Question
I currently have about £170k in my Hargreaves Lansdown SIPP. This is invested in various funds - not Investment Trusts at present.
Like many (I think) - I congratulated myself at being financially aware, and using HL - however, I am beginning to see some light regarding the real cost of trail commissions.
I am therefore thinking about moving my SIPP - either to a lower cost SIPP (such as Cavendish) or maybe even to a Personal Pension (Skandia?). I am unlikely to require access to commercial property investments, but might look at Investment Trusts in the future. I do not anticipate making numerous fund switches.
I am slightly confused over the costs of the Cavendish offering - for example it mentions a yearly admin charge of £291, but states that "Investors who have more than £150,000 in their SIPP will not have to pay the yearly charge below"? I have tried the Compare Fund Platforms site, with a portfolio >£150k, but this still seems to include the £291 annual charge?
I would be grateful for your advice as to what options to consider.Answer
Thanks, you're right to be confused as my comparefundplatforms site was showing a £291 annual charge on £150,000+ portfolios even if my calculations behind the scenes were handling this. Anyway, now all fixed, so thank you for pointing this out.
As for what might be the best decision in your situation, you can almost certainly save money by using a different SIPP provider.
Hargreaves Lansdown (HL) was once a trailblazer, being the first mainstream discount broker to rebate some trail commission to customers. However, despite the company making bumper profits it's been overtaken by a number of competitors in terms of overall cost in many scenarios.
In its 2013 Interim Results HL says its overall revenue margin on the Vantage platform is 0.81%, so on average it would have earned £1,377 on a £170,000 SIPP last year (after any rebates). Trail commission rebates average 0.17%, meaning on average you'll receive a £289 annual commission rebate assuming your SIPP is fully invested in funds (the SIPP rebate only started in January 2013).
Compare this to a platform using 'clean' funds such as Alliance Trust Savings (ATS) or Charles Stanley Direct, where you'll probably save around 0.75% on annual fund charges before platform fees, and the difference can be significant - I'd guesstimate a potential annual saving of at least £500 versus HL based on your pension fund size.
Cavendish Online could also prove good value given the £291 annual fee won't apply. You'll get a full trail commission rebate of typically 0.5% while platform fees (probably c0.25%) are built into annual fund charges.
While I still have to add Sippdeal to the compare site (there's a lot of data to wade through), despite stingy rebates they can be good value if institutional (i.e. 'clean') versions of the funds you hold are available. While still a bit hit and miss in terms of availability, as the platform fee ('custody charge') for using these funds is only £50 a year (regardless of how many funds held) Sippdeal can prove very good value provided low cost versions of the funds you want are on offer.
The Skandia personal pension via discount broker Clubfinance can offer a decent deal depending on the funds held, although I can't see a pressing reason to use it over the other options mentioned.
Hope this points you in the right direction.
P.S. If you decide to transfer away from Hargreaves Lansdown, watch out for exit charges - see my article here.
You might also find my guide to low cost SIPPs helpful (I need to update the Cavendish Online entry to reflect the annual fee being waived over £150,000).
I currently have about £170k in my Hargreaves Lansdown SIPP. This is invested in various funds - not Investment Trusts at present.
Like many (I think) - I congratulated myself at being financially aware, and using HL - however, I am beginning to see some light regarding the real cost of trail commissions.
I am therefore thinking about moving my SIPP - either to a lower cost SIPP (such as Cavendish) or maybe even to a Personal Pension (Skandia?). I am unlikely to require access to commercial property investments, but might look at Investment Trusts in the future. I do not anticipate making numerous fund switches.
I am slightly confused over the costs of the Cavendish offering - for example it mentions a yearly admin charge of £291, but states that "Investors who have more than £150,000 in their SIPP will not have to pay the yearly charge below"? I have tried the Compare Fund Platforms site, with a portfolio >£150k, but this still seems to include the £291 annual charge?
I would be grateful for your advice as to what options to consider.Answer
Thanks, you're right to be confused as my comparefundplatforms site was showing a £291 annual charge on £150,000+ portfolios even if my calculations behind the scenes were handling this. Anyway, now all fixed, so thank you for pointing this out.
As for what might be the best decision in your situation, you can almost certainly save money by using a different SIPP provider.
Hargreaves Lansdown (HL) was once a trailblazer, being the first mainstream discount broker to rebate some trail commission to customers. However, despite the company making bumper profits it's been overtaken by a number of competitors in terms of overall cost in many scenarios.
In its 2013 Interim Results HL says its overall revenue margin on the Vantage platform is 0.81%, so on average it would have earned £1,377 on a £170,000 SIPP last year (after any rebates). Trail commission rebates average 0.17%, meaning on average you'll receive a £289 annual commission rebate assuming your SIPP is fully invested in funds (the SIPP rebate only started in January 2013).
Compare this to a platform using 'clean' funds such as Alliance Trust Savings (ATS) or Charles Stanley Direct, where you'll probably save around 0.75% on annual fund charges before platform fees, and the difference can be significant - I'd guesstimate a potential annual saving of at least £500 versus HL based on your pension fund size.
Cavendish Online could also prove good value given the £291 annual fee won't apply. You'll get a full trail commission rebate of typically 0.5% while platform fees (probably c0.25%) are built into annual fund charges.
While I still have to add Sippdeal to the compare site (there's a lot of data to wade through), despite stingy rebates they can be good value if institutional (i.e. 'clean') versions of the funds you hold are available. While still a bit hit and miss in terms of availability, as the platform fee ('custody charge') for using these funds is only £50 a year (regardless of how many funds held) Sippdeal can prove very good value provided low cost versions of the funds you want are on offer.
The Skandia personal pension via discount broker Clubfinance can offer a decent deal depending on the funds held, although I can't see a pressing reason to use it over the other options mentioned.
Hope this points you in the right direction.
P.S. If you decide to transfer away from Hargreaves Lansdown, watch out for exit charges - see my article here.
You might also find my guide to low cost SIPPs helpful (I need to update the Cavendish Online entry to reflect the annual fee being waived over £150,000).
Read this Q and A at http://www.candidmoney.com/askjustin/844/where-to-transfer-my-hargreaves-lansdown-sipp
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