SIPP, Hargreaves Lansdown and Funds

dunstonh · 20 February 2006 at 7:18PM

Low cost Sipps don't usually apply AMCs to funds - indeed they often don't have AMCs at all.Funds themselves may have AMCs.

That is the whole point behind these comments though. That same principle applies to stakeholder and personal pensions. The charges exist on the funds.

By comparison with other low cost Sipps, the HL one appears to be the cheapest for people wishing to invest in funds with regular contributions.

This is where the hybrids will beat the full SIPPs. There will be no purchase costs and the money will buy the funds directly rather than going into a cash account (just like a regular saving ISA).

Pal · 21 February 2006 at 11:24AM

EdInvestor wrote:

Low cost Sipps don't usually apply AMCs to funds - indeed they often don't have AMCs at all.Funds themselves may have AMCs.

By comparison with other low cost Sipps, the HL one appears to be the cheapest for people wishing to invest in funds with regular contributions.

Other Sipps may be more competitive for those with a lump sum to invest, and for those who are interested in shares or other non-fund investments.

So when you tell people to invest in funds through a SIPP because there is no AMC, you are only referring to the SIPP company and forgetting to mention that there will be an AMC on the funds that they choose?!

Who cares whether one SIPP is better than another for investing in funds, if stakeholder or personal pension policies can invest in funds even cheaper?

I really can't see why you are so desperate to hype up SIPPs in preference to more suitable vehicles by suggesting them as being "low cost" when they are clearly not.

EdInvestor · 21 February 2006 at 12:47PM

Whether or not Sipps are cheaper depends on a load of things such as the size of your pension fund, plus what you want to invest in and how often you want to invest.

Basically bigger pension funds which will be put into shares and long term buy and hold funds are likely to cost less to run in a Sipp ( you can't put a pension into shares in an ordinary PP anyway).Small or starter pensions where people want to make regular contributions into basic generic funds will usually be cheaper in a PP, with the possible exception of the HL (and maybe Alliance trust) Sipps. Tracker investment should be cheaper in a Sipp. Ordinary pensions charge extra for access to the best external funds, Sipps don't , so high quality investment strategies may be cheaper in a Sipp. You would have to compare on a case by case basis, I suspect.

One suspects we may be comparing a racehorse with a donkey here

Pal · 21 February 2006 at 1:57PM

EdInvestor wrote:

One suspects we may be comparing a racehorse with a donkey here

Indeed, but you may have them the wrong way around.

Example: If I want to invest in the Newton Higher Income fund, the charges through the HL Vantage SIPP would be an initial bid/offer spread of 0.25%, plus an AMC of 1.5% p.a.

http://www.hargreaveslansdown.co.uk/siteredesign/discounts/results.asp?Company=Newton&strTable=vtrandisc

Through a Legal & General stakeholder, there would be no initial bid/offer spread and the AMC would be between 1.05% and 0.85% depending on how much was being invested.

http://www.legalandgeneral.com/pensions/stakeholder-for-individuals/the-charges.html

If I am reading this correctly, there would be no other charges from L&G unless a paper application form was required, when an unspecified charge would be made.

With HL, on top of the AMC for the fund choice, there are the admin charges listed here:

http://www.hargreaveslansdown.co.uk/siteredesign/hlvantage/SIPP/sipp_fees.asp

For the sake of argument it is worth assuming that the Newton Fund would pay renewal commission to HL otherwise an additional AMC of 0.5% would be payable!

Finally, these are advertised rates, and according to Dunston, most personal pension and stakeholder business is transacted by IFAs at lower charging levels than advertised.

So why do you think that the HL SIPP is beneficial for people investing in funds? Why do you consider it "low cost". I can understand a SIPP recommendation for people wanting to invest directly in assets, or who "need" a wider range of funds than a stakeholder can provide, but for most people it would seem a much more expensive way to do it. I appreciate that Stakeholders charge more for accessing external funds, but given that all funds are "external" to a SIPP provider, they appear to charge higher fees for most funds anyway.

Can you please explain how you think it is possible for a SIPP provider to provide cheaper access to funds than an insurance company? They are both accessing the same funds, and the SIPP provider has more administration to deal with because of the dealing platform offered that is in addition to the pension admin platform that personal pension providers supply. As a result, one would expect a SIPP to be the more expensive option for people who did not want, need or wish to pay for the additional flexibility that a SIPP offers.

whiteflag_3 · 21 February 2006 at 3:51PM

Pal wrote:

Indeed, but you may have them the wrong way around.

Example: If I want to invest in the Newton Higher Income fund, the charges through the HL Vantage SIPP would be an initial bid/offer spread of 0.25%, plus an AMC of 1.5% p.a.

http://www.hargreaveslansdown.co.uk/siteredesign/discounts/results.asp?Company=Newton&strTable=vtrandisc

Through a Legal & General stakeholder, there would be no initial bid/offer spread and the AMC would be between 1.05% and 0.85% depending on how much was being invested.

http://www.legalandgeneral.com/pensions/stakeholder-for-individuals/the-charges.html

If I am reading this correctly, there would be no other charges from L&G unless a paper application form was required, when an unspecified charge would be made.

With HL, on top of the AMC for the fund choice, there are the admin charges listed here:

http://www.hargreaveslansdown.co.uk/siteredesign/hlvantage/SIPP/sipp_fees.asp

For the sake of argument it is worth assuming that the Newton Fund would pay renewal commission to HL otherwise an additional AMC of 0.5% would be payable!

Finally, these are advertised rates, and according to Dunston, most personal pension and stakeholder business is transacted by IFAs at lower charging levels than advertised.

So why do you think that the HL SIPP is beneficial for people investing in funds? Why do you consider it "low cost". I can understand a SIPP recommendation for people wanting to invest directly in assets, or who "need" a wider range of funds than a stakeholder can provide, but for most people it would seem a much more expensive way to do it. I appreciate that Stakeholders charge more for accessing external funds, but given that all funds are "external" to a SIPP provider, they appear to charge higher fees for most funds anyway.

Can you please explain how you think it is possible for a SIPP provider to provide cheaper access to funds than an insurance company? They are both accessing the same funds, and the SIPP provider has more administration to deal with because of the dealing platform offered that is in addition to the pension admin platform that personal pension providers supply. As a result, one would expect a SIPP to be the more expensive option for people who did not want, need or wish to pay for the additional flexibility that a SIPP offers.

Pal

You are completely correct.

Thought I would give you a practical "real world" example

I have just run a transfer quote for "discounted" pp vs Sipp on the same commisson terms

PP has Amc of 0.81%pa (tracker plus 5 fund managers) against Sipp 1.5%

Projected fund on PP is £31,000 higher than on Sipp @ age 65.

On this basis Sipp isnt for everyone

dunstonh · 21 February 2006 at 4:41PM

Finally, these are advertised rates, and according to Dunston, most personal pension and stakeholder business is transacted by IFAs at lower charging levels than advertised.

FSA publish market averages on commission taken by IFAs every 6 months (does not include tied agents which would nearly always be at maxium). Every IFA in the land has just had to update their menu with the current averages. It currently has pensions showing a single premium commission as 7% as the usual maximum but the FSA average is showing 4.8%. (both taking max up front with no trail to compare like for like). The FSA tables assume maximum commissions and does not take into account market averages. So, average means many are taking more but also means many are taking less. However, a minority must be taking maximum.

So, when you compare the HL SIPP (or similar) to an advice product and make out that the HL SIPP is cheaper than a personal pension shown on the FSA tables, then you are putting a Labour party style spin on the figures. It is very easy for a stakeholder/personal pension in the same funds to be cheaper than a SIPP.

All I have asked for here when comparing products is that they are compared for on a like for like basis. I don't favour one over the other as stakeholder, personal and SIPP all have advantages for different people.

Pal · 24 February 2006 at 9:33AM

While we are all (still) waiting for EdInvestor to justify his/her claim that HL is "good for funds", perhaps Whiteflag or Dunston could advise whether or not they think that HL would be better for investment in tracker funds (another of Ed's claims).

On the face of it that might be correct: HL offer L&G's UK equity tracker at 0.5% AMC. Through an L&G stakeholder the AMC would be between 0.7% and 0.9%. Two questions arise:

- Would an IFA be able to get access to a tracker fund through an L&G stakeholder at a discount to the headline rate?

- Would the L&G tracker pay renewal commission to H&G? If it does not, then H&G would charge an additional 0.5% AMC, bringing it up to 1% - more expensive than the L&G stakeholder.

dunstonh · 24 February 2006 at 10:59AM

If the IFA was discounting the L&G product or doing it on fee basis, you could get it down from 0.9% to around 0.6%. With fund based discounts (which are present on the stakeholder/PPP) it could drop to 0.4/0.5%.

It is possible to get the schroder 250 tracker at 0.6% on Scottish Life with IFA earning from it.

L&G do not pay trail on their trackers. So HL would levy the extra 0.5% making it more expensive than a stakeholder/PPP.

EdInvestor · 24 February 2006 at 11:30AM

How encouraging to see all these charges coming down

Amazing what a little competition can do.

Of course there are always Exchange Traded Funds (ETFs) aka I-shares in Sipps if you want a tracker. Lower charge than the unit trusts, no stamp duty and at least one broker I know of charges no dealing fee for ETF investments in ISAs.

That's a bit hard to beat.;)

https://www.ishares.net

There's a big variety of these trackers now as well.

Pal · 24 February 2006 at 1:15PM

Given your previous claims that HL is good for fund investment and good for index trackers, I am surprised that you haven't commented on my previous questions.

I am genuinely interested as to how you reached your conclusions.

SIPP, Hargreaves Lansdown and Funds

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