Move to SIPP or stay in active managed fund with fees?

Md1542

I know this question has been asked plenty of times in various guises, so apologies upfront!

I’m 50, with around £220k in a pension and contributing £1,645/month via salary sacrifice. At the moment, everything goes into a Quilter account managed through Tatton (Global Core Active), with total fees of about 1.4% (0.5% of that to my IFA). If I stay put and keep contributing, modelling using historic data (which I appreciate doesn’t guarantee future outcomes)  suggests I’ll have around ~£550–600k after fees by the time I’m 60 assuming moderate/high growth. I like my IFA, but I’m not doing anything complex in reality, so those fee’s sting!  If I instead transfer to a low-cost SIPP, I could invest in something like Vanguard LifeStrategy 80 (on a glidepath down to LS60 or LS40), derisking gradually from 55–60. Fees would be ~0.3–0.4%, saving me around £45–60k over the next decade for essentially the same risk level assuming similar growth. I’m struggling to think of a reason why wouldn’t I do this? Are there any risks or downsides I’m not considering by moving away from Quilter/Tatton/IFA to a simple low-cost SIPP with global index funds?

MeteredOut

I'm also struggling to understand why you would not do this.

No-one can say for sure whether doing it will result in better returns due to the reduced fees (since you can't exactly match the Quilter investments within your SIPP), but analysis of history scenarios suggest you will.

The one downside I've seen mentioned is those who might get nervous in a downturn would find it much easier to panic-sell with a SIPP, whereas doing that when you have an IFA is more likely to result in them providing some cautious words against any rash decisions.

Also, does your IFA provide any other services that you'd lost? eg, retirement cashflow modelling

LHW99

You mention sal sac. Is this an auto-enrollment employment scheme?

If so, you may have to opt out in order to transfer and then opt back in. Which could lose some months contributions, unless you could partially transfer and leave the existing one open.

dunstonh

IFAs have to take instructions from their clients if there is an investment style preference.   So, you could instruct your IFA that you want passive investments only in your portfolio.

Several of the lowest cost MPS in passives, with an 80% equity mix, that are available to IFAs have outperformed VLS80 even after including a 0.5% fee.  Even Tatton's passive option on the same risk level has outperformed VLS80, although not net of the IFA charge.   VLS80 global, which is only available to IFAs has also outperformed VLS80.  But there are several other lower cost MPS that have outperformed those that the IFA can use.

Quilter is not a low cost platform.   So, you could ask your IFA to move you to a low cost platform (you may give up some functionality or you may not need functionality that is included in the Quilter price).

So, there are potential options where the impact can be mitigated if you wish to retain the IFA.   

Md1542

LHW99 said:

You mention sal sac. Is this an auto-enrollment employment scheme?

If so, you may have to opt out in order to transfer and then opt back in. Which could lose some months contributions, unless you could partially transfer and leave the existing one open.

I've already opted out - and I'm currently paying into quilter via Sal Sac....so I'd just need to move it over to the new provider if I do move....

Md1542

dunstonh said:

IFAs have to take instructions from their clients if there is an investment style preference.   So, you could instruct your IFA that you want passive investments only in your portfolio.

Several of the lowest cost MPS in passives, with an 80% equity mix, that are available to IFAs have outperformed VLS80 even after including a 0.5% fee.  Even Tatton's passive option on the same risk level has outperformed VLS80, although not net of the IFA charge.   VLS80 global, which is only available to IFAs has also outperformed VLS80.  But there are several other lower cost MPS that have outperformed those that the IFA can use.

Quilter is not a low cost platform.   So, you could ask your IFA to move you to a low cost platform (you may give up some functionality or you may not need functionality that is included in the Quilter price).

So, there are potential options where the impact can be mitigated if you wish to retain the IFA.   

Thanks - that's a fair point, and one I hadn't considered. I've been with my IFA for 10 years, but we don't really do anything complex. We have some insurances he manages for us, and this quilter > Tatton arrangement. Other than an annual check-up and the occasional ad-hoc question there's little else going on. But it gives me something else to cogitate on!