SJP

[Chipper]

My wife and I have been putting maximum pension contribution into our pensions with SJP for just under 18 months now. At first I was concerned about all the negativity regarding charges in the papers and online but after going back to the agent he reassured me via an email that the upfront 6% costs if I left in the first year would be reduced per year by 1% so after the 6 years I was led to believe that if I was unhappy I could walk without having any penalty bar the standard 1.5 management costs per year.

I accepted the 1.5% management cost for the portfolio and went on the bases that if they can achieve what they say then I’ll take the hit and if they don’t I will leave thinking no penalty after the 6 years.

Yesterday I started to watch a chap called PensionCraft on YouTube and he does a neutral clip about SJP. Low and behold I notice that the 6% charge reinstates every time I pay each month for that particular payment.. In essence I’m trapped with them as the longer I’m with them the more expensive it is remove the pensions from them.

We have achieved just under 7% growth but I’m livid that there was no mention in the email when I was concerned about their charges and wanted clarification. Instead the email clearly tells me that the charges to leave will be reduced each year by 1% but completely neglected to inform me that each time I pay into the pension that payment starts the 6 years process again.

I’m not sure how to play this but I’ve decided to leave. I’m unsure where to turn to for proper advice. I have a client who’s an FA who reassured me I could take this to the ombudsman and they will settle in my favor and I would get all of our money invested returned without the penalty.

I think my main questions are -

I haven’t got anyone to move the pension to at the moment and my trust in this industry is low.I don’t want to use people I know through my business so is it a case of looking online for another FA and just trying to find a good independent FA ?

I’m not sure if it would be best just to stop the monthly pension contribution to SJP and wait the 6 years and then take it out. I would start a new pension straight away when I stop the SJP contribution with another provide.

As I signed the agreement if I go to the ombudsman I do feel the email is so misleading especially as my initial email to the agent was specifically asking for clarification that I feel I have a strong case but unsure how this would play out.

Edited by Chipper on Wednesday 30th October 08:11

[Simpo Two]

Well I'm no pension expert but if what you say is true my senses tell me to jump asap, take the hit while the pot is small and move it to IM. They can tell you whatever else you need to know. Any 'FA' is simply going to take an extra slice of your wealth and steer your money into his favourite company.

By the way that is not Advice

[Mr Pointy]

OP: look through this sticky at the top of the forum:
https://www.pistonheads.com/gassing/topic.asp?h=0&...

It's a long thread but it's worth skimming through. Chat/email either Julian PH or Nik & they will be happy to spend some time going through your options. It's free & at the very least you'll end up much better informed as to what to do next.

This is a suggestion, not Advice

[Derek Chevalier]

Chipper said:

My wife and I have been putting maximum pension contribution into our pensions with SJP for just under 18 months now. At first I was concerned about all the negativity regarding charges in the papers and online but after going back to the agent he reassured me via an email that the upfront 6% costs if I left in the first year would be reduced per year by 1% so after the 6 years I was led to believe that if I was unhappy I could walk without having any penalty bar the standard 1.5 management costs per year.

I accepted the 1.5% management cost for the portfolio and went on the bases that if they can achieve what they say then I’ll take the hit and if they don’t I will leave thinking no penalty after the 6 years.

Yesterday I started to watch a chap called PensionCraft on YouTube and he does a neutral clip about SJP. Low and behold I notice that the 6% charge reinstates every time I pay each month for that particular payment.. In essence I’m trapped with them as the longer I’m with them the more expensive it is remove the pensions from them.

We have achieved just under 7% growth but I’m livid that there was no mention in the email when I was concerned about their charges and wanted clarification. Instead the email clearly tells me that the charges to leave will be reduced each year by 1% but completely neglected to inform me that each time I pay into the pension that payment starts the 6 years process again.

I’m not sure how to play this but I’ve decided to leave. I’m unsure where to turn to for proper advice. I have a client who’s an FA who reassured me I could take this to the ombudsman and they will settle in my favor and I would get all of our money invested returned without the penalty.

I think my main questions are -

I haven’t got anyone to move the pension to at the moment and my trust in this industry is low.I don’t want to use people I know through my business so is it a case of looking online for another FA and just trying to find a good independent FA ?

I’m not sure if it would be best just to stop the monthly pension contribution to SJP and wait the 6 years and then take it out. I would start a new pension straight away when I stop the SJP contribution with another provide.

As I signed the agreement if I go to the ombudsman I do feel the email is so misleading especially as my initial email to the agent was specifically asking for clarification that I feel I have a strong case but unsure how this would play out.

Edited by Chipper on Wednesday 30th October 08:11

Chipper, it's certainly possible to avoid paying the exit fee. I know of a few IFAs that have successfully negotiated for their new clients (ex SJP) to avoid paying this.

For what it's worth I'm sorry to hear your trust in the industry is low - the downside with these articles is that they give people the impression that all advisers are the same

[The Leaper]

OP,

Just a point: This looks like a sales issue, not a pensions issue, in which case if you wish to raise a formal complaint and ask an ombudsman for assistance it will be the Financial Ombudsman Service you need, not the Pensions Ombudsman.

I would have thought a good look at the contract with SJP should reveal whether or not the 6% charge is part of the deal. If there, I think that you have little chance of a successful complaint as regards the e mail you received.

R.

[tighnamara]

Chipper said:

My wife and I have been putting maximum pension contribution into our pensions with SJP for just under 18 months now. At first I was concerned about all the negativity regarding charges in the papers and online but after going back to the agent he reassured me via an email that the upfront 6% costs if I left in the first year would be reduced per year by 1% so after the 6 years I was led to believe that if I was unhappy I could walk without having any penalty bar the standard 1.5 management costs per year.

I accepted the 1.5% management cost for the portfolio and went on the bases that if they can achieve what they say then I’ll take the hit and if they don’t I will leave thinking no penalty after the 6 years.

Yesterday I started to watch a chap called PensionCraft on YouTube and he does a neutral clip about SJP. Low and behold I notice that the 6% charge reinstates every time I pay each month for that particular payment.. In essence I’m trapped with them as the longer I’m with them the more expensive it is remove the pensions from them.

We have achieved just under 7% growth but I’m livid that there was no mention in the email when I was concerned about their charges and wanted clarification. Instead the email clearly tells me that the charges to leave will be reduced each year by 1% but completely neglected to inform me that each time I pay into the pension that payment starts the 6 years process again.

I’m not sure how to play this but I’ve decided to leave. I’m unsure where to turn to for proper advice. I have a client who’s an FA who reassured me I could take this to the ombudsman and they will settle in my favor and I would get all of our money invested returned without the penalty.

I think my main questions are -

I haven’t got anyone to move the pension to at the moment and my trust in this industry is low.I don’t want to use people I know through my business so is it a case of looking online for another FA and just trying to find a good independent FA ?

I’m not sure if it would be best just to stop the monthly pension contribution to SJP and wait the 6 years and then take it out. I would start a new pension straight away when I stop the SJP contribution with another provide.

As I signed the agreement if I go to the ombudsman I do feel the email is so misleading especially as my initial email to the agent was specifically asking for clarification that I feel I have a strong case but unsure how this would play out.

Edited by Chipper on Wednesday 30th October 08:11

Reminds me of being in the same predicament with SJP a number of years ago, tried fighting the charges as this was never clearly explained but didn't get anywhere as the information brochure had reference to the 6 years. Still didn't think it was clear especially to a non savvy financial investor, in the end I took the hit, paid the charges and moved on.

Couldn't trust an Advisor who didn't make these charges clear at the off set or during any subsequent meetings. Could have left the money in to remove the charges but just wanted clear of them.

I didn't go to the ombudsman as I believed rightly or wrongly that the small wording in the documentation was enough to put the ball in their court.

Hope you have success in having these charges removed.

Definitely worth a talk with IM as mentioned above, again no connection to them other than looking at moving investments across.
I have learnt more over the last few meetings / telephone calls with Julian & Nic than anything from any previous FA so worth at the least having a discussion.

Edited by tighnamara on Wednesday 30th October 12:38

[Ian350]

I found myself with a shortlist of SJP and Howard Worth (in Cheshire) 5 or so years ago. The SJP charges were way too high even after the 6 years so I went with the latter and have been delighted with them. There are also some good people who post on here.

I would have thought a good IFA may even be able to guide you on how to deal with the SJP exit charges most effectively.

[Derek Chevalier]

Ian350 said:

I would have thought a good IFA may even be able to guide you on how to deal with the SJP exit charges most effectively.

See above.

[JulianPH]

Hi Simpo Two, Mr Pointy and tighnamara - thanks for your comments!

Chipper - Please feel free to get in touch via PM or post on the IM thread. We get this a lot and had another PHer today realise he had been paying SJP a 6% initial charge on top of the 6% (reducing) exit charge and annual management charges for his pension.

May I add that this is simply an offer of free assistance and has nothing to do with you becoming a client of IM.

Alternatively - for balance - I am sure that Derek (a good financial adviser) can provide the same assistance, though I don't know if this would be dependent on you becoming a client of his - I am sure he can clarify on this point.

[Derek Chevalier]

JulianPH said:

Chipper - Please feel free to get in touch via PM or post on the IM thread. We get this a lot and had another PHer today realise he had been paying SJP a 6% initial charge on top of the 6% (reducing) exit charge and annual management charges for his pension.

I'd be surprised if they were paying an initial charge AND an exit charge. It's one or the other in all the cases I've come across and speaking to dozens of advisers on both sides of the fence. This article excludes transaction costs but is broadly accurate.

https://citywire.co.uk/wealth-manager/news/numis-s...

Pension and investment bond : 0% initial charge. 1.5% ongoing fee which includes ongoing adviser charge. Add on fund and transaction costs (pension transaction costs are not published on their website) and it's around 2.2-2.4% all in. That's "all" you pay if you stay for a minimum of 6 years.

ISA charges: 5% initial (which can be negotiated, apparently). Ongoing is typically around 0.25% cheaper than the equivalent pension fund.

JulianPH said:

Alternatively - for balance - I am sure that Derek (a good financial adviser) can provide the same assistance, though I don't know if this would be dependent on you becoming a client of his - I am sure he can clarify on this point.

No obligation at all. I'm more than happy to have an email/call.

[OddCat]

JulianPH said:

We get this a lot and had another PHer today realise he had been paying SJP a 6% initial charge on top of the 6% (reducing) exit charge and annual management charges for his pension.

....he really hasn't. SJP have no facility to accommodate both an explicit up front fee AND a tapering six year Early Withdrawal Charge (EWC) on the same product. With a pension, only the latter applies.

Re the OP, yes the six year clock will run separately on each contribution made in the first 5 years. But not ones made thereafter. The plan also has a cumulative 7.5% Annual Withdrawal Allowance (AWA) meaning 7.5% of the amount invested can be accessed EWC free x number of years invested. Most people with an SJP pension will ultimately access the monies through drawdown so they'll never draw the lot out and, realistically, if they use the plan correctly, they should (or in most cases will) never pay an EWC as it will either have expired or their withdrawals will be well covered bg their cumulative AWA. SJP always automatically apply withdrawals to the monies with the lowest (or no) EWC.

In the meantime 100% of each contribution is invested with, effectively, no explicit fee deduction. Any EWC paid is merely a 'claw back' of the fee that wasnt taken. You leave each contribution invested for six years + and SJP will have recovered their initial costs (initial fee to adviser, advice fee, set up fee etc) gradually from the ongoing fees.

OP there is nothing wrong with the SJP plan you have. It is just a different concept. You just need to understand it.

Imagine you go to a nightclub. The entrance fee is £10. Or you can get in for free but pay an exit fee of £15 if you leave in the first 20 minutes. If you leave between 20 and 40 minutes the exit fee is £12.50. Between 40 minutes and 1 hour it's £10. Between 1 hour and 1 hour 20 if us £7.50. Between 1 hour 20 and 1 hour 40 it's £5 etc. After 2 hours there is no exit fee. Imagine liking it, staying over 2 hours, and kicking yourself as you could have got in for free. After just 40 minutes the exit fee is the same as the entrance fee you have paid anyway. You'd think people would like that idea. And so did SJP. It isn't really free of course as you pay a slightly higher ongoing fee. But it is all roughly net neutral in the end.

SJP are truly terrible at explaining their charges - especially on the 'no explicit fee but has EWC' products. Which is a shame. Perhaps they should just charge 3% up front, or 4%, or whatever like all the others, and then a slightly lower ongoing fee, as god forbid that someone might do something imaginative for a change !

[tighnamara]

OddCat said:

....he really hasn't. SJP have no facility to accommodate both an explicit up front fee AND a tapering six year Early Withdrawal Charge (EWC) on the same product. With a pension, only the latter applies.

Re the OP, yes the six year clock will run separately on each contribution made in the first 5 years. But not ones made thereafter. The plan also has a cumulative 7.5% Annual Withdrawal Allowance (AWA) meaning 7.5% of the amount invested can be accessed EWC free x number of years invested. Most people with an SJP pension will ultimately access the monies through drawdown so they'll never draw the lot out and, realistically, if they use the plan correctly, they should (or in most cases will) never pay an EWC as it will either have expired or their withdrawals will be well covered bg their cumulative AWA. SJP always automatically apply withdrawals to the monies with the lowest (or no) EWC.

In the meantime 100% of each contribution is invested with, effectively, no explicit fee deduction. Any EWC paid is merely a 'claw back' of the fee that wasnt taken. You leave each contribution invested for six years + and SJP will have recovered their initial costs (initial fee to adviser, advice fee, set up fee etc) gradually from the ongoing fees.

OP there is nothing wrong with the SJP plan you have. It is just a different concept. You just need to understand it.

Imagine you go to a nightclub. The entrance fee is £10. Or you can get in for free but pay an exit fee of £15 if you leave in the first 20 minutes. If you leave between 20 and 40 minutes the exit fee is £12.50. Between 40 minutes and 1 hour it's £10. Between 1 hour and 1 hour 20 if us £7.50. Between 1 hour 20 and 1 hour 40 it's £5 etc. After 2 hours there is no exit fee. Imagine liking it, staying over 2 hours, and kicking yourself as you could have got in for free. After just 40 minutes the exit fee is the same as the entrance fee you have paid anyway. You'd think people would like that idea. And so did SJP. It isn't really free of course as you pay a slightly higher ongoing fee. But it is all roughly net neutral in the end.

SJP are truly terrible at explaining their charges - especially on the 'no explicit fee but has EWC' products. Which is a shame. Perhaps they should just charge 3% up front, or 4%, or whatever like all the others, and then a slightly lower ongoing fee, as god forbid that someone might do something imaginative for a change !

That is interesting on the charges only being in the first 5 years, that was not in place when I left SJP or I was misled on charges.
Can you point me in the right direction where this can be found on SJP paperwork.
Thanks

[OddCat]

tighnamara said:

That is interesting on the charges only being in the first 5 years, that was not in place when I left SJP or I was misled on charges.
Can you point me in the right direction where this can be found on SJP paperwork.
Thanks

Just to be absolutely clear, the 5 year thing applies to 'regular' contributions only - not to 'ad hoc' or 'single' ones which are subject to a specific separate advice and suitability report will have the 6 year EWC applied individually.

Obviously, even with the EWC applying to the first 5 years only it still means the last one (month 60) will have an EWC until month 132 (its own mini 6 year EWC)

But how much is the EWC really ? Take a £1,000 pm regular contribution scenario where the first contribution has a sliding scale 6 year 6%, 5%, 4% etc EWC. It also has a 7.5% cumulative Annual Withdrawal Allowance (AWA). So, in year 6 it has a 1% EWC but 60% (7.5% x 6) is AWA. Let's say it has grown tk £1,250. So the EWC on that single first month contibution is £1,250 x 40% x 1% = £5. So 60% of the balance of that one premium is EWC free at that point and in year 7 there is no EWC applied to that £1,250. It is possible to create a spreadsheet to forecast the hypothetical EWC. It's really not a whole hill of beans. And who withdraws the whole balance that soon anyway ? Especially relative to the usual up front fee that the client didn't incur in the first instance.

I think it was in the Key Facts for the plan when I took mine out but, in typical hopeless SJP style, was as clear as mud. This genuinely appears to be because whoever writes their material is retarded - and eally not because they are trying to hide behind complexity. The advisers receive a fee for each regular contribution for the first 5 years - but nothing on contributions thereafter. Thus SJP don't have the same costs (paying the Adviser) from contribution 61 onwards. Hence no need for an EWC on contributions after that point as SJP have no need for a cost recovery claw back (which is what the EWC is) from month 61 onwards.

How would this have helped ? If they'd explained it properly might you have remained with them? I suspect that is a common thing. People leave because they don't understand the charges and SJP are incapable of explaining them (and their true effects). Especially individual advisers. Ridiculous really and a shame.

EDIT : have looked at my Key Features document (SJP Retirement Account) and it says things like If you make a regular investment, the cost of our initial advice and services will be 4.5% of the amount you invest over the first five years. For example, if you invest £500 per month, the charge will be £1,350 . Basically, the whole EWC thing is aimed at SJP clawing back the Initial Advice Fee (set up charges including the Advisers 3% paid by SJP to the Adviser) if the client doesn't stick around long enough for it to have been worthwhile not charging them up front.

The Key Features document also says For single investments and amounts invested in the first five years of a regular investment , the annual product management charge will be waived for the first six years that each contribution is invested . Again referencing a 5 year limit.

Basically, on normal charging terms (these can be reduced in some cases but let's ignore that) an SJP Adviser gets a payment from SJP of 3% of any pension contribution made. In the case of regular contributions they get 3% of what is calculated as the first 5 years worth. So, if you take out a pension at £500 per month the Adviser gets £500 x 12 x 5 x 3% = £900. If you stop your contributions he will suffer a proportional claw back. He can, alternatively, take the 3% of each contribution as it happens (£15 a month for 60 months = the same £900) but if you stop his £15 per month will simply stop but he won't suffer a clawback. Obviously, they are also receiving their ongoing fund based fee which is usually 0.5% of the amount invested which of course grows over time. A £500 pm investment would be worth, say, £40k after 5 years so at that point the Adviser will be getting £40,000 x 0.5% = £200 pa. These fee numbers are not massive.

I expect many SJP Advisers don't realise the 3%'s stop after 60 months.

Bottom line. The only things wrong with the SJP charging model are :

1. their complete inability to explain it properly
2. the fact that their competitors hate it and think it gives SJP an unfair advantage with SJP being able to avoid taking a bite out of the clients monies initially in favour of a slightly higher ongoing charge with an EWC (this is not a redemption fee it is a temporary 'early exit' fee in lieu of having not made an up front charge). Those competitors therefore twist it round to look like a bad thing and accuse SJP of breaking redemption penalty rules (ignoring the fact that 100% of the clients money has been invested).

I think the only way to understand SJP charges is to take a specific and defined scenario and work that through.

If a client dies the whole balance of their pension is available to relatives without any EWC deduction (EWC doesn't apply on death and SJP just suck it up)

Don't invest with SJP unless you are committed to staying the course. They don't want you to do that. They have no interest in butterfly clients. Their whole model is aimed at clients staying for the duration and all the EWC / AWA malarkey is simply a safety net for them in case that doesn't happen. I expect application of the EWC is very, very, rare. Forget the "switch every 5 minutes" mentality - this isn't car insurance this is a serious long term savings arrangement.

Finally, ongoing charges. Leaving aside the EWC stuff and assuming a client stays for years, all they will actually pay is the annual fee of something like 1.9% per annum (which is basically 1% product, 0.5% adviser, 0.4% underlying fund manager). That's it. Nothing else. That is all you need to worry about. It is all taken from the underlying fund unit values so fund performance is always net of all charges. There are no 'additional fees'. The competition hate that sort of integrated fee thing too saying the breakdown of what you are paying isn't clear. Well it is really if you just ask.

SJP are not perfect. But they are huge, safe and reasonably competent. Their portfolio of funds isn't the best performing but it is more than adequate. Their charges aren't the lowest but they are far from the highest. You always have comeback if something goes wrong.

Edited by OddCat on Thursday 31st October 08:39

Edited by OddCat on Thursday 31st October 08:40

[JulianPH]

I am obviously not going to share the details of a private individual here, but he has indeed found out he is paying an initial charges on his contributions as well as facing an exit penalty.

SJP's website state:

Initial advice charge of 4.5%

Annual advice charge of 0.5%

Initial product charge of 1.5%

Annual product charge of 1% (waived for the first 6 years)

Then of course the fund charges on top of this (I can't see these disclosed anywhere).

So there is clearly a 6% initial charge and a 1% early exit charge, but its statement on the exit charge goes at odds with what else I have heard/read.

It is also worth remembering that its pension funds also have a 5% bid/offer spread.

Adding this to the equation give an effective 11% initial charge!

Perhaps someone from SJP could elaborate further here...?

[OddCat]

JulianPH said:

I am obviously not going to share the details of a private individual here, but he has indeed found out he is paying an initial charges on his contributions as well as facing an exit penalty.

SJP's website state:

Initial advice charge of 4.5%

Annual advice charge of 0.5%

Initial product charge of 1.5%

Annual product charge of 1% (waived for the first 6 years)

Then of course the fund charges on top of this (I can't see these disclosed anywhere).

So there is clearly a 6% initial charge and a 1% early exit charge, but its statement on the exit charge goes at odds with what else I have heard/read.

This is a perfect example of how SJP confuse what is a simple issue. The initial charge is notional and is offset by the waiving of the product fee for the first six years which, admittedly, is a stupid way of describing it. Basically they mean they don't charge the Product Fee for six years but charge an initial fee of 6% instead at an identical 1% per year (one replacing the other) so the fee is effectively paid over six years but the Product Fee is waived in the same period. It is a tax thing I suspect where if SJP call it an Initial Advice Fee they pay less tax on the revenue than they would if they called it a Product Fee. What matters is that no physical initial charge upfront is actually 'taken'. Which is why I say you need a real example. And, luckily, you have one.

If you look at the clients SJP Wealth Account statement (which he should be able to self generate online or get from his SJP Adviser in 30 seconds flat) it will show total of actual contributions made (or transfers in) and that these were 100% invested. So the total invested will be identical to the amount paid in - ie no deduction for charges.

The only fees he will be paying are those built into the investment return (see below)

JulianPH said:

It is also worth remembering that its pension funds also have a 5% bid/offer spread.

No they don't. They are all single price units.

JulianPH said:

Adding this to the equation give an effective 11% initial charge!

No it isn't. Honestly, it isn't.

You will find that your client has physically paid no initial fee whatsoever. And that the only thing he is paying is between 1.9% and 2.1% depending on which funds (or portfolio) he is invested. Which is 1% Product fee (called Advice Fee for the first six years), 0.5% ongoing advice fee and between 0.4% and 0.6% for the underlying investment fund AMC's. That is literally all he will really be physically paying and it will all be debited within the investment return so his investment return is automatically net of all fees.

Edited by OddCat on Thursday 31st October 10:30

[JulianPH]

OddCat said:

JulianPH said:

I am obviously not going to share the details of a private individual here, but he has indeed found out he is paying an initial charges on his contributions as well as facing an exit penalty.

SJP's website state:

Initial advice charge of 4.5%

Annual advice charge of 0.5%

Initial product charge of 1.5%

Annual product charge of 1% (waived for the first 6 years)

Then of course the fund charges on top of this (I can't see these disclosed anywhere).

So there is clearly a 6% initial charge and a 1% early exit charge, but its statement on the exit charge goes at odds with what else I have heard/read.

This is a perfect example of how SJP confuse what is a simple issue. The initial charge is notional and is offset by the waiving of the product fee for the first six years which, admittedly, is a stupid way of describing it. Basically they mean they don't charge the Product Fee for six years but charge an initial fee of 6% instead at an identical 1% per year (one replacing the other) so the fee is effectively paid over six years but the Product Fee is waived in the same period. It is a tax thing I suspect where if SJP call it an Initial Advice Fee they pay less tax on the revenue than they would if they called it a Product Fee. What matters is that no physical initial charge upfront is actually 'taken'. Which is why I say you need a real example. And, luckily, you have one.

If you look at the clients SJP Wealth Account statement (which he should be able to self generate online or get from his SJP Adviser in 30 seconds flat) it will show total of actual contributions made (or transfers in) and that these were 100% invested. So the total invested will be identical to the amount paid in - ie no deduction for charges.

The only fees he will be paying are those built into the investment return (see below)

JulianPH said:

It is also worth remembering that its pension funds also have a 5% bid/offer spread.

No they don't. They are all single price units.

JulianPH said:

Adding this to the equation give an effective 11% initial charge!

No it isn't. Honestly, it isn't.

You will find that your client has physically paid no initial fee whatsoever. And that the only thing he is paying is between 1.9% and 2.1% depending on which funds (or portfolio) he is invested. Which is 1% Product fee (called Advice Fee for the first six years), 0.5% ongoing advice fee and between 0.4% and 0.6% for the underlying investment fund AMC's. That is literally all he will really be physically paying and it will all be debited within the investment return so his investment return is automatically net of all fees.

Edited by OddCat on Thursday 31st October 10:30

That simply makes no sense whatsoever!

SJP pension charges:

https://www.sjp.co.uk/charges/pensions-charges

SJP bid/offer spread:

[OddCat]

JulianPH said:

That simply makes no sense whatsoever!

I never promised it would make sense. I'm just telling you how it works in practice.

JulianPH said:

SJP pension charges:

https://www.sjp.co.uk/charges/pensions-charges

SJP bid/offer spread:

There is no bid / offer spread applied within SJP products. Perhaps there is if you try to buy those funds in an external arrangement (although I can't imagine anyone doing that).

The above demonstrates SJP's challenge to a tee. They find it impossible to describe what actually happens and it ends up as a mess of over complicated convoluted explanations.

Basically, they waive the initial fee in favour of a higher ongoing fee (maybe 0.5% higher than some alternatives that do charge an up front fee but then a lower ongoing fee) but they operate a sliding scale clawback to make sure they aren't shafted (imagine doing a fee free DB transfer only for the client to up sticks and move to another provider after six months).

Just get your client to provide you with a Wealth Account statement / summary so you can see that 100% of contributions have been invested and also get him to ask his SJP Adviser for a comprehensive breakdown of what physical fees he has paid since inception (type, amount etc). Then you will see....

[tighnamara]

OddCat said:

Just to be absolutely clear, the 5 year thing applies to 'regular' contributions only - not to 'ad hoc' or 'single' ones which are subject to a specific separate advice and suitability report will have the 6 year EWC applied individually.

Obviously, even with the EWC applying to the first 5 years only it still means the last one (month 60) will have an EWC until month 132 (its own mini 6 year EWC)

But how much is the EWC really ? Take a £1,000 pm regular contribution scenario where the first contribution has a sliding scale 6 year 6%, 5%, 4% etc EWC. It also has a 7.5% cumulative Annual Withdrawal Allowance (AWA). So, in year 6 it has a 1% EWC but 60% (7.5% x 6) is AWA. Let's say it has grown tk £1,250. So the EWC on that single first month contibution is £1,250 x 40% x 1% = £5. So 60% of the balance of that one premium is EWC free at that point and in year 7 there is no EWC applied to that £1,250. It is possible to create a spreadsheet to forecast the hypothetical EWC. It's really not a whole hill of beans. And who withdraws the whole balance that soon anyway ? Especially relative to the usual up front fee that the client didn't incur in the first instance.

I think it was in the Key Facts for the plan when I took mine out but, in typical hopeless SJP style, was as clear as mud. This genuinely appears to be because whoever writes their material is retarded - and eally not because they are trying to hide behind complexity. The advisers receive a fee for each regular contribution for the first 5 years - but nothing on contributions thereafter. Thus SJP don't have the same costs (paying the Adviser) from contribution 61 onwards. Hence no need for an EWC on contributions after that point as SJP have no need for a cost recovery claw back (which is what the EWC is) from month 61 onwards.

How would this have helped ? If they'd explained it properly might you have remained with them? I suspect that is a common thing. People leave because they don't understand the charges and SJP are incapable of explaining them (and their true effects). Especially individual advisers. Ridiculous really and a shame.

EDIT : have looked at my Key Features document (SJP Retirement Account) and it says things like If you make a regular investment, the cost of our initial advice and services will be 4.5% of the amount you invest over the first five years. For example, if you invest £500 per month, the charge will be £1,350 . Basically, the whole EWC thing is aimed at SJP clawing back the Initial Advice Fee (set up charges including the Advisers 3% paid by SJP to the Adviser) if the client doesn't stick around long enough for it to have been worthwhile not charging them up front.

The Key Features document also says For single investments and amounts invested in the first five years of a regular investment , the annual product management charge will be waived for the first six years that each contribution is invested . Again referencing a 5 year limit.

Basically, on normal charging terms (these can be reduced in some cases but let's ignore that) an SJP Adviser gets a payment from SJP of 3% of any pension contribution made. In the case of regular contributions they get 3% of what is calculated as the first 5 years worth. So, if you take out a pension at £500 per month the Adviser gets £500 x 12 x 5 x 3% = £900. If you stop your contributions he will suffer a proportional claw back. He can, alternatively, take the 3% of each contribution as it happens (£15 a month for 60 months = the same £900) but if you stop his £15 per month will simply stop but he won't suffer a clawback. Obviously, they are also receiving their ongoing fund based fee which is usually 0.5% of the amount invested which of course grows over time. A £500 pm investment would be worth, say, £40k after 5 years so at that point the Adviser will be getting £40,000 x 0.5% = £200 pa. These fee numbers are not massive.

I expect many SJP Advisers don't realise the 3%'s stop after 60 months.

Bottom line. The only things wrong with the SJP charging model are :

1. their complete inability to explain it properly
2. the fact that their competitors hate it and think it gives SJP an unfair advantage with SJP being able to avoid taking a bite out of the clients monies initially in favour of a slightly higher ongoing charge with an EWC (this is not a redemption fee it is a temporary 'early exit' fee in lieu of having not made an up front charge). Those competitors therefore twist it round to look like a bad thing and accuse SJP of breaking redemption penalty rules (ignoring the fact that 100% of the clients money has been invested).

I think the only way to understand SJP charges is to take a specific and defined scenario and work that through.

If a client dies the whole balance of their pension is available to relatives without any EWC deduction (EWC doesn't apply on death and SJP just suck it up)

Don't invest with SJP unless you are committed to staying the course. They don't want you to do that. They have no interest in butterfly clients. Their whole model is aimed at clients staying for the duration and all the EWC / AWA malarkey is simply a safety net for them in case that doesn't happen. I expect application of the EWC is very, very, rare. Forget the "switch every 5 minutes" mentality - this isn't car insurance this is a serious long term savings arrangement.

Finally, ongoing charges. Leaving aside the EWC stuff and assuming a client stays for years, all they will actually pay is the annual fee of something like 1.9% per annum (which is basically 1% product, 0.5% adviser, 0.4% underlying fund manager). That's it. Nothing else. That is all you need to worry about. It is all taken from the underlying fund unit values so fund performance is always net of all charges. There are no 'additional fees'. The competition hate that sort of integrated fee thing too saying the breakdown of what you are paying isn't clear. Well it is really if you just ask.

SJP are not perfect. But they are huge, safe and reasonably competent. Their portfolio of funds isn't the best performing but it is more than adequate. Their charges aren't the lowest but they are far from the highest. You always have comeback if something goes wrong.

Edited by OddCat on Thursday 31st October 08:39

Edited by OddCat on Thursday 31st October 08:40

Thanks for the detailed reply.

Unless I have missed it above, what happens when you increase your monthly payment with SJP, does the 6 year countdown still start on that new investment ?

I have been away from SJP for around 6 years now so the Key Features document may have changed in the wording. (think I have a copy at home, will try and dig it out)

I had a pension plan with SJP, paid x into the plan and depending on how finances were I would increase the monthly amount every other year or so.

It turned out that each time I increased the monthly amount they gave it a new plan which kicked off the 6 year again (even though I was already invested in a pension with them). This additional exit charges on increased investment was never made clear until I started questioning the service being provided and what the exit charges were on my fund value.

This may be normal and I am missing something but was one of the reasons I took a hit and paid to get out as soon as I could. I could have left the money invested with them to remove the exit charges but they left a massive sour taste with me .


Question to SJP

4.Why does an increase in a monthly payment require a new Retirement Plan, I find it strange that this requires a new plan other than to start the 6 year countdown on the exit charges. Is this the normal in the industry? This was never pointed out when making an increase from £1000 per month to £1500 per month.

SJP Answer

The exit charge process is simply a way of building in a structure to the plan that allows payment for the variety of costs experienced by any firm that manufactures and distributes these types of products. The way in which these charges are constructed can vary however the method used on our regular contribution retirement products allows for money invested early to enjoy full growth potential over the full length of the plan. Other providers may well strip out these charges by way of a “charge spread” on early regular or lump sum payments and therefore allow no period in which the full sum invested can enjoy any potential growth. These charges would have been clearly outlined in the documentation provided at the time and are not unique to our industry. In comparative terms they are certainly not excessive.

[OddCat]

tighnamara said:

Thanks for the detailed reply.

Unless I have missed it above, what happens when you increase your monthly payment with SJP, does the 6 year countdown still start on that new investment ?

Things are perhaps a little different now. But, fundamentally, if you increase a regular contribution (having been through an advice process to do so) then, yes, I think the extra would still be considered 'new money' (and would be allocated to a new 'tranche') and subject to its own new EWC period. Like as if it were a brand new regular contribution.

The thing is though that you aren't paying an up front fee (nor a bid / offer spread fee as mentioned above) so the only way SJP can recover the initial costs is if you stay for at least six years or you pay them an exit fee during that period. In year one they need to get 6% to beak even. In year 2 they have had the 1% (annual Product Fee although called something else for the first 6 years) so they only need 5% to break even etc.

Depending how old you are, when you need to access your pension monies, and how much income you need from your fund (assuming drawdown not an old style annuity), it is highly unlikely that anyone will ever pay any Early Withdrawal Charge. Especially given the Annual Withdrawal Allowance and the fact that the earliest contributions will drop off the EWC radar and SJP will always take withdrawals from the monies with least (or usually no) EWC. They really do treat each contribution as a separate thing with its own unique EWC / AWA arrangement. If you are 445 and start a £3,000 per month pension then by the time you get to 55 this EWC / AWA malarkey is all history and irrelevant.

Just out of interest, what was the value of your fund and how much EWC did you pay on transfer ?

One last thing. The SJP income is essentially only the 1% pa Product Fee. And will only ever be that. The rest of the 1.9% ongoing AMC is 0.5% to the adviser and 0.4% (ish) to the fund managers. The fact that they 'waive' this (which they don't because they still charge 1% but it is considered to be re-imbursement of the initial 6% fee that they didn't actually physically charge and is only called a Product Fee from year seven onwards) means they don't actually book a profit on a client until year seven. I believe they have a whole waves of clients from the last six years for whom profits will gradually properly start to come on line each year in tranches. In 2019 it will be clients whose plans started in 2012/13 where the 1% annual fee will become a true Product Fee as re-imbursement of the original 6% will have completed. The EWC merely completed the six year re-imbursement if a client ups and leaves before the end of year six directly proportional to the number of 1% years SJP have managed to retrieve before exit.

I think a lot of people misunderstand this whole thing and that is completely understandable given the massively over complex way in which SJP present it. If you strip out that complexity, and look at (and understand) what is really happening, you find it is quite bland and simple.

I suspect you would have been fine staying but I completely understand why you didn't.

[Derek Chevalier]

OddCat said:

In year 2 they have had the 1% (annual Product Fee although called something else for the first 6 years) so they only need 5% to break even etc.

Surely the "break even" is dependent on the amount of time and work to provide the advice in the first instance.

The fact that so many people are unclear on the structure means the charging model is overly complicated IMO.