interest rates, the Ukraine war, high energy prices, high inflation, Brexit and a depressed world economy has led to my pension underperforming. This also seems plausible to me, hence my enquiry here to get a benchmark as to how the fund of others have performed in the same time period.

I really do appreciate all the helpful advice I have received so far. I guess my next question is for recommendations for other companies who can manage my funds for me. I have looked at PensionBee and Hargreaves Landsdown's managed funds. I do take on board all the excellent comments about me managing my own funds, but I do find this extremely daunting and this pension is my main source of retirement income. 

MK62

mad1_2 said:

JohnWinder said:

If you're taking first steps to understanding your investments I'd say your asset mix isn't terrible. Important to remember that start and end dates used for calculating returns can have a big effect; a 2% fall on one day at the start or end can change a 10% return into 12% or 8% if you change the start or end date by one day. We also have no idea what effect fees had on your return. While your assets don't seem to have done well recently they might do better than the rest of our mixes over the next six months. Short time periods are like that.

We don't know how 'smart' you are with personal investing, but you can judge by scanning the contents or reading sections in 'google books' of Tim Hale's book Smarter Investing. You'll then know of you should borrow it from your local library, as it will put you on an equal footing with your adviser.

Although the performance of your portfolio over a short period should not be used to judge it there are bits to question.

How does it help you to have <1% in property or index linked bonds? Diversification of assets is good, but those assets can do better than the others by only 1-15%/year for a short time. A 15% outperformance by property would boost your returns by < one hundredth of that ie 0.15%/year. If you were managing your own investments you simply wouldn't bother, so ask yourself and your adviser why they chose those for you. If you can find a reason other than it makes investing look too complicated for anyone but a professional, report back and tell us. And if you can't get a cogent reason, you've taken one step towards doing better yourself.

You also ought to be familiar with all the fees you're paying, directly and indirectly in fund management fees, and reduce those you can. Over the short term it's less important, but compounding means that if you're investing for another twenty years which you might be, fees are very important.

Thank you all for your comments - and to JohnWinder for a very helpful post.

I am currently paying a total annual charge of 1.93% to the financial advisors' company who invest my pension. This includes the use of the Quilter platform and their own fees.

I am not in any way 'smart' and would not consider investing my own pension. I am in awe of those who do this, but I think I would do more harm than good to my pension pot.

JohnWinder  I will ask the question about property and index linked bonds - thank you for pointing this out.

Just to clarify - I am not necessarily 'judging' the performance of my pension over such a short period of time. I am looking for a benchmark with others experience over this same time period. I am concerned that my pension has not grown at all over this time period and at some periods it was actually in a negative balance.

Thanks to all for your help so far.

Another option could be a Managed SIPP, where the pension platform does all the investing for you......

Vanguard do one (though they aren't the only option)......which costs 0.3%pa for the management charge, plus 0.15% (capped at £375) for the account charge......then there are the fund fees, but you don't pay these directly (they are taken out of the fund(s)), and in any case are payable on all platforms. So this would cost you c£830pa, compared to c £3550pa.......

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/we-do-it-for-you