Move away from the expensive Royal London Pension Scheme and partial transfer to Vanguard?

analystfish

Hello All,

I have been doing some research recently on the provider my employer use and they come up rather pricey so want to see if my logic makes sense here.

• Current Provider - Royal London

• Scheme - Relief at source

• My Tax Band - Higher Rate (40%)

• Management Charge - 0.75%

• Current annual charge - 250GBP (Pot around 33K)
  

• Current percentage contributions - 18% (3% from employer) 1.5K per month total.

• Current overall growth - 3.3K (around 10% in the 5 year I've been paying in)

• Current Plan - Balanced Tracker

• Age 30

Looking at these fee's and charges I've been looking at some of the SIPP competitors. If I had a Salary Sacrifice scheme I would be not be thinking about this. I found this useful table:

https://imgur.com/a/6urYURE

So what I am thinking I should open a SIPP to get a cheaper scheme in the long run, put it in VWRP and 10 year before retirement put it into one of the Life Strategy Funds to reduce the risk on the portfolio.

Just not sure if I am missing something here and if there are any any benefits to sticking in an employer scheme (Royal London have not said there are any).

• Alt 1: would be staying with RL but swapping into one of the more aggressive and risky funds while I am still young and put up with the 0.75% fees and hope the riskier scheme outweighs it's cost.

• Alt 2: Open a new SIPP with Vanguard, do a partial transfer of most of the current pot and put it into VWRP. But continue paying in the 18% to RL and just do a few partial transfers a year to top it up. I'd also pay an additional 100GBP per month into it anyway.
  

• Alt 3: Drop my contributions down to 5%, use the cash I get on my pay check to pay that amount into the Vanguard Sipp. Then do a partial transfer once a year as it won't be as much being put into their scheme.
  

I'm pretty diligent with my investing and saving so an extra 750 to 1K a month won't be spent or used and would just be moved over to the SIPP.

Thank you for any comments, just not sure if this is a good idea or not. 

dunstonh

• Management Charge - 0.75%

Is that the default before fund based discounts are applied (RL discount based on fund value and your value plus contribution is not far away from the biggest jump in discount)?

are you forgetting the annual return of charges through the mutual bonus?  (never been below 0.15%)

analystfish

dunstonh said:

• Management Charge - 0.75%

Is that the default before fund based discounts are applied (RL discount based on fund value and your value plus contribution is not far away from the biggest jump in discount)?

are you forgetting the annual return of charges through the mutual bonus?  (never been below 0.15%)

I can’t believe I overlooked the profit share! I think I get back around £90 a year at the moment which does change things quite substantially, I knew I was would have missed something.

The 0.75% I was told was the plan negotiated price through my employer, standard was 1%.  

I can’t see to find any details on the discount based on fund value, so you have any links? I can always call them tomorrow. 

I’ll have to run the numbers again with these two factors to see how they stack up. May just be work moving into one of the more adventurous funds. 

aril85_2

Hi, how is the research going? I am with RL too and thinking of making a partial transfer to Vanguard SIPP ( I already have an account with them). Are you sure that £90 is a profit share per year? Is not not in total, up till now? 

Did you check the performance of your funds? How does it compare to even Vanguard SP500?

Hal17

Not sure if the OP will reply, but I have a RL pension and the Profit Share is reported annually. So you can assume that the £90.00 is a payment for that year.

As dunstonh mentioned the bonus has always been around 0.15% of the fund value, although this could change as it is a profit share.

dunstonh

Did you check the performance of your funds? How does it compare to even Vanguard SP500?

No UK based investor in their right mind is going to invest 100% into Vanguard S&P500.   That would be silly.   

However, If you were silly enough to consider such a thing, then RL have several US equity funds, including a BlackRock index tracker for US which gives virtually the same return, noting the following things:

• Royal London is bundled pricing whereas Vanguard is not (so platform charge needs to be deducted from Vanguards return)
• Royal London gets fund size discounts.    The performance returns assume the 1% default and not the rebates for discounting (that would improve RL returns as the discount will lead to more units being bought)
• The annual Royal London profitshare buys more units.