Question
In the guide to choosing a personal pension you say that with more than £50,000 of trail commission paying funds the Cavendish SIPP is cheaper than HL. How is that amount arrived at?
With a trail rate of 0.5% £50k of funds would incur a fee of £250 whereas the annual fee for the Cavendish product is only £60 in the first year and £10 thereafter. Surely those with much smaller value funds would also find this SIPP cheaper.Answer
The answer is because you'll also pay underlying SIPP provider (i.e. FundsNetwork) charges via Cavendish Online. My calculations are as follows, assuming a fund charging 1.5% a year:
Hargreaves Lansdown Vantage SIPP
No annual SIPP fee (assuming trail commission paying investments). No trail commission rebates, so annual charges total 1.5%.
£40,000 invested, annual charges = £40,000 x 1.5% = £600
£50,000 invested = £750
£60,000 invested = £900
Fidelity FundsNetwork SPP via Cavendish Online
Fidelity charges a £108 SIPP setup fee and £269 annual administration charge.
In addition Cavendish Online charges a £50 initial fee then £10 a year, but rebates 0.5% trail commission, effectively reducing the annual fund charge to 1%.
First Year
£40,000 invested, annual charges = £40,000 x 1% + £108 + £269 + £50 + £10 = £837
£50,000 invested = £50,000 x 1% + £108 + £269 + £50 + £10 = £937
£60,000 invested = £60,000 x 1% + £108 + £269 + £50 + £10 = £1,037
Thereafter
£40,000 invested, annual charges = £40,000 x 1% + £269 + £10 = £529
£50,000 invested = £50,000 x 1% + £269 + £10 = £779
£60,000 invested = £60,000 x 1% + £269 + £10 = £879
Ok, the breakeven in this example is actually nearer £55,000 (after the first year), hence I mentioned c£50,000 in the guide. The exact breakeven will obviously depend on funds held and the associated trail commission rebates.
Hope this makes more sense now.
In the guide to choosing a personal pension you say that with more than £50,000 of trail commission paying funds the Cavendish SIPP is cheaper than HL. How is that amount arrived at?
With a trail rate of 0.5% £50k of funds would incur a fee of £250 whereas the annual fee for the Cavendish product is only £60 in the first year and £10 thereafter. Surely those with much smaller value funds would also find this SIPP cheaper.Answer
The answer is because you'll also pay underlying SIPP provider (i.e. FundsNetwork) charges via Cavendish Online. My calculations are as follows, assuming a fund charging 1.5% a year:
Hargreaves Lansdown Vantage SIPP
No annual SIPP fee (assuming trail commission paying investments). No trail commission rebates, so annual charges total 1.5%.
£40,000 invested, annual charges = £40,000 x 1.5% = £600
£50,000 invested = £750
£60,000 invested = £900
Fidelity FundsNetwork SPP via Cavendish Online
Fidelity charges a £108 SIPP setup fee and £269 annual administration charge.
In addition Cavendish Online charges a £50 initial fee then £10 a year, but rebates 0.5% trail commission, effectively reducing the annual fund charge to 1%.
First Year
£40,000 invested, annual charges = £40,000 x 1% + £108 + £269 + £50 + £10 = £837
£50,000 invested = £50,000 x 1% + £108 + £269 + £50 + £10 = £937
£60,000 invested = £60,000 x 1% + £108 + £269 + £50 + £10 = £1,037
Thereafter
£40,000 invested, annual charges = £40,000 x 1% + £269 + £10 = £529
£50,000 invested = £50,000 x 1% + £269 + £10 = £779
£60,000 invested = £60,000 x 1% + £269 + £10 = £879
Ok, the breakeven in this example is actually nearer £55,000 (after the first year), hence I mentioned c£50,000 in the guide. The exact breakeven will obviously depend on funds held and the associated trail commission rebates.
Hope this makes more sense now.
Read this Q and A at http://www.candidmoney.com/questions/question552.aspx
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