Reply to: Is my understanding of pensions correct?

[russell]

Just don't put all your eggs in one basket russell.

My experience when I used to live in Dublin has put me right off property investing (it wasn't an investment, but when I decided to move back to the UK it was at the worst possible time)

But then Ireland is an extreme case.

Yeah, that is bad luck and maybe you were not looking at it as an investment when you bought it?

[Fred Bloggs]

I manage about £100k with H&L with the majority of my funds are held in an ISA. If I can get a steady flow of work this year and next, I hope to top up my Pension a bit more.

Excellent plan, beauty of ISA's in retirement is the tax free income. I had planned to top up my SIPP by about £50k this year but thanks to the coalition policies on education, that money now has to pay for my son's university course fees when he starts university in 2012. Just puts my eventual retirement back by another year.

[pmeswani]

If you want to understand how a HL SIPP works, the HL website is extremely clear and explains it all very well. However, to answer your question. If you buy "funds" in a HL SIPP (funds = unit trusts and OEICs) you pay nothing to HL. On purchasing the funds, the (usually ~5% charge upfornt levied by the fund manager) upfront charge is discounted by HL, the result is usually a zero or a close to zero upfront charge. HL make their money from the trail commission that the fund managers pay them annually. The trail commission is paid out of the fund mangers fees (typically 0.5 to 1.5% depending on the fund). You pay the fund mangers fees out of the fund whether you hold the fund directly or in a SIPP (or an ISA). Nothing extra leaves your HL SIPP account in terms of manager fees.

The situation changes for all other investments (shares, bonds, gilts ETFs etc....) HL charge a trading fee and an annual management fee capped at £200. I believe HL is best used as a funds SIPP, there are better providers for SIPPs contatning non fund assets IMO.

HL SIPP suits me very well, I manage about £200k of funds with HL, it works very well. HTH.

I manage about £100k with H&L with the majority of my funds are held in an ISA. If I can get a steady flow of work this year and next, I hope to top up my Pension a bit more.

[jmo21]

Thats why I said "good proven rent-able area". Also you say investment can go up or down, that is correct. Many people brighter than you can't predict how its going to go in 12 months never mind decades, so its a gamble at best. You also say the property bubble bursts, people always need housing and if your properties are in a rent-able area (Near university for example) they will rarely be empty.

Just don't put all your eggs in one basket russell.

My experience when I used to live in Dublin has put me right off property investing (it wasn't an investment, but when I decided to move back to the UK it was at the worst possible time)

But then Ireland is an extreme case.

[Fred Bloggs]

So when you invest into a SIPP with HL and buy into several leading funds, aside from the £200 per account per year, what are you paying on average per fund for each investment?

If you want to understand how a HL SIPP works, the HL website is extremely clear and explains it all very well. However, to answer your question. If you buy "funds" in a HL SIPP (funds = unit trusts and OEICs) you pay nothing to HL. On purchasing the funds, the (usually ~5% charge upfornt levied by the fund manager) upfront charge is discounted by HL, the result is usually a zero or a close to zero upfront charge. HL make their money from the trail commission that the fund managers pay them annually. The trail commission is paid out of the fund mangers fees (typically 0.5 to 1.5% depending on the fund). You pay the fund mangers fees out of the fund whether you hold the fund directly or in a SIPP (or an ISA). Nothing extra leaves your HL SIPP account in terms of manager fees.

The situation changes for all other investments (shares, bonds, gilts ETFs etc....) HL charge a trading fee and an annual management fee capped at £200. I believe HL is best used as a funds SIPP, there are better providers for SIPPs contatning non fund assets IMO.

HL SIPP suits me very well, I manage about £200k of funds with HL, it works very well. HTH.

[pmeswani]

Thats why I said "good proven rent-able area". Also you say investment can go up or down, that is correct. Many people brighter than you can't predict how its going to go in 12 months never mind decades, so its a gamble at best. You also say the property bubble bursts, people always need housing and if your properties are in a rent-able area (Near university for example) they will rarely be empty.

No such thing as good proven rentable area any more. Also, students are looking to skip going to Universities now because of the high costs. It will be a matter of time that the number of students will drop significantly and the so called "Guaranteed" income will disappear. Sorry, i am no fan of property. For me it's a false economy.

[AussieDigger]

I asked HL for confirmation on this very point in January, here was their response:

"The annual charge is levied by the fund management company to cover the cost of managing funds. They are normally deducted on a daily basis and reflected in the price of the units. This means that you will not see them shown on your statement and you do not need to pay for them separately.
Where a particular investment does not pay Hargreaves Lansdown a renewal commission, we charge an annual fee of 0.5% up to a maximum of £200 which is charged monthly in arrears from a snapshot we take of your account on the last working day of each month. "

Not sure thats a really useful answer from HL......

[russell]

The only time you will be guaranteed rent is if you rented the place to a council. When nobody wants to rent your place, you are losing money. With a good pension, your investments can go up as well as down. And if you invest in the right areas, you will see an increase in investments. With property, when the bubble bursts, and nobody wants to rent, you are guaranteed one thing... the income will go out the window. I know what I would prefer to do... have a pension that has little or no CGT applied on it, and a decent self-management of the investments I make. Seemples.

Thats why I said "good proven rent-able area". Also you say investment can go up or down, that is correct. Many people brighter than you can't predict how its going to go in 12 months never mind decades, so its a gamble at best. You also say the property bubble bursts, people always need housing and if your properties are in a rent-able area (Near university for example) they will rarely be empty.

[pmeswani]

I wouldn't invest in a pension, you work hard and put in X% of your profit then you retire just as your pensions goes up in smoke. Invest in good rent able property in an area with proven (over decades) demand. not only do you get the rent each month but the principal is rising over time. Whereas a pension you "might" get what you put in depnding on the ball landing on red.

The only time you will be guaranteed rent is if you rented the place to a council. When nobody wants to rent your place, you are losing money. With a good pension, your investments can go up as well as down. And if you invest in the right areas, you will see an increase in investments. With property, when the bubble bursts, and nobody wants to rent, you are guaranteed one thing... the income will go out the window. I know what I would prefer to do... have a pension that has little or no CGT applied on it, and a decent self-management of the investments I make. Seemples.

[russell]

I wouldn't invest in a pension, you work hard and put in X% of your profit then you retire just as your pensions goes up in smoke. Invest in good rent able property in an area with proven (over decades) demand. not only do you get the rent each month but the principal is rising over time. Whereas a pension you "might" get what you put in depnding on the ball landing on red.

[jmo21]

So these 2400 funds without a management fee....are you saying that when you invest, say, £100 into this fund via your SIPP, that you're not paying any commission on that ? (e.g. 3%)

I asked HL for confirmation on this very point in January, here was their response:

"The annual charge is levied by the fund management company to cover the cost of managing funds. They are normally deducted on a daily basis and reflected in the price of the units. This means that you will not see them shown on your statement and you do not need to pay for them separately.
Where a particular investment does not pay Hargreaves Lansdown a renewal commission, we charge an annual fee of 0.5% up to a maximum of £200 which is charged monthly in arrears from a snapshot we take of your account on the last working day of each month. "

[AussieDigger]

Low cost SIPP | SIPP charges and interest rates | Hargreaves Lansdown

Ok, let's me explain the above the best I can. The £200 is the upper limit of any charges that a customer will expect to be charged. It's not a fixed fee of £200 a year plus charges from the fund managers. they only charge £200 a year for any investments that are not free of any management fee from the fund managers (i.e. outside the 2,400 funds that do not have a management fee).

So these 2400 funds without a management fee....are you saying that when you invest, say, £100 into this fund via your SIPP, that you're not paying any commission on that ? (e.g. 3%)

[Support Monkey]

A very good friend of mine for 25 years was an IFA for a major bank and now retired (so a trusted source as far as i am concerned) I recently mentioned to him about pensions and he said "do it yourself" he said why pay all those costs just setup with HL as the information is readily availble to do just as good a job, he also said when he was an IFA he took all the commission and kept it where as HL put alot of theirs back.

[pmeswani]

Where did you get the £200 per account per year from? For as long as I have been a customer of H&L, I have never paid £200 a year for their services. I would be interested in knowing where you got that figure from.

On my investments, I don't pay more than 0.5% for any investments choices.

Low cost SIPP | SIPP charges and interest rates | Hargreaves Lansdown

Ok, let's me explain the above the best I can. The £200 is the upper limit of any charges that a customer will expect to be charged. It's not a fixed fee of £200 a year plus charges from the fund managers. they only charge £200 a year for any investments that are not free of any management fee from the fund managers (i.e. outside the 2,400 funds that do not have a management fee).

[AussieDigger]

When I spoke to an IFA that was recommended by my accountant I couldn't believe the charges involved.
Firstly there was a large up front commision of the amount I was going to invest, which considering the market would more the wipe out the best possible advice. This was being sold as far better than the rolling commisin option, which I couldn't believe anyone would agree to!!!!

Then if for some reason the world changed and the investment options turned out to be tulip, then for another fee he'd review these - wtf.

H&L SIPP - take your punt, which I think will be just as good, if not better than the monkeys that call themselves IFAs.

Most are taking the p1ss and as mentioned are more in it for their commision than what's best for the customer.

In the last 6 months the H&L funds are up over 10% and these are a safe bet for those who aren't willing to look further. As you get a bit of time you can look at other options. I'll admit to knowing very little about the seemingly unlimited choices so asked a friend who is a fund manager himself for some top picks then just spread my investment between them.

Think you're right here....most IFA's aren't really adding any value...its all guesswork....some IFA's just re-hash stuff from the public domain and sell it on as 'advice'...pretty shoddy stuff..