Hi guys Iāve recently been looking into a pension I took out 3 years ago. I was advised to accept an offer to be bought out of a defined benefit pension and my advisor advised an LV pension with funds being managed by a company called brewin dolphin. The trouble is when I look at it now I can see yearly fees to
financial advisor
London Victoria
brewin dolphin
Total yearly fees for those 3 is around Ā£6000. The pension pot I transferred was Ā£305000. Over 3 years the pot has grown to Ā£349000.
My question is do you think I would be better off in a SIPP (invested in a few things like SMT, BGCG, USA etc)
It seems there are a lot of people taking a yearly slice of the money as it is but the growth is not too bad. Any advice much appreciated
This does seem extremely high, but it depends on what the fees are actually relating to.
Thereās usually at minimum two fees, a platform fee and a fund fee (assuming you hold funds, which you probably do).
Itās hard to say without a breakdown on what all the fees actually are, if that includes fund fees etc. But for example, Vanguard charges a platform fee of 0.15% capped at Ā£275 (covering all account types). You then only have to account for the fund fee which for example VWRL is 0.22%. 0.22% of Ā£349,000 is Ā£767 so youāre looking at a total cost per year (not including gains) of Ā£1042.
itās worth breaking down what exactly the costs are. And yes, it sounds like its almost certainly cheaper to move your pension.
(presumably you dont use the financial advisor? so presumably youāre paying for a service youāre not using)
Iād recommend you do a bit of analysis of all the major SIPP providers. Most charge a % but some charge a flat fee.
Iām with Interactive Investor. Their customer service is dreadful but their platform charge is Ā£9.99 per month for the account and an additional Ā£9.99 per month for the SIPP. Less that Ā£240 per year.
But youāll need to look at all other charges too, such as dealing charges (maybe you donāt plan to transact all that often).
In terms of fund choice, do A LOT of research and DO NOT just chuck it into what a bunch of strangers on a forum tell you. With a pot like yours youāll want a decent bit of diversity to protect from any volatile downturns.
Could always just emulate the set up your advisers have created in your own SIPP, if youāre happy with the rate of growth. Your age abd attitude to risk are also factors.
Honestly go read up as much as you can on SIPP management. Moneysavingsexpert can give you a steer in terms of the best manager.
Thanks for taking the time to reply I really appreciate it.
I have only seen the financial advisor once and that was to transfer the pension out. Their fee is a pretty modest 0.1% but itās still money for nothing.
I have never had anything to do with anyone from LV. They seem like they were just a āmiddle manā and I believe Iām paying them around Ā£1500pa. So that is definitely money for nothing.
Brewin dolphin who manage the money seem like a decent company. I get a thorough report of all my holdings, deals, profit/loss etc every 3 months.
I need to go through all my paperwork tomorrow and see exactly how much I am paying and for what. But it seems to me that I could save a lot on fees alone by moving to a SIPP.
I would be looking at long term investments in a SIPP so wouldnāt be looking to do many transactions. I feel like interactive investor sounds like a good choice for me. I like a lot of what Baillie gifford offer and they have a good track record over at least the last 4/5 years so they would be some of the first investments if I do transfer. I will however do A LOT of research before diving in.
I already know I want to make my portfolio up of funds/trusts rather than individual shares. I was thinking in the region of 6-7 weighted towards America but with exposure to Europe and China. I also want some green energy in there because I think that will be going places in the next 15 years.
I am 41 by the way so have a bit of time on my side.
Thanks again for taking the time to respond. I appreciate the advice
I have to say Iām very surprised your adviser would advise you to accept a buy-out offer of a defined benefit pension; I wouldāve kept that right where it was. It all depends on the value of it and how much the buy out was, I suppose, but that was a guaranteed amount every year.
And if LV are doing a good job thatās great, but most (if not all) managers are obliged to provide statements, etc. so definitely look around.
Again though, certainly put your strength in those sectors if thatās where you are currently invested, but remember to hedge a bit.
I decided against an adviser when I moved my SIPP and Iām glad I did, but I did a swathe of research on sectors, funds trusts, performance, charges, etc. before I pulled the trigger. My SIPP is spread across 12 funds and trusts (no stocks - thatās way too risky for a pension pot in my view) and 5 of those are BG. And Iāll switch one more over next year (itās important to give the funds time to do their work, so these funds should only be reviewed once a year - every 6 months in oddity years such as 2020 is probably prudent).
Iām weighted about 84% equities, 16% bonds/gold - the latter being my hedging. High risk folio but Iām in your age bracket and would prefer early retirement so growth is key.
Joey thanks for taking time out to reply. Itās all a great help.
The buyout figure for the pension was a decent offer. It was double what the cash out value was the previous year. There were also some big selling points for me like the option to access the pension at 55 and the fact that if I die, my wife or children get 100% of the pot instead of 50%. Each to their own but for me they are big selling points.
Today Iām going to have a detailed look at the fees I am paying. And take a look at a few SIPP providers.
Thanks again
Sounds like the perks of the offer were decent enough to consider, and of course you have to do what is best for your own circumstances. Sounds like it might have got you a few years ahead in terms of compounding as well which is always great.
If you are not planning to do a lot of foreign currency transactions Interactive Investor costs are pretty acceptable, being flat rates regardless of pension size.
Looking at the investment side of things, Iāve been looking into the FSCS protection. If I was to purchase 2 separate trusts from Baillie Gifford and invested Ā£850000 in each for example, would I only be protected for Ā£85000 if Baillie gifford were to go bust? I know its a big if but never say never and explore every possibility. From what I have read it seems that it would only be Ā£85000
There is no FSCS protection for investment trusts, itās a company, just like thereās no protection for holding shares in Tesla.
In any case the protection is mainly for fees, shortfalls or mishandling of your assets by your broker. Not for protecting all all your assets value. That would never work.
Protection of your assets as a whole is covered by them being held in a well protected separated trust by your broker (check your terms and conditions, 212 for example doesnāt necessarily do this).
FSCS kicks in if your missold, etc or for example your broker or whoever holds your assets goes under. This will generally cover administration costs and fees incurred in transferring your assets as well as any shortfalls or compensation for cash held.
sorry to hear that.
This does seem extremely high, but it depends on what the fees are actually relating to.