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  1. #21

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    Quote Originally Posted by eek View Post
    When I looked into that many years back the fees for drip feeding were far higher than one off lump sums.
    If you buy a small amount of shares every month then the purchase fees will mount up, however I don't buy new shares until I have about £1000 as a mixture of new capital and dividends to re-invest
    “Live a good life. If there are gods and they are just, then they will not care how devout you have been, but will welcome you based on the virtues you have lived by. If there are gods, but unjust, then you should not want to worship them. If there are no gods, then you will be gone, but will have lived a noble life that will live on in the memories of your loved ones.”

    ― Marcus Aurelius

  2. #22
    eek
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    Quote Originally Posted by SimonMac View Post
    If you buy a small amount of shares every month then the purchase fees will mount up, however I don't buy new shares until I have about £1000 as a mixture of new capital and dividends to re-invest
    The killer one for me was the commission being paid to the seller of the pension scheme. It was significant (roughly equal to the first 18 months of contributions over 20 years). One off payments just don't have the same reductions.
    merely at clientco for the entertainment

  3. #23

    I live on CUK

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    Quote Originally Posted by jlo1983 View Post
    Ah ok, that's a fair point about the monthly payments possibly leading to higher overall fees than a one off lump sum payment at year end. I guess this is the case with HL?

    Also thanks for the heads up on the final salary warnings- I'll take some advice on that one.

    Any comments on earlier post re. fee comparison. Is it simply the 0.4% fee difference or are there hidden cost with would make HL far superior over IFA recommendation?
    It's a good idea to do your own research on pensions as one size doesn't fit all.

    Even with an IFA's advice it worth using a pocket calculator and reading the financial pages of a respected (i.e. not the DM) newspaper.

    For example it's acknowledged by some in the industry that the pension fund growth predictions that IFAs are legally obliged to give aren't going to happen due to low interest rates.
    "You’re just a bad memory who doesn’t know when to go away" JR

  4. #24

    Contractor Among Contractors


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    Quote Originally Posted by TheFaQQer View Post
    Interesting - the approach recommended by my advisor was to do things regularly rather than in larger lump sums.
    IFAs are bound to prefer regular contributions as it guarantees that they get their cut. They probably think that if you pay in only when you feel like it you might not bother, and they'll lose out.

    Others have noted some issues with regular contribution, possible increased fees, but I think that the fact that contractor income is not regular and predictable is the more important of the reasons that have been mentioned.

    An issue that has not been mentioned is that if you set up regular payments from your "employer", then one day decided to reduce the amount or skip a few payments, the pension provider may be obliged to report you to HMRC, at it's assumed you might be failing in your obligations to your employee. (Something like this was the case a few years ago, don't know if it's still true.) So regular contributions may be administratively/legally more complex than single contributions.
    Last edited by IR35 Avoider; 4th August 2013 at 15:45.

  5. #25

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    Quote Originally Posted by jlo1983 View Post
    Thanks all, great advice..

    Just a quick follow up question, looking at the HL site and their most popular fund, the "Invesco Perpetual High Income", it has the following fees:


    Fund manager's initial charge 5.00%
    HL saving on initial charge 5.00%
    HL Dealing charge Free
    Net initial charge 0.00%

    Fund manager's annual charge 1.50%
    HL Annual saving (loyalty bonus) 0.25%
    Net Annual charge 1.25%

    Fund manager's other expenses 0.19%
    Performance fee No
    HL Platform charge Free

    So essentially a net annual charge of 1.25% + 0.19% overall. (If I haven't missed any hidden costs).

    Isn't this very similar when compared to the IFA Aegon SIPP recommendation (fund management fee 1% and 0.19%)? I'm not sure what the extra 0.4% charge the IFA SIPP relates to?

    But when you mention 1% is a huge sum of the gross capital growth, does the same not apply to the HL fund, with their net annual charge of 1.25%?

    Thanks
    My personal rules are

    1. 0% initial charge is the maximum I will pay
    2. 0.5% annual is the upper limit on what I will pay for a fund invested in equities, in practise it should be possible to stay below 0.3% for non-UK equities and UK shares can be owned for as little as 0.1%.

    (An exception to rule 1 is that I will pay 0.5% initial to invest in Vanguards UK tracker, as all that payment is doing is explicitly refunding them for stamp duty they have to pay. Other UK funds have the same expense, but it is implicit and hidden, and spread across all investors, so that long-term investors are subsidising those who dip in and out.)

    I think you are mad to contemplate the level of charges you are talking about, to understand why I think that, follow my earlier reading recommendation, or in fact read almost any advice on investing that wasn't written by a financial advisor or fund manager.

    Hint: advisors and fund managers are not on your side, they are the enemy. Every penny paid to middle-men is a penny less that active investors get in returns.

    Here's a simple illustration of the problem. Divide investors into two categories, those who invest in cap-weighted index trackers and those who don't. The latter will pay higher fees, say 1% versus 0.2%. (The exact figures not relevant here, these figures are just for illustration.)

    (1) The set of all investors will collectively get, before charges, the same underlying returns as the index. This is by definition: the index measures the return on all shares.

    (2) The subset (2) of index tracker investors will get the return of the index, less 0.2%, because that's what index trackers return, by construction.

    (3) If you take the set of people who are in (1) and remove the subset who are in (2) you get the subset consisting of active investors (3). Since both those first two sets got the same return as the index, it follows that the members of this set (3) must also collectively have underlying returns (before charges) equal to the index. The only way a member of (3) can have above-average/index returns is if someone else in (3) has made below-average/index returns. So active investing is in a sense (relative to the index) a zero-sum game, where one person's out-performance can only come at the expense of someone else's under-performance. That's all before charges, after the higher charges the average active investor must of course do less well than the average tracker investor.

    (Strictly speaking it's not the average investor in (3) that must do worse than the market average, it's the average pound invested, but I'm trying to keep my language simple.)

    So if you choose to be in set 3, you choose to be in a group that is collectively going to do worse than average, and the only way (other than luck) you can overcome that handicap is by you out-thinking the average member of your set in investment selection, to the extent that you manage to take money off them.

    So what makes you think you are an above-average chooser of investments?

    Note that if you subcontract the choosing to advisors or fund managers you are merely increasing overheads without solving the problem.
    (a) If you are not a better than average selector of investments, maybe you need a fund manager to select them.
    (b) What makes you think you are a better than average selector of fund managers? Maybe you need to pay an advisor to choose your fund managers.
    (c) What makes you think your advisor is above average, may you need an advisor advisor to choose your advisor.
    (d) and so on, to an infinite number of levels, or at least until all your money is the pockets of middle-men.

    Note there is something called "efficient markets theory" which says the shares are always correctly priced and the only reason one investor ever does better than another is luck. While maybe not 100% true, you really should regard it as 99.99% true. It is very unlikely that you fall in the fraction of 1% who make a profit setting prices because they really do know better than all other market participants what the price should be.

    If follows from regarding efficient markets theory as practically true that every penny unnecessarily paid to a fund manager is a penny wasted, because all differences in returns between them are a result of luck rather than skill. (Again, oversimplifying a little, as there is some evidence that professional fund managers do collectively take money off individual investors, by out-trading them, but that profit is more than eaten up by their extra charges.)
    Last edited by IR35 Avoider; 4th August 2013 at 16:53.

  6. #26

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    Note that as a benchmark, if investing in Vanguard FTSE 100 ETF via Sippdeal, you pay say £40 a year (£10 for each quarterly purchase) in brokerage charges, these are in in effect the initial charges. On top of that you pay 0.1% management charge on the ETF.

    Not suggesting that as a strategy, just calculate the actual pounds it would cost, compare with your preferred strategy, and ask yourself how sure you are your extra cost is worth it.

  7. #27

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    Sippdeal looks significantly cheaper than HL, although less information for a beginner.
    I assume you can get access to similar funds?
    Also now been persuaded by the quarterly/annual purchase rather than monthly.

  8. #28

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    Quote Originally Posted by jlo1983 View Post
    Sippdeal looks significantly cheaper than HL, although less information for a beginner.
    I assume you can get access to similar funds?
    Instead of asking us why don't you have a look?

    Both companies allow you to have a look at what some of their funds are before signing up. They also tell you the rules of investment in those funds i.e. the minimum amount you can put in.
    "You’re just a bad memory who doesn’t know when to go away" JR

  9. #29

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    I'd advise the OP to look very closely at HL's SIPP. The online system is very user friendly and their custome service by phone or email is excellent. The OP at 30 years old can build a really nice pension pot in 30 years or so. If I was the OP I'd look at these funds for starters- Marlborough Special Situations, Unicorn Income, Aberdeen Emerging Markets.

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    Thanks!

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