Reply to: Whether to switch pension or not

[Hobosapien]

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Vanguard let you go direct now, hence there is no middlemen fees. I'm with HL and hoping they will start reducing their annual management fees with this news.

The Vanguard fund charge is 0.22%.

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According to the example on their website (https://www.vanguardinvestor.co.uk/what-we-offer/fees) they also charge 0.15% account fee, so 0.37% overall, costing £74/year for a 20k investment.

That's for their ISA. So worth seeing how going direct stacks up on the fees front if only interested in investing in Vanguard LifeStrategy via ISA. Sounds like (according to elsewhere on their website) they'll also offer a direct SIPP from 2018 but don't yet.

Certainly food for thought guys, cheers.

[The Canny Contractor]

Pensions and Fees

I agree with Lukemg re his strategy:

I went the Vanguard Lifestrategy 60/40 (bit more cautious) route for my SIPP, as I have a high growth fund in place already.
Vanguard let you go direct now, hence there is no middlemen fees. I'm with HL and hoping they will start reducing their annual management fees with this news.

The Vanguard fund charge is 0.22%.

There is ALSO a HL annual management fee in place for funds (unit trusts and OEICs) held within their platform, and this charge is applied across each account separately with no cap. For the first £250,000 of funds within each account, the charge is 0.45% per annum. On the value of funds between £250,000 and £1 million this is 0.25% per annum.

It's worth using one of these little compounding/ fees calculators to work out your net return over the long term. The fees soon stack up.

That's my number one rule too, never sell. Unless one of my dividend stocks has its dividend cut.

[lukemg]

but remember not to die before you can spend/enjoy your money

Yep - balance is needed, remember not to p**s it all away on s**t you don't need to impress people you don't care about, followed by either:
- Having to work way past when you can't stand it and becoming known as the miserable old t**t.
- Hit the career earnings decline/lack of opportunities with k'all to show for 20 years on the tools, that won't be a picnic either as you hit retirement.

By all means, buy experiences/travel and smell the roses on the way but for your own sake stash a bit too....

[legal]

Great advice everyone. Thanks.

I am going to open account with II.

[pr1]

Ok - I understand the outrage, huge vested interests and marketing budgets are directed at making you pay for active management and thanking them for the privilege, it's genius in a way..

BUT there IS a very simple solution to what you should do...

1. You save as much as possible, use ISA's (great tax benefits, instant access)and SIPP's (good way to get money out of company, tax benefits too)
2. Use an online broker (HL, III - see monevator.com for best choice for you, depends on amount you have)
3. Invest in globally diversified Index funds/ETF's.(see monevator.com for why). Consider using Vanguard Lifestrategy 80 as a one stop solution (global, 80%equity, 20% bonds, low cost, massive company)
4. NO MATTER WHAT THE MARKET DOES/WHAT THEY SAY ON THE NEWS YOU NEVER SELL AND NEVER STOP MAKING THE MONTHLY INVESTMENTS.
5. Stick enough in, let compounding/time do the heavy lifting and you retire a millionaire.

GLA

but remember not to die before you can spend/enjoy your money

[lukemg]

Low cost index trackers that will save you money
Old pension plans

[lukemg]

Ok - I understand the outrage, huge vested interests and marketing budgets are directed at making you pay for active management and thanking them for the privilege, it's genius in a way..

BUT there IS a very simple solution to what you should do...

1. You save as much as possible, use ISA's (great tax benefits, instant access)and SIPP's (good way to get money out of company, tax benefits too)
2. Use an online broker (HL, III - see monevator.com for best choice for you, depends on amount you have)
3. Invest in globally diversified Index funds/ETF's.(see monevator.com for why). Consider using Vanguard Lifestrategy 80 as a one stop solution (global, 80%equity, 20% bonds, low cost, massive company)
4. NO MATTER WHAT THE MARKET DOES/WHAT THEY SAY ON THE NEWS YOU NEVER SELL AND NEVER STOP MAKING THE MONTHLY INVESTMENTS.
5. Stick enough in, let compounding/time do the heavy lifting and you retire a millionaire.

GLA

[Fred Bloggs]

In the context of this thread, there should be clearer/easier tools for joe and joanne bloggs (jojo to their 'friends') to work out what the best course of action is at a point in time so they can be sure by changing pension providers or going it alone via SIPP (or whatever else comes along) that they're not jumping out of the frying pan into the fire.

The lack (afaik) of such 'for dummies' tools or impartial services means it is understandable to be wary about being ripped off/scammed by companies offering a 'better' deal.

I suspect there are few reasons why it doesn't work that way.

1 Constant meddling and rule changes at almost every UK budget.
2 Horrendous complexity that hardly anyone understands.
3 Everyone has different financial circumstances.
4 The willingness for witch-hunts to be launched by authorities long after the event along the lines of the PPI and other fairly recent scandals.

Many more too, I'm sure.

[Hobosapien]

In the context of this thread, there should be clearer/easier tools for joe and joanne bloggs (jojo to their 'friends') to work out what the best course of action is at a point in time so they can be sure by changing pension providers or going it alone via SIPP (or whatever else comes along) that they're not jumping out of the frying pan into the fire.

The lack (afaik) of such 'for dummies' tools or impartial services means it is understandable to be wary about being ripped off/scammed by companies offering a 'better' deal.

[MrHappy]

Getting people to save somehow is normally seen as part of solving the problem, but it’s complex …

The profiteering, lack of transparency, etc. is a key part of many people’s attitude to it all. I think many do see it as a scandal – why nothing seems to be done is an interesting question, the FCA’s reports notwithstanding. Therefore, many just don’t trust anything about the market, and perhaps just buy property, artwork, vintage wine, etc. or otherwise just spend it. YOLO indeed.

To me, there are ‘efficiency’ and ‘fairness’ parts that are missing (or at least perceived as missing, which is effectively the same) from most of the financial market’s offerings, at least for savings/pensions and wealth preservation. The inefficient and unfair market is partly a supply/demand thing (with capitalism and educational aspects) and partly a governance/government thing (even verging onto social policy and philosophy). Never mind how poor you are, it should be ‘seen’ as good to be allowed to save/invest ‘fairly’, to a degree that the wealth inequalities can be justified. But it’s complex …

However, there will apparently be a systemic problem with everybody just using passive trackers, since statistically this won’t work as stocks etc. won’t be correctly valued by a functioning market, leading to a divorce from reality and instability. For now, the low-cost platforms and passive trackers seem a reasonable phase on the market’s structural journey, hopefully forcing change in the industry (or at least making issues more obvious) and in the meantime allowing those who use them judiciously to profit, even through crashes (relatively). So just do it (judiciously!) and perhaps feel good that you’re helping the market on its journey … ??!!!

I’d better stop wittering now.

[Hobosapien]

Because first thing to do is to force people to save.

Also, maybe they go with the dragons den mentality that 30% of a large amount is better than DIY and losing it all on penny shares. Though along with managed fees eating into long term investments, there's also evidence that managed schemes don't outperform trackers over the same period, on average. So need to be lucky and pick a provider above average over the life of the investment to come out better.

No wonder many just spend everything and worry about retirement when it happens. YOLO and all that.

[SueEllen]

If that's the case why isn't this a scandal that the government are clamping down on seeing as they're so keen on people doing more to save for their retirement so they can reduce the reliance on state pensions in the future?

If all these big companies are so bad and DIY options so good (for those that can get their head around it all) why isn't more done to change perception that pensions are in safe hands with the long established institutions?

Because first thing to do is to force people to save.

[Hobosapien]

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DONT put it in any managed funds, on average over time they suck out >70% of your returns...
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If that's the case why isn't this a scandal that the government are clamping down on seeing as they're so keen on people doing more to save for their retirement so they can reduce the reliance on state pensions in the future?

If all these big companies are so bad and DIY options so good (for those that can get their head around it all) why isn't more done to change perception that pensions are in safe hands with the long established institutions?

[lukemg]

x10 for the switch, the fees are killing your returns and only going to get worse.
DONT put it in any managed funds, on average over time they suck out >70% of your returns...
You want a global tracker, consider VWRL (Vanguard ETF) or hang on till Vanguard offer SIPP's direct (expected in next 12 months) and chuck it in a Lifestrategy fund - depending on your age.

[MrHappy]

A few years ago I had a similar Standard Life pension pot (among other pension pots) due to a brief spell as a permie with a large corporation, which had negotiated an approx. 0.7% discount (0.72 or 0.74 or similar IIRC) off the fund charges, that nominally resulted in a total charge* of about 0.3% for me. For what it's worth, I thought Standard Life was among the best of the traditional providers. However, I understand that level of discount was typical of what may be available to large organisations, and so it provides a clue about typical profit margins.

Somewhat independently, I have a SIPP with AJ Bell, but I originally considered II and another one I've forgotten. The low-lost providers all seemed roughly similar at the time (a good few years ago now) and I went with them because of a clearer and smoother website. Their charge structure changed last year, which highlighted how much cheaper ETFs can be than funds.

To answer the original question, unless you are particularly nervous or there are other factors specific to your circumstances, I strongly suggest you switch to a low-cost SIPP. I had no switching/exit fees from Standard Life, but double check yours. Without doing the research, my gut feel is that a few simple low-cost trackers (say 50% UK, 50% US currency-hedged, maybe a bit of other countries, whatever) via a low-cost platform will very likely have given better performance over the last few years than your Standard Life fund (which itself seems not that bad).

* The charges, fees, etc. etc. across the financial services industry (to me) seem 'almost intentionally' confusing. The first I found it all rationalised in one place was several years ago in Pete Comley's "Monkey with a Pin" free online book: well-researched, detailed, but easy-skim-read and probably still very relevant - Read/download the book (FREE) | Monkey with a Pin. He later wrote a similar, more philosophically-speculative ebook about inflation.
To me, there is little to justify the obfuscation and complexity other than a lot of vested interests, and the recent FCA report all but says this: https://www.fca.org.uk/publication/m...s/ms15-2-3.pdf