Having to self manage funds within an ISA

[Ozzie Osmond]

JulianPH said:

These days, nothing whatsoever. Today every pension you can open allows you (or your adviser) to self select the investment(s) to be held within in it. So there really is no difference any more and it is semantics.

Thanks, I thought that was probably the case although some of the posts in this thread had me wondering.

JulianPH said:

Put your investment requirements first and then select the best SIPP or PP to go with it. Don't let the tax tail wag the investment dog...

What I do is run a single investment strategy across everything while using the tax wrappers to maximise efficiency. Probably a number of us on here are doing something similar.

[Ginge R]

The big difference is price. 0.4% pa for a personal pension versus the higher (1.4%?) cost of a SIPP really adds up over 30 years. As does the fact it can be left to run, pretty much from year to year if you don't have any drastic life changing events.

[JulianPH]

Ozzie Osmond said:

What I do is run a single investment strategy across everything while using the tax wrappers to maximise efficiency. Probably a number of us on here are doing something similar.

That is exactly the way to do it. If the investment is right then the tax wrapper (PP/SIPP/ISA) is only going to enhance this. If the investment strategy is right the wrappers will enhance your returns.

[JulianPH]

Ginge R said:

The big difference is price. 0.4% pa for a personal pension versus the higher (1.4%?) cost of a SIPP really adds up over 30 years. As does the fact it can be left to run, pretty much from year to year if you don't have any drastic life changing events.

We have always acted with respect for each other, but I am starting to get a bit miffed now.

A SIPP can be completely free just as a PP can be. This does not give either of them any value though.

Show me a full breakdown of a 0.4% pension and I will show you the additional costs. How you have determined that a SIPP costs 1% more is completely beyond me. What are your assumptions?

Given you are selling a Parminion DFM solution that comes with a free SIPP (limited to Parmenion investments only) I can't work out why you are so anti-SIPP here.

I ask out of interest, rather than anything else. I'm hoping this could be insightful.

[Ozzie Osmond]

Ginge R said:

The big difference is price. 0.4% pa for a personal pension versus the higher (1.4%?) cost of a SIPP really adds up over 30 years.

My SIPP with one of the biggest names in the retail business costs 0.25% Yes, this is in the context of some economies of scale from their point of view.

I just checked the standard retail prices charged by Hargreaves Lansdown for their SIPP and they look pretty reasonable,

• Charge of 0.45% for a SIPP from £0 to £250,000

• 0.25% for anything above £250,000 (up to £1m and further reductions after that).

[Ginge R]

JulianPH said:

We have always acted with respect for each other, but I am starting to get a bit miffed now.

A SIPP can be completely free just as a PP can be. This does not give either of them any value though.

Show me a full breakdown of a 0.4% pension and I will show you the additional costs. How you have determined that a SIPP costs 1% more is completely beyond me. What are your assumptions?

Given you are selling a Parminion DFM solution that comes with a free SIPP (limited to Parmenion investments only) I can't work out why you are so anti-SIPP here.

I ask out of interest, rather than anything else. I'm hoping this could be insightful.

Here's a quick screen shot of my updated due diligence currently going out to my providers, you can't see how long it is from that, but it's close to five sides of A4. I'm quite familiar with costs and charges, especially weeding out the opaque ones. Here's an idea. You send me details of a SIPP provider you have in mind, and I'll request and publish the data side by side, with three other SIPP and four Personal Pension providers.. for objective scrutiny. How's that? I'll also input it into the research software I pay (far too much for) each month. Does that sound like a plan?

I'm not anti SIPP at all. I'm anti SIPP when it's sold to the wrong person for the wrong reasons. We all know that many SIPP providers make a margin through trading and in other ancillary areas. I am in no doubt whatsoever that the vast majority of folk who hold a SIPP would be better served by a PP. And not just for cost. But also performance and functionality. The majority probably hardly ever make meaningful and beneficial change (they know better than a gifted and well regarded manager?) and most of them hardly make changes at all.

In fact, Fidelity has (apocryphal?) research that suggests its most successful DIY investors were either dead or had forgotten about their accounts. Which SIPP is free? I don't know of any product in a pension wrapper that's genuinely free (who pays the trustees, regulation, various levies etc?). Anyway, are we up for the 'challenge'? I'd be keen to add to my list if I've missed any areas that you can add.

[Ginge R]

Ozzie Osmond said:

My SIPP with one of the biggest names in the retail business costs 0.25% Yes, this is in the context of some economies of scale from their point of view.

I just checked the standard retail prices charged by Hargreaves Lansdown for their SIPP and they look pretty reasonable,

• Charge of 0.45% for a SIPP from £0 to £250,000

• 0.25% for anything above £250,000 (up to £1m and further reductions after that).

Sure, but 0.4% for the PP can also include funds, management, paper (!) reporting, rebalancing, switches etc etc etc. The HL (and I have huge respect for them) SIPP also comes with a further 0.45% fund holding charge, a fund charge of, say 0.5-0.85% plus dealing costs etc. Three a month will cost you c.£35 a month.

http://www.hl.co.uk/__data/assets/pdf_file/0015/37...

For the right saver, that might be perfect. And that's great.

[JulianPH]

Ginge R said:

I am in no doubt whatsoever that the vast majority of folk who hold a SIPP would be better served by a PP. And not just for cost. But also performance and functionality.

Hi Al,

This is becoming madness to me. I'll ignore the bit about the most successful DIY investors being dead people...

With a PP you are limited to the investment choices available (and often retirement options). How can you suggest this makes for better functionality and performance?

The Royal London "PP" you are talking about is actually, guess what? A SIPP!!! It offers full SIPP functionality into any HMRC approved asset classes (for an eye watering price). It is not a PP at all.

Also, you go on about it costing 0.4% a year. Really? Their charges are as clear as a sheet of lead and you have to jump through many different documents to begin to start, but this is what I have discovered so far:

All clients have a 1% annual charge but you could pay more or less than this depending on where - and how much - you have invested. This is achieved by either adding or cancelling units each month. Very transparent then!

You get a discount from this charge the more you have invested.

But it does not properly disclose the costs of the (core) investments themselves. I tried to find some individual fund information and the first I was able to access was their property fund.

One document says it has a 1% AMC and a 1% TER with 0% investment expenses. Another shows a 0.75% AMC with a 0.9% TER and a 0.8% PER on top of this - totalling 1.7%.

Whatever the real case is, you need to find another document to find out it has a massive 7.3% bid/offer spread! That is effectively a 7.3% initial charge.

So assuming you had the £184,000 - £615,000 to get the 0.6% discount off the annual charge you wouldn't be paying 0.4%, you would be paying 7.3% up front and 1.1% a year.

I realise that this in relation to just one property fund, but the principle applies across the board. The headline charges are not the full costs by a long stretch.

You have also asked for an example of a free SIPP. How about we start with Parmenion (the company you use for fiveraday.co.uk) and their free SIPP (restricted to their investments only).

Anyway, I'm sure my point is clear: You are "in no doubt whatsoever that the vast majority of folk who hold a SIPP would be better served by a PP" and you highlight this by comparing SIPPs to a Royal London SIPP!

As I have said before, it is all semantics anyway. There is no difference these days other than investment restrictions/availability.

There is still one major point I have not raised before;

Insurance companies = Hidden charges at every level that are difficult to spot and the fact my money sits on their balance sheet, so if they fail I am left taking the hit (Equitable Life...!).

SIPP Providers = All charges stated in black and white and my money is ring-fenced under Trust - so if they fail my money is safe.

Anyway, that's my tuppence worth!

[Jockman]

We moved PPs into SIPPs to put our Commercial Property in. Should we just have left them as PPs ?

[Ozzie Osmond]

Ginge R said:

Sure, but 0.4% for the PP can also include funds, management, paper (!) reporting, rebalancing, switches etc etc etc. The HL (and I have huge respect for them) SIPP also comes with a further 0.45% fund holding charge, a fund charge of, say 0.5-0.85% plus dealing costs etc. Three a month will cost you c.£35 a month.

Take a look at the what the big boys of SIPP are really offering - both HL and Fidelity - you may find it a real eye-opener just how much is included within their "no hidden charges" fee structure. They can be highly competitive these days.

[sidicks]

JulianPH said:

Insurance companies = Hidden charges at every level that are difficult to spot and the fact my money sits on their balance sheet, so if they fail I am left taking the hit (Equitable Life...!).

That comment suggests you don't understand the unit-linked regulation for insurance companies or the Equitable Life situation!

[JulianPH]

sidicks said:

JulianPH said:

Insurance companies = Hidden charges at every level that are difficult to spot and the fact my money sits on their balance sheet, so if they fail I am left taking the hit (Equitable Life...!).

That comment suggests you don't understand the unit-linked regulation for insurance companies or the Equitable Life situation!

No it doesn't! It means I understand I am at the mercy of a hopelessly underfunded FSCS should something go wrong with an insurer. I prefer the idea of my money being held in Trust off the balance sheet of my provider, that's all.

[Ginge R]

JulianPH said:

Hi Al,

This is becoming madness to me. I'll ignore the bit about the most successful DIY investors being dead people...

With a PP you are limited to the investment choices available (and often retirement options). How can you suggest this makes for better functionality and performance?

The Royal London "PP" you are talking about is actually, guess what? A SIPP!!! It offers full SIPP functionality into any HMRC approved asset classes (for an eye watering price). It is not a PP at all.

Also, you go on about it costing 0.4% a year. Really? Their charges are as clear as a sheet of lead and you have to jump through many different documents to begin to start, but this is what I have discovered so far:

All clients have a 1% annual charge but you could pay more or less than this depending on where - and how much - you have invested. This is achieved by either adding or cancelling units each month. Very transparent then!

You get a discount from this charge the more you have invested.

But it does not properly disclose the costs of the (core) investments themselves. I tried to find some individual fund information and the first I was able to access was their property fund.

One document says it has a 1% AMC and a 1% TER with 0% investment expenses. Another shows a 0.75% AMC with a 0.9% TER and a 0.8% PER on top of this - totalling 1.7%.

Whatever the real case is, you need to find another document to find out it has a massive 7.3% bid/offer spread! That is effectively a 7.3% initial charge.

So assuming you had the £184,000 - £615,000 to get the 0.6% discount off the annual charge you wouldn't be paying 0.4%, you would be paying 7.3% up front and 1.1% a year.

I realise that this in relation to just one property fund, but the principle applies across the board. The headline charges are not the full costs by a long stretch.

You have also asked for an example of a free SIPP. How about we start with Parmenion (the company you use for fiveraday.co.uk) and their free SIPP (restricted to their investments only).

Anyway, I'm sure my point is clear: You are "in no doubt whatsoever that the vast majority of folk who hold a SIPP would be better served by a PP" and you highlight this by comparing SIPPs to a Royal London SIPP!

As I have said before, it is all semantics anyway. There is no difference these days other than investment restrictions/availability.

There is still one major point I have not raised before;

Insurance companies = Hidden charges at every level that are difficult to spot and the fact my money sits on their balance sheet, so if they fail I am left taking the hit (Equitable Life...!).

SIPP Providers = All charges stated in black and white and my money is ring-fenced under Trust - so if they fail my money is safe.

Anyway, that's my tuppence worth!

Not madness at all, and a belting tuppence worth it is, btw. By contrast, check *this* madness out..!

http://twocents.lifehacker.com/the-best-investors-...

The standard, in this instance, RL charge is close to 1%, but it drops with fund size.. as do many. In this instance, a fund size of, I think we said, £100,000, reduces that to 0.4%. Is it better for someone with no funds? No. And I would, and do, suggest other options. The property fund is offered via many routes to market.. not in that which I refer to. Certainly not at those costs.

I have never said a PP is worse, or better, than a SIPP. I have said that a SIPP is invariably sold by thoughtless and sometimes, indifferent practice, to the wrong people in the wrong circumstances. And I stand by that. The RL PP has the SIPP trustee functionality to up its game, but if a business owner wanted to gear into, for instance, commercial property, I wouldn't suggest it. I would choose a proper SIPP, SSAS etc, anyway.

I don't use the Parmenion SIPP for Fiver a Day. I'd like to, if the numbers work out. We'll see. It's not free, and I would never suggest that it is. Once (if/when) I roll it out, that will be made clear. Royal London is a mutual. It's not a Equitable Life, but I'm sure you didn't mean to confuse the two. On the other hand, there's a plethora of niche SIPP out there, coming increasingly under the regulatory spotlight. Rightly so, in my opinion. I'm sure we'd agree that compliancy certainty and safety is vital.

I have never, ever, had a client cancel or switch investments with a RL pension. If a client wants investment choice, if they know what they are doing, then I suggest a SIPP that has functionality to match expectations. For the vast majority of folk, who don't really know what they're doing, a PP is perfect. I wonder how many SIPP investors match their circumstances to fund Alpha, Beta, etc. In my estimation, not many.

The funds I showed, and yes, RL offers hundreds, don't have those bid offer spreads. For a vanilla client, someone with a fund size to warrant the choice, something like RL is the best choice. Such is the benefit of vibrant discourse. Let's get that test set up - if you know any SIPP that I can add to my research, let's do it. We can grab that beer at the same time. I'm keen to make this as objective, as honest and as open as possible, so let's collaborate properly on it. Do we have a plan?!

[Ginge R]

JulianPH said:

No it doesn't! It means I understand I am at the mercy of a hopelessly underfunded FSCS should something go wrong with an insurer. I prefer the idea of my money being held in Trust off the balance sheet of my provider, that's all.

I'm sure that you know, but to clarify, client money (with any pension company like this) in a fluent account is held separately from cash belonging to Royal London, or another insurer. In fact, banks they use must acknowledge that money is held as client money. Are you getting confused with Master Trusts?

[Ginge R]

Ozzie Osmond said:

Take a look at the what the big boys of SIPP are really offering - both HL and Fidelity - you may find it a real eye-opener just how much is included within their "no hidden charges" fee structure. They can be highly competitive these days.

Ozzie,

Don't necessarily disagree mate. I'm not anti SIPP, I'm anti bad recommendation and choice, that's all.

[sidicks]

JulianPH said:

No it doesn't! It means I understand I am at the mercy of a hopelessly underfunded FSCS should something go wrong with an insurer. I prefer the idea of my money being held in Trust off the balance sheet of my provider, that's all.

Still untrue

1. Unit-linked funds have to be matched by the underlying assets and ring-fenced.
2. The Equitable life situation was nothing to do with unit-linked policies - how much did unit-linked policyholders lose? Zero.

[Ozzie Osmond]

Ginge R said:

Don't necessarily disagree mate. I'm not anti SIPP, I'm anti bad recommendation and choice, that's all.

[Ginge R]

back atcha. Alas, it's more likely to be Prosecco here in half an hour I think. I have some JD in strategic reserve though.

[JulianPH]

Ginge R said:

Not madness at all, and a belting tuppence worth it is, btw. By contrast, check *this* madness out..!

http://twocents.lifehacker.com/the-best-investors-...

The standard, in this instance, RL charge is close to 1%, but it drops with fund size.. as do many. In this instance, a fund size of, I think we said, £100,000, reduces that to 0.4%. Is it better for someone with no funds? No. And I would, and do, suggest other options. The property fund is offered via many routes to market.. not in that which I refer to. Certainly not at those costs.

I have never said a PP is worse, or better, than a SIPP. I have said that a SIPP is invariably sold by thoughtless and sometimes, indifferent practice, to the wrong people in the wrong circumstances. And I stand by that. The RL PP has the SIPP trustee functionality to up its game, but if a business owner wanted to gear into, for instance, commercial property, I wouldn't suggest it. I would choose a proper SIPP, SSAS etc, anyway.

I don't use the Parmenion SIPP for Fiver a Day. I'd like to, if the numbers work out. We'll see. It's not free, and I would never suggest that it is. Once (if/when) I roll it out, that will be made clear. Royal London is a mutual. It's not a Equitable Life, but I'm sure you didn't mean to confuse the two. On the other hand, there's a plethora of niche SIPP out there, coming increasingly under the regulatory spotlight. Rightly so, in my opinion. I'm sure we'd agree that compliancy certainty and safety is vital.

I have never, ever, had a client cancel or switch investments with a RL pension. If a client wants investment choice, if they know what they are doing, then I suggest a SIPP that has functionality to match expectations. For the vast majority of folk, who don't really know what they're doing, a PP is perfect. I wonder how many SIPP investors match their circumstances to fund Alpha, Beta, etc. In my estimation, not many.

The funds I showed, and yes, RL offers hundreds, don't have those bid offer spreads. For a vanilla client, someone with a fund size to warrant the choice, something like RL is the best choice. Such is the benefit of vibrant discourse. Let's get that test set up - if you know any SIPP that I can add to my research, let's do it. We can grab that beer at the same time. I'm keen to make this as objective, as honest and as open as possible, so let's collaborate properly on it. Do we have a plan?!

What is the average bid/offer spread and TER/real ongoing costs on an average RL fund? Say for a global managed portfolio? I can't find out!!!

Can you tell me which PP is better than a SIPP for most people (as the RL PP is actually a SIPP not a PP)? Or can we just agree there really is no difference between the names any more?!!

Having the ability to access all permitted investments/asset classes doesn't make a PP a SIPP. Equally denying access to large swaths of investments/asset classes doesn't make a SIPP a PP. It is whether there is the ability to self select (by the client or their adviser/DFM) the underlying investments that turns a PP into a SIPP.

My whole point is that there is no difference these days between a PP and a SIPP. There is, however, still a big difference between SIPP provider disclosure of cost and the approach insurance companies take.

Go on then, take Parmenion and Intelligent Money and compare them to RL and Standard Life (to quickly pull a big name out of a hat!). Assume the same client circumstances (someone with 20 years remaining an a £100,000 fund - nothing else to complicate matters) and let's see the illustration (including RIY for both).

Then let's question all the charges taking every undisclosed factor into account. If the life insurance companies offer the best solution (factoring in cost, functionality and performance - the points you raise) and if the SIPP really does costs 1% a year more (the figure you gave) I will pay a fiveraday to the charity of your choice for a year and you buy me a beer. If the SIPP(s) work out better, then the situation is reversed (SCOPE for me, by the way).

I can't be fairer than that!

[Ginge R]

I could do, but I'm in the garden having a few drinks and if I spend any more time on this, I'm going to get my nuts chopped off. Catch up later, off piste, lets grab that beer and produce the results.