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  • FIRST POST
    • thriftytracey
    • By thriftytracey 10th Apr 18, 10:43 AM
    • 93Posts
    • 80Thanks
    thriftytracey
    DIY Pension Drawdown
    • #1
    • 10th Apr 18, 10:43 AM
    DIY Pension Drawdown 10th Apr 18 at 10:43 AM
    Hi


    I wondered if any MSE users had gone down the route of DIY Pension Drawdown? I would be grateful for any advice.


    Let me set out my position.


    My husband has a DC pension pot with Aviva worth 160,000. He is 62 years of age and semi retired. He now wishes to retire. He receives a decent DB pension which pays the bills. The mortgage is paid off. He has diabetes. I work full time in the Financial Services sector so have a fair bit of knowledge on pensions. I have spent a lot of time researching, speaking to Pension Wise, looking at web sites etc and we have decided to go down the option of drawdown. He only needs a small "top up" each month so intend to use the TFLS for a period of years leaving the balance invested in drawdown. We prefer to opt for a product not self select funds (growth rather than income initially) and have a cautious risk profile.


    I have got quotes for enhanced annuity and even at the highest rate do not want to go down that route. Nor do we want to go down uncrystalised route as he is a tax payer.


    I have found Which website quite helpful in detailing the costs and charges for the most popular drawdown providers. I haven't been able to find a comparison regarding flexibility e.g. frequency, transferring to another provider, changing portfolio etc. So if anyone knows of a website with that information that would be helpful.


    I have also spoken to a few financial advisers. Generally their fees to find a drawdown product are 3%. I did some haggling and got one IFA to come down to 2.5%. This is still about 4k. I fail to understand why their fee isn't fixed rather than a percentage of the fund value as I would not have thought the work involved was more.


    I understand the arguments for going with an IFA - protection, compliance, annual reviews - although charged at between 0.75% and 1.6%). I also understand that they have to do a full factfind, risk profile etc and have explored all the options.


    Having said that I have already explored options and have decided the option. I have also done a risk profile using software from my employment.


    We worked very hard to save into our pensions. I do feel that there needs to be some middle road for advice, or better websites for DIYers like myself. I have pension pots totaling 240k and intend to retire in 12-18 months so fee for that would be 7500.


    What are your thoughts? Has anyone gone down the DIY route? - I really do not want a self select portfolio though.


    Apologies for the long email but wanted to set out all the facts.


    Thanks
Page 1
    • Dox
    • By Dox 10th Apr 18, 11:00 AM
    • 937 Posts
    • 719 Thanks
    Dox
    • #2
    • 10th Apr 18, 11:00 AM
    • #2
    • 10th Apr 18, 11:00 AM
    I fail to understand why their fee isn't fixed rather than a percentage of the fund value as I would not have thought the work involved was more.
    Originally posted by thriftytracey
    The adviser's risk is greater as the fund value increases.
    • dunstonh
    • By dunstonh 10th Apr 18, 11:21 AM
    • 94,525 Posts
    • 62,470 Thanks
    dunstonh
    • #3
    • 10th Apr 18, 11:21 AM
    • #3
    • 10th Apr 18, 11:21 AM
    I have also spoken to a few financial advisers. Generally their fees to find a drawdown product are 3%. I did some haggling and got one IFA to come down to 2.5%. This is still about 4k. I fail to understand why their fee isn't fixed rather than a percentage of the fund value as I would not have thought the work involved was more.
    There are advisers that offer fixed. Percentage is the most popular option but not the only option.

    The greater the amount, the greater the liability and there is more work. You are less likely to use multi-asset funds with larger amounts but instead, use single sector funds.
    I have found Which website quite helpful in detailing the costs and charges for the most popular drawdown providers.
    I wouldnt rely on that. The providers available through intermediaries are different to those if you DIY. And they probably use default charges rather than market charges.

    Plus, charges should not be the primary driver. A lot of the very cheapest providers have dire systems. Charges are important but secondary to having something that meets your needs, requirements and objectives

    Having said that I have already explored options and have decided the option. I have also done a risk profile using software from my employment.
    Have you explored all the options? My experience is that those that come to us with the solution that they think is right usually end up doing something different as they were not aware of all the options.

    Risk profiling software is just the starting point. They are not reliable. So much so that the FCA dont allow advisers to use them in isolation.

    I do feel that there needs to be some middle road for advice, or better websites for DIYers like myself.
    if it smells like advice and looks like advice then it is advice. You cant have advice that isnt advice.
    DIY providers cannot provide advice because if they did they would not be DIY any more and you would have to pay for the advice as the DIY provider would need to pay different regulatory costs and put in place a whole load of staff and systems.

    What are your thoughts? Has anyone gone down the DIY route? - I really do not want a self select portfolio though.
    Plenty have gone down the DIY route. Many do a very good job. Some make a right pigs ear of it. Its like any DIY job you do in life. If you know what you are doing it can save you money. If not, it can cost you money.
    Last edited by dunstonh; 10-04-2018 at 12:04 PM. Reason: typo
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Fermion
    • By Fermion 10th Apr 18, 11:45 AM
    • 90 Posts
    • 36 Thanks
    Fermion
    • #4
    • 10th Apr 18, 11:45 AM
    • #4
    • 10th Apr 18, 11:45 AM
    The HL website has some very good factsheets about DIY SIPPs and Drawdown:
    See http://www.hl.co.uk/pensions/drawdown

    and http://www.hl.co.uk/pensions/pensions/sipp/transfer-to-the-vantage-sipp

    I use HL for my Drawdown and my wife will use them as well when she moves her SIPP in Drawdown, although she has a good DB pension as well.

    Some forum contributors will argue that there are various DIY SIPP/Drawdraw providers that have lower charges than HL although I don't think the differences are very significant. Certainly much cheaper that going via a IFA. I find the HL website, admin and service very good.

    Not sure why you don't want a self self portfolio though - going the DIY Drawdown route means that you will have to have a portfolio in some form or another, although this may simply be a very small number of funds of funds (HL have their own so called Multi-Manger funds, other SIPP/Drawdown providers do the same).

    In your situation rather than go for an IFA I would transfer from Aviva to a good DIY SIPP/Drawdown provider (HL , AJ Bell or others) and and then talk to a few knowledgeable friends about a sensible balanced portfolio of funds. You can also get some limited advice from your SIPP/Drawdown provider - this doesn't have to be a full IFA review - HL for example will give you a free assessment/consultation to see what you require prior to a chargeable service. If all you need is advise on a suitable portfolio of funds to buy with you SIPP then they can limit the advise to that.

    The one thing I would recommend however is to go for Income rather than accumulation funds and keep a reasonable float (say 6 months at least) - that way you can take drawdown payments from your drawdown pension generally without having to sell any funds - the natural dividend yield from pension pot should cover your income, particularly as you say you only initially require a small supplemental income.
    Last edited by Fermion; 10-04-2018 at 11:49 AM. Reason: incorrect URL
    • BLB53
    • By BLB53 10th Apr 18, 12:00 PM
    • 1,376 Posts
    • 1,151 Thanks
    BLB53
    • #5
    • 10th Apr 18, 12:00 PM
    • #5
    • 10th Apr 18, 12:00 PM
    I haven't been able to find a comparison regarding flexibility e.g. frequency, transferring to another provider, changing portfolio etc. So if anyone knows of a website with that information that would be helpful.
    I have built my SIPP with AJ Bell Youinvest and have now converted to flexi-drawdown which means my funds remain invested as before but I sell off some of my investments and withdraw the cash once each year - currently drawdown 4% of the total value.

    I follow the DIY Investor site and have found it helpful over the years and also bought the book 'DIY Pensions' so you may find it useful to read some of the articles on the pension section...
    http://diyinvestoruk.blogspot.co.uk/p/pension.html

    I have managed my own investments for many years - both ISA and SIPP so it's not a problem continuing during retirement but diy is not for everyone, I think much depends upon your personality and ability to stick with it when the markets become more volatile.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • dunstonh
    • By dunstonh 10th Apr 18, 12:11 PM
    • 94,525 Posts
    • 62,470 Thanks
    dunstonh
    • #6
    • 10th Apr 18, 12:11 PM
    • #6
    • 10th Apr 18, 12:11 PM
    Some forum contributors will argue that there are various DIY SIPP/Drawdraw providers that have lower charges than HL although I don't think the differences are very significant. Certainly much cheaper that going via a IFA. I find the HL website, admin and service very good.
    Is it that much cheaper?

    For example, we can ignore fund costs as they are the same. So, HL platform is 0.45%. An IFA can use a platform at 0.26% on that amount. So, that is 0.19% cheaper with the IFA. IFA cost will add on 0.50%. making them more expensive at 0.31%. Thats not a lot and it could be in the ballpark for someone happy to pay.

    If all you need is advise on a suitable portfolio of funds to buy with you SIPP then they can limit the advise to that.
    How much do they charge in year 2, 3, 4 etc when it comes to rebalancing, weighting adjustments and revised due diligence/research?
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • thriftytracey
    • By thriftytracey 10th Apr 18, 12:15 PM
    • 93 Posts
    • 80 Thanks
    thriftytracey
    • #7
    • 10th Apr 18, 12:15 PM
    • #7
    • 10th Apr 18, 12:15 PM
    Thank you Fermion and BLB53. I will investigate HL further particularly the limited advice about funds. I do subscribe to their emails and newletters however I had heard they were a little more expensive than other providers but the extra charges may only be minor and worth it. A J Bell have a good reputation too.


    The reason why we preferred growth was because we intend to use the Tax Free Lump Sum for several years and would not need to drawdown the investments for a while.
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