Pension charges Vs performance

TheRickster

Hi everyone! Can you help, I'm terrible with numbers....

How do I know whether I'm paying too much for my pension charges/fees, or whether my advisor has positioned my investment optimally (I realise this is subjective, but surely there are some indications a layperson can use)?

For some reason I've got 2 SIPPS with AEGON (I realise I should understand why this is, but I don't). One has ~£60k where I'm being charged an "Annual charge (monthly)" of 0.22% and an "Ongoing adviser charge (monthly)" of 1.00%. The other has ~£220k where I'm being charged an "Annual charge (monthly)" of 0.22%, an "Ongoing adviser charge (monthly)" of 1.00%, and a "Ongoing DFM charge" of 0.15%.

If I look at the Product Report for 23/24 it's showing a cumulative return of 17.06% and 18.92% respectively - which sounds great. However the 'Other key values section' shows Investment Income of ~£1k, against Platform, Adviser and DFM Charges totalling ~£3.5k - which sounds terrible (I suspect I'm misunderstanding the Investment Income value).

Is this good? What kind of cumulative returns should be expected? 

Albermarle

Firstly for both SIPPs, the charge you see is most likely just for the platform that administers the pension.
The investments you hold in those SIPPs will have their own charges. You do not see these explicitly as they are paid internally by the investment fund.
The advisor fee of 1 % for a £60K SIPP is low, if that was a standalone SIPP.
The advisor fee for a £200K SIPP could normally be 0.75% to 1 % . However the lower figure would be fairer as they have delegated some of the work to a DFM.
In reality you have £260K and 0.75% would be a fairer fee in my opinion.
So your total fee for the bigger one is 
0.22% + 1 % + 0.15% + investment charges ( you need to clarify what these are with the advisor as they can vary a lot)

 What kind of cumulative returns should be expected? 

It completely depends on the type of investments held. During your initial discussions with the IFA , your objectives and risk tolerance would have been discussed and appropriate investments chosen.
Some people have a high risk tolerance, so will go for long term growth, knowing there could be some big bumps in the road. Others prefer to live with more modest growth with a  more safety first approach. Your age/how near retirement can affect the choices as well.

Marcon

TheRickster said:

Hi everyone! Can you help, I'm terrible with numbers....

How do I know whether I'm paying too much for my pension charges/fees, or whether my advisor has positioned my investment optimally (I realise this is subjective, but surely there are some indications a layperson can use)?

For some reason I've got 2 SIPPS with AEGON (I realise I should understand why this is, but I don't). One has ~£60k where I'm being charged an "Annual charge (monthly)" of 0.22% and an "Ongoing adviser charge (monthly)" of 1.00%. The other has ~£220k where I'm being charged an "Annual charge (monthly)" of 0.22%, an "Ongoing adviser charge (monthly)" of 1.00%, and a "Ongoing DFM charge" of 0.15%.

If I look at the Product Report for 23/24 it's showing a cumulative return of 17.06% and 18.92% respectively - which sounds great. However the 'Other key values section' shows Investment Income of ~£1k, against Platform, Adviser and DFM Charges totalling ~£3.5k - which sounds terrible (I suspect I'm misunderstanding the Investment Income value).

Is this good? What kind of cumulative returns should be expected? 

You might be terrible with numbers, but you're paying for advice from someone who should be good with them: your adviser. Have you asked them?

TheRickster

Thanks Albermarle, that's useful. I'll bring it up at my next review

TheRickster

Hey Marcon, thanks for the suggestion, but when you're buying a product off someone, asking them whether their fees are reasonable, or whether it's a good product, seems a little naïve. Maybe that's just me being paranoid.

IvanOpinion

TheRickster said:

Thanks Albermarle, that's useful. I'll bring it up at my next review

Why wait for the next review? Unless that is imminent then talk to your advisor now, that is what you are paying them for. See if you can negotiate the rates down a bit, the advisor fee seems a bit high for a £250-300K portfolio (I assume it is the same advisor covering both).

Sarahspangles

TheRickster said:

Hey Marcon, thanks for the suggestion, but when you're buying a product off someone, asking them whether their fees are reasonable, or whether it's a good product, seems a little naïve. Maybe that's just me being paranoid.

I think you’re asking them what they’re doing to earn their fee. It’s a slightly different question. Some FA companies are facing claims because they haven’t been performing the services they claim to.