Question
I have c. £90,000 to transfer into a modern, low cost pension arrangement. I have been in touch with an adviser, who has suggested using a platform solution, such as Skandia or Transact. Alternatively, I have been looking at setting up a low cost SIPP, such as Hargreaves Lansdown Vantage or Fidelity FundsNetwork (through Cavendish Online), both featured on this website. Platforms seem to be adviser accessed - if this is this the main difference between the two, then presumably they are more expensive?
Whereas SIPP costs are unbundled and transparent, as far as I can make out platform costs are bundled, so how do I compare the two? Also, reading the 2012 Retail Distibution Review summary, it seems that the rules for Platforms are being tidied up at present, with concern about IFAs holding shares and the ability to transfer away, so my hunch would be to go down the SIPP route at the moment. Would you agree?
On the choice of SIPP product, suitability seems to depend on predominance of investment type ie funds or shares etc, with Hargreaves Lansdown/Fidelity being best for funds and Sippdeal etc for shares. While at the moment my investment will be fund based, I intend to diversify in the future. Are there any SIPP products that are good value for funds and shares?Answer
I wouldn't worry too much about the distinction between 'platforms' and SIPPs, as these days they're often much the same thing. But you are right to focus on charges - the investment choice available on the various offerings tends to be similar, so how much you'll end up paying is a key differentiator.
I think your first decision should be whether you need or want advice. Obviously this comes at a cost, which will usually be reflected by higher platform/SIPP charges (to pay the adviser commission or fees) unless the adviser charges their fees independently. Any adviser should clearly disclose how much their fees will be, so you can ascertain how much the advice will cost, even if it's 'hidden' via higher platform/SIPP charges.
For example: the Skandia Collective Retirement Account charges £52.32 a year as a platform charge. Financial advisers can take up to 4.5% initial commission, which is effectively a direct charge to you and taken from your investment (i.e. up to £3,825 on £90,000) as well ongoing annual 'trail' commission of up to 1.5%. About 0.5% trail commission is usually built into the cost of the underlying funds, if the adviser takes more this will again be a further direct charge to you.
If you use an adviser or discount broker who takes no commission then you'll just pay Skandia's £52.32 annual fee and standard fund charges (less any trail commission, which should be rebated to you), along with any fees paid directly to the adviser/discount broker.
I've yet to see a 'perfect' SIPP for investors wanting to hold funds and shares, but the Alliance Trust Savings Select SIPP is well worth considering. Because it's offered via their i.nvest platform (you can read my review here) there's generally no initial fund charges and you enjoy discounts on annual fund charges, typically reducing the cost of a fund charging 1.5% a year to 0.75% - 1%. Despite an annual SIPP charge of £75 plus VAT and online dealing fees of £12.50 per trade (funds and shares), this is probably the cheapest option currently if you wish to hold both funds and shares and don't plan to make small regular contributions (in which case the £12.50 dealing fee could be prohibitive). Just bear in mind that Alliance Trust doesn't presently offer as wide a fund choice as most rivals - this may not be a problem but I'd definitely check whether your preferred funds are available if considering this route.
Hope this helps and that you find a solution you're happy with.
I have c. £90,000 to transfer into a modern, low cost pension arrangement. I have been in touch with an adviser, who has suggested using a platform solution, such as Skandia or Transact. Alternatively, I have been looking at setting up a low cost SIPP, such as Hargreaves Lansdown Vantage or Fidelity FundsNetwork (through Cavendish Online), both featured on this website. Platforms seem to be adviser accessed - if this is this the main difference between the two, then presumably they are more expensive?
Whereas SIPP costs are unbundled and transparent, as far as I can make out platform costs are bundled, so how do I compare the two? Also, reading the 2012 Retail Distibution Review summary, it seems that the rules for Platforms are being tidied up at present, with concern about IFAs holding shares and the ability to transfer away, so my hunch would be to go down the SIPP route at the moment. Would you agree?
On the choice of SIPP product, suitability seems to depend on predominance of investment type ie funds or shares etc, with Hargreaves Lansdown/Fidelity being best for funds and Sippdeal etc for shares. While at the moment my investment will be fund based, I intend to diversify in the future. Are there any SIPP products that are good value for funds and shares?Answer
I wouldn't worry too much about the distinction between 'platforms' and SIPPs, as these days they're often much the same thing. But you are right to focus on charges - the investment choice available on the various offerings tends to be similar, so how much you'll end up paying is a key differentiator.
I think your first decision should be whether you need or want advice. Obviously this comes at a cost, which will usually be reflected by higher platform/SIPP charges (to pay the adviser commission or fees) unless the adviser charges their fees independently. Any adviser should clearly disclose how much their fees will be, so you can ascertain how much the advice will cost, even if it's 'hidden' via higher platform/SIPP charges.
For example: the Skandia Collective Retirement Account charges £52.32 a year as a platform charge. Financial advisers can take up to 4.5% initial commission, which is effectively a direct charge to you and taken from your investment (i.e. up to £3,825 on £90,000) as well ongoing annual 'trail' commission of up to 1.5%. About 0.5% trail commission is usually built into the cost of the underlying funds, if the adviser takes more this will again be a further direct charge to you.
If you use an adviser or discount broker who takes no commission then you'll just pay Skandia's £52.32 annual fee and standard fund charges (less any trail commission, which should be rebated to you), along with any fees paid directly to the adviser/discount broker.
I've yet to see a 'perfect' SIPP for investors wanting to hold funds and shares, but the Alliance Trust Savings Select SIPP is well worth considering. Because it's offered via their i.nvest platform (you can read my review here) there's generally no initial fund charges and you enjoy discounts on annual fund charges, typically reducing the cost of a fund charging 1.5% a year to 0.75% - 1%. Despite an annual SIPP charge of £75 plus VAT and online dealing fees of £12.50 per trade (funds and shares), this is probably the cheapest option currently if you wish to hold both funds and shares and don't plan to make small regular contributions (in which case the £12.50 dealing fee could be prohibitive). Just bear in mind that Alliance Trust doesn't presently offer as wide a fund choice as most rivals - this may not be a problem but I'd definitely check whether your preferred funds are available if considering this route.
Hope this helps and that you find a solution you're happy with.
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