All Pension Costs

Moonwolf

I wondered if anyone had a list of ALL pension costs.

So I know that there are clear charges but what about hidden costs.

FA/IFA charges - usually a percentage of money under management for ongoing advice or perhaps a fixed fee.  I don't have an IFA at the moment.

Then there are platform charges which can be quite low, some SIPPs seem to be a few £ a year

Then there are fund changes, for my pension I don't pay platform charges but there is clearly weight in the management charges as they then "discount" them

for my current pension my overall charge is 0.335% which seems to cover all visible charges.

a typical tracker fund looks like

AMC = 1.000%
Additional = 0.015%
Discount = 0.720%
Total fund charge = 0.295%

but an actively managed fund (I have a small % in a couple)

AMC = 1.825%
Additional = 0.004%
Discount = 0.720%
Total fund charge = 1.109%

Do the management charges cover all the funds admin costs, offices and such, that none of that is hidden in fund value changes?

However, I assume when they buy and sell equities into the fund the loss of value in the bid-ask spread is just shown as a change in the fund value not in costs, so between us all we are paying for the market traders' Lamborghinis in addition to the visible charges?  

Are there any other hidden costs?

dunstonh

So I know that there are clear charges but what about hidden costs.

What hidden costs?

a typical tracker fund looks like
AMC = 1.000%

Additional = 0.015%

Discount = 0.720%
Total fund charge = 0.295%

That doesn't look typical.   It looks old fashioned.  It discloses everything but uses discount to achieve price.

Do the management charges cover all the funds admin costs, offices and such, that none of that is hidden in fund value changes?

Yes, as best as they can.   TC covers that. TC is transaction costs.  Or your provider referring to them as Additional.  However, that is a synthetic charge and not explicit.  i.e. you are not being charged 0.015% explicitly.  Its a calculation using one of several methods to give you an indication of what the implicit charges are.   Its highly flawed but its the best you are going to get.  Most investors totally ignore TC.

However, I assume when they buy and sell equities into the fund the loss of value in the bid-ask spread is just shown as a change in the fund value not in costs, so between us all we are paying for the market traders' Lamborghinis in addition to the visible charges?  

That is factored into the TC calculation.

Moonwolf

dunstonh said:

So I know that there are clear charges but what about hidden costs.

What hidden costs?

a typical tracker fund looks like
AMC = 1.000%

Additional = 0.015%

Discount = 0.720%
Total fund charge = 0.295%

That doesn't look typical.   It looks old fashioned.  It discloses everything but uses discount to achieve price.

I think I suggested what the hidden costs might be, things like bid-ask spread.  Is there anything that is being paid out of fund value rather than management charges?  I didn't know, which is why I asked.

Sorry - when I said typical, I meant within my pension, typically that is the charge information I get and pay. As an aside aren't these old fashioned pensions quite common and many people still have a lot in old group schemes?

It makes it difficult for me to compare costs with a platform charge SIPP although from this forum, it would appear that an overall charge of 0.335% isn't particularly high although many people are beating it.

That particular fund SL Blackrock ACS World ex UK Equity Tracker Pn has grown 61.89% in 5 years and 15.29% this year although is down 2.27% this quarter, which seems OK.

westv

I'm not sure bid-ask spread exists anymore for most pension funds.

Albermarle

Moonwolf said:

dunstonh said:

So I know that there are clear charges but what about hidden costs.

What hidden costs?

a typical tracker fund looks like
AMC = 1.000%

Additional = 0.015%

Discount = 0.720%
Total fund charge = 0.295%

That doesn't look typical.   It looks old fashioned.  It discloses everything but uses discount to achieve price.

I think I suggested what the hidden costs might be, things like bid-ask spread.  Is there anything that is being paid out of fund value rather than management charges?  I didn't know, which is why I asked.

Sorry - when I said typical, I meant within my pension, typically that is the charge information I get and pay. As an aside aren't these old fashioned pensions quite common and many people still have a lot in old group schemes?

It makes it difficult for me to compare costs with a platform charge SIPP although from this forum, it would appear that an overall charge of 0.335% isn't particularly high although many people are beating it.

That particular fund SL Blackrock ACS World ex UK Equity Tracker Pn has grown 61.89% in 5 years and 15.29% this year although is down 2.27% this quarter, which seems OK.

My SL pension charges breakdown looks very similar but I only have 0.67% discount 
I have 4 standard charge funds and one managed fund so my overall cost comes out at around 0.5%
Another ex workplace pension with SW I only pay 0.25%
SIPP charges can vary a lot as platform charging regimes are all a bit different and of course it depends on what investments you hold. So can be from say )0.15% to 2 % 
So at 0.335% you are definitely in the low cost ballpark. Also no charges to buy and sell funds, and no extra charges for drawdown ( I think) .

dunstonh

I think I suggested what the hidden costs might be, things like bid-ask spread.

At fund level, they are rare nowadays. But would be disclosed is they existed and that has been the case for 30 years.
At internal level when buying assets, they have been disclosed since 2018.   However, it's that synthetic calculation I referred to you that everyone ignores.

Sorry - when I said typical, I meant within my pension, typically that is the charge information I get and pay. As an aside aren't these old fashioned pensions quite common and many people still have a lot in old group schemes?

They are still heavy in volume, but it's the old-fashioned way of doing it.    However, many schemes still do things the old fashioned way.   The individual retail pensions are mostly unbundled nowadays but there are still a handful of bundled charged plans.     The group/occupational pensions are slowly going unbundled but many are still bundled.

It makes it difficult for me to compare costs with a platform charge SIPP although from this forum, it would appear that an overall charge of 0.335% isn't particularly high although many people are beating it.

If its a very old plan with multi-charges, then only software can really tell you the differences. But from what you have said, it should be a doddle to compare with a SIPP.  In your case:

Pension AMC =   Fund OCF in SIPP
Pension additional  =  Transaction costs
Pension provider cost is bundled into the AMC minus the discount.  On the SIPP it will be separate to the  fund.

Lets say you were investing in Vanguard lifestrategy with a platform charge of 0.15%.
Platform: 0.15%
OCF: 0.22%
Transaction Costs: 0.07%
Bottom line = 0.44%