Cavendish Online for Pensions?

[Colourful Contractor]

I use Sippdeal to invest using ETFs and investment trusts, if I wanted to use unit trusts/OEICs I would use Alliance Trust.

And herein lies the problem with me taking a SIPP - I do not know what the above means, and recognise that my limited investment knowledge is therefore probably better suited to a stakeholder rather than SIPP...

[Fred Bloggs]

I've used Alliance and I now use HL. They will hold your hand as much as you need in my experience. I would look seriously at a HL SIPP before going with a Stakeholder plan. I started in a very similar way to you, £15k lumps sum and £1k a month. I typically hold 10 to 12 unit trusts split between income funds and global growth funds. Over the three years I have held the SIPP, I haven't done fantastically well, but presently I'm breaking even across the funds over the three years. I've invested monthly all the way down to the the bottom. Hopefully, from here it will be steadily upwards for the next 3 or 4 years.

[pmeswani]

I've used Alliance and I now use HL. They will hold your hand as much as you need in my experience. I would look seriously at a HL SIPP before going with a Stakeholder plan. I started in a very similar way to you, £15k lumps sum and £1k a month. I typically hold 10 to 12 unit trusts split between income funds and global growth funds. Over the three years I have held the SIPP, I haven't done fantastically well, but presently I'm breaking even across the funds over the three years. I've invested monthly all the way down to the the bottom. Hopefully, from here it will be steadily upwards for the next 3 or 4 years.

I've managed to make about £2.5k by changing my investment choices to cover mainly Emerging Markets. Seemed to have worked a treat.

[IR35 Avoider]

To compare Hargreaves Lansdown and Alliance Trust Savings, I looked up the price of holding a fund I kind of like, but can't obtain at a price I'm willing to pay. The fund is "Schroder Income Maximiser." Alliance Trust charges 1.22% initial fee and 1% annual, Hargreaves Lansdowne charges 0% initial and 1.5% annual (when held in a SIPP, 1.3% otherwise.) A £100,000 investment that grows at 7% a year (that fund's official target) for 30 years will yield, after charges, £567,342 with Alliance Trust, compared to £498,395 with Hargreaves Lansdown. (Illustration of how I did the calculation: £100,000*(100%-1.22%)*(100%+7%-1%)^30 = £567,342.)

So Hargreaves Lansdown charges £69,000 more than Alliance Trust on a £100,000 initial investment, in this example.

Incidentally, the figures involved in this example are not unrealistic: for me with 30 years to go until I have to buy an annuity and more than £100,000 currently in my pension, they understate the differences.

This comparison only includes fund charges, I've ignored any overall charges for operating the account, which I assume will make a negligible difference, since both are competing in the market as cheap SIPP providers.

It's interesting that I often see Hargreaves recommended on the basis of cost, but I don't think most people understand how much a little extra on the fund annual management charge costs them in the long run. (In fairness, I think it's only very recently that Alliance started refunding trail comission, making themselves cheaper.) It's currently my policy never to pay more than 0.5% per year for fund management, and with Vanguard launching funds in the UK, co-incidentally currently only easily available via Alliance Trust, I can foresee myself tightening this criterion to 0.3% a year.

This example is not meant to show Hargreaves is bad, on the contrary they might make third place on my overall list of providers, rather it is meant to illustrate the importance of cutting annual fund management charges to the bone. I think Alliance Trust are currently in the lead on this criterion.

I know this is a contentious opinion, but you can arguably get all the equity exposure you need with just two funds, Vanguard UK tracker which charges 0.5% initial and 0.15% annual, and Vanguard world excluding UK tracker, for 0% initial and 0.3% annual.

The 0.5% initial charge on Vanguards UK fund is to cover stamp duty on shares, as long as your holding period is more than a couple of years they will still work out cheaper than other tracker funds that don't charge an initial fee. Vanguard is the worlds biggest and cheapest fund manager and are highly ethical. They explicitly charge stamp duty so that one set of investors (frequent traders) doesn't end up being cross-subsidised by another set, long-term holders. Also, I think they include all expenses in their quoted fee, whereas most other managers charge some ancillary expenses in addition.

[IR35 Avoider]

I think the cheapest way to invest in equities is via Vanguard funds with Alliance. (Vanguard only launched in the UK in July so hopefully it is only a matter of time before they are available with other providers as well.) Assuming 7% growth again, £100,000 split 50:50 between UK and rest-of-the-world trackers and invested for 30 years becomes £712,854 after charges with Vanguard funds. The same strategy using equivalent iShare ETFs becomes £670,816.

The iShare option costs the same in management charges whether you use Sippdeal, Alliance or Hargreaves. The annual account charges are cheapest with Sippdeal, but I haven't bothered to calculate how much difference the cost of reinvesting dividends makes. (I implicitly assumed that cost was zero in arriving at the £670,816 figure, so that figure slightly overstates the return.)

Edit: OK, assuming quarterly reinvestment of dividends of about £1000, I think the annual Account and brokerage charges for the iShare option would be as follows:

Sippdeal: £0 + 4 * £14.95 = £60.
Alliance: £75+VAT + 4 * £12.75 = £136.
Hargreaves: £200+VAT + 4 * £14.94 = £290.

[pmeswani]

To compare Hargreaves Lansdown and Alliance Trust Savings, I looked up the price of holding a fund I kind of like, but can't obtain at a price I'm willing to pay. The fund is "Schroder Income Maximiser." Alliance Trust charges 1.22% initial fee and 1% annual, Hargreaves Lansdowne charges 0% initial and 1.5% annual (when held in a SIPP, 1.3% otherwise.) A £100,000 investment that grows at 7% a year (that fund's official target) for 30 years will yield, after charges, £567,342 with Alliance Trust, compared to £498,395 with Hargreaves Lansdown. (Illustration of how I did the calculation: £100,000*(100%-1.22%)*(100%+7%-1%)^30 = £567,342.)

So Hargreaves Lansdown charges £69,000 more than Alliance Trust on a £100,000 initial investment, in this example.

Incidentally, the figures involved in this example are not unrealistic: for me with 30 years to go until I have to buy an annuity and more than £100,000 currently in my pension, they understate the differences.

This comparison only includes fund charges, I've ignored any overall charges for operating the account, which I assume will make a negligible difference, since both are competing in the market as cheap SIPP providers.

It's interesting that I often see Hargreaves recommended on the basis of cost, but I don't think most people understand how much a little extra on the fund annual management charge costs them in the long run. (In fairness, I think it's only very recently that Alliance started refunding trail comission, making themselves cheaper.) It's currently my policy never to pay more than 0.5% per year for fund management, and with Vanguard launching funds in the UK, co-incidentally currently only easily available via Alliance Trust, I can foresee myself tightening this criterion to 0.3% a year.

This example is not meant to show Hargreaves is bad, on the contrary they might make third place on my overall list of providers, rather it is meant to illustrate the importance of cutting annual fund management charges to the bone. I think Alliance Trust are currently in the lead on this criterion.

I know this is a contentious opinion, but you can arguably get all the equity exposure you need with just two funds, Vanguard UK tracker which charges 0.5% initial and 0.15% annual, and Vanguard world excluding UK tracker, for 0% initial and 0.3% annual.

The 0.5% initial charge on Vanguards UK fund is to cover stamp duty on shares, as long as your holding period is more than a couple of years they will still work out cheaper than other tracker funds that don't charge an initial fee. Vanguard is the worlds biggest and cheapest fund manager and are highly ethical. They explicitly charge stamp duty so that one set of investors (frequent traders) doesn't end up being cross-subsidised by another set, long-term holders. Also, I think they include all expenses in their quoted fee, whereas most other managers charge some ancillary expenses in addition.

I won't pretend to understand Alliance Trust's model, but it appears that you are comparing apples with pears. The self select option seems to be a more cut down version compared to what Hargreaves Lansdown are offering. Also, it is a lot harder to find out about the charges on specific funds without being a member of the Alliance Trust SIPP. Very Cloak and Dagger. Alliance Trust may appear cheaper, but at least H&L are not hiding their opinions behind some lock and key mechanism.

[pmeswani]

I won't pretend to understand Alliance Trust's model, but it appears that you are comparing apples with pears. The self select option seems to be a more cut down version compared to what Hargreaves Lansdown are offering. Also, it is a lot harder to find out about the charges on specific funds without being a member of the Alliance Trust SIPP. Very Cloak and Dagger. Alliance Trust may appear cheaper, but at least H&L are not hiding their opinions behind some lock and key mechanism.

I stand corrected. It's in a PDF document. However, I prefer H&L's way of showing information about Funds. At least I can view the history of a fund's performance before I invest in it.

[Colourful Contractor]

I stand corrected. It's in a PDF document. However, I prefer H&L's way of showing information about Funds. At least I can view the history of a fund's performance before I invest in it.

Agreed, makes it easy to compare funds.

However, taking IR35s point, i am concerned with AMC and their impact on the returns you may get. The lowcosts were one of the things that attracted me to stakeholders, but obv not good value if you get lousy growth.

Not seen much below 1.25% amc after discounts on HL website, does this seem right? The charges IR35 mentions seem much lower through AT?

[Fred Bloggs]

Though I am with HL, I was very happy to use Alliance for a number of years and would be happy to use them again.

Regarding the tracker funds, a very contentious POV I know, but I do tend to put my money with the managers who have the long term market out performance track record. These managers do exist, but you need to find them. I find the HL site very good in this respect. I keep my choice of funds to around a dozen so that I can keep a close eye on them. Presently, I have just one dog of a fund that I might well bail out of, Artemis Global Growth. It's been terrible.

As was suggested above, I do have a significant exposure to emerging economies but this is through a couple of global growth funds and a commodity fund rather than via dedicated emerging market funds. These funds were terrible last year but are rebounding strongly this year so far.

At age 52, I plan a steady move into income generating assets and "absolute return" funds over the next 10 to 15 years though as capital values increase on my growth funds. (I hope).

[Colourful Contractor]

Does an average 1.25% AMC through HL seem like good value on a SIPP?

As others have pointed out, the charges can really eat into the investment over time.