Pension Fees - Workplace Pension Vs SIPP
Discussion
Hi,
My workplace pension is with Standard Life and invested in Vanguards FTSE Developed World ex-UK Pension Fund. I also have a Vanguard ISA where I am invested in the FTSE Developed World ex-U.K. Equity Index Fund. Fees on both are as follows:
- SL Pension - 0.737% (supposedly 1.017% discounted by 0.280%).
- ISA - 0.29% (0.14 fund charge and 0.15% account fee).
With the above in mind, I am thinking of opening a SIPP with Vanguard and doing two things:
1) Transfer my pension tax rebate I have just received into the Vanguard SIPP and Vanguards FTSE Developed World ex-UK Pension Fund (rather than stick it in my workplace pension as previously intended).
2) Reduce my 11% workplace contribution to the minimum 5% (employer only pays up to a maximum of 5% currently) and instead contribute the equivalent amount also into the Vanguard SIPP & Vanguards FTSE Developed World ex-UK Pension Fund.
Given the fee difference, this seems logical to me but whilst I am continually educating myself on all things personal finance there is every chance I have missed something obvious to others?
Is Standard lifes fee hiding some invaluable service that I shall be missing out on or is it just to cover the cost of them giving me a call when i near retriement age to ask if I'd like to reduce my risk a little?
Could anyone confirm whether my proposals are sensible?
Thanks.
My workplace pension is with Standard Life and invested in Vanguards FTSE Developed World ex-UK Pension Fund. I also have a Vanguard ISA where I am invested in the FTSE Developed World ex-U.K. Equity Index Fund. Fees on both are as follows:
- SL Pension - 0.737% (supposedly 1.017% discounted by 0.280%).
- ISA - 0.29% (0.14 fund charge and 0.15% account fee).
With the above in mind, I am thinking of opening a SIPP with Vanguard and doing two things:
1) Transfer my pension tax rebate I have just received into the Vanguard SIPP and Vanguards FTSE Developed World ex-UK Pension Fund (rather than stick it in my workplace pension as previously intended).
2) Reduce my 11% workplace contribution to the minimum 5% (employer only pays up to a maximum of 5% currently) and instead contribute the equivalent amount also into the Vanguard SIPP & Vanguards FTSE Developed World ex-UK Pension Fund.
Given the fee difference, this seems logical to me but whilst I am continually educating myself on all things personal finance there is every chance I have missed something obvious to others?
Is Standard lifes fee hiding some invaluable service that I shall be missing out on or is it just to cover the cost of them giving me a call when i near retriement age to ask if I'd like to reduce my risk a little?
Could anyone confirm whether my proposals are sensible?
Thanks.
A couple more things to consider..........
What are the fees on the Vanguard SIPP - are they the same as the ISA or more? A SIPP is normally a more complex and expensive product to administer than an ISA, so may have higher charges (it might not).
Your workplace pension may have some kind of 'Large Fund Discount' that could reduce your charges at certain thresholds such as £50k in the plan. If you divert money and have it with a different provider you could lose out on this. I'm not sure if Vanguard have any sort of bonus, or if it could apply to money across different tax wrappers (ISA and SIPP).
What are the fees on the Vanguard SIPP - are they the same as the ISA or more? A SIPP is normally a more complex and expensive product to administer than an ISA, so may have higher charges (it might not).
Your workplace pension may have some kind of 'Large Fund Discount' that could reduce your charges at certain thresholds such as £50k in the plan. If you divert money and have it with a different provider you could lose out on this. I'm not sure if Vanguard have any sort of bonus, or if it could apply to money across different tax wrappers (ISA and SIPP).
Gin and Ultrasonic said:
A couple more things to consider..........
What are the fees on the Vanguard SIPP - are they the same as the ISA or more? A SIPP is normally a more complex and expensive product to administer than an ISA, so may have higher charges (it might not).
Your workplace pension may have some kind of 'Large Fund Discount' that could reduce your charges at certain thresholds such as £50k in the plan. If you divert money and have it with a different provider you could lose out on this. I'm not sure if Vanguard have any sort of bonus, or if it could apply to money across different tax wrappers (ISA and SIPP).
Thanks.What are the fees on the Vanguard SIPP - are they the same as the ISA or more? A SIPP is normally a more complex and expensive product to administer than an ISA, so may have higher charges (it might not).
Your workplace pension may have some kind of 'Large Fund Discount' that could reduce your charges at certain thresholds such as £50k in the plan. If you divert money and have it with a different provider you could lose out on this. I'm not sure if Vanguard have any sort of bonus, or if it could apply to money across different tax wrappers (ISA and SIPP).
Fees for a SIPP with Vanguard seem to be the same as with an ISA.
My workplace pension discount of 0.280% is already taken into account in the 0.737% figure quoted. I cannot see any other future discounts dependent on the amount invested.
monthou said:
I'm not an expert - far from it - but as I understand it the other advantage of paying into a workplace scheme rather than a SIPP is that you can do it via salary sacrifice, so save on national insurance.
Happy to be corrected if that's wrong.
Where I work does not currently do salary sacrifice but it is something I am involved in trying to change. I believe employers can contribute to an indivuals SIPP instead of workplace penionsHappy to be corrected if that's wrong.
David_M said:
The reason I stay with my workplace pension is that they match contributions (up to a cap), which is worth massively more than any variation in fees or returns for the time being. Don't know what your work arrangements are in that respect.
They dont match unfortunately! Something else I am also involved with trying to change. ThanksLordGrover said:
The reason I've stuck with my workplace pension is as the deduction is before tax it enables me to get below the higher tax threshold.
I'd have to significantly increase my contributions for this to work for me at my current salary so not an option for me atm. thanks.Edited by seismic22 on Tuesday 9th July 17:26
seismic22 said:
monthou said:
I'm not an expert - far from it - but as I understand it the other advantage of paying into a workplace scheme rather than a SIPP is that you can do it via salary sacrifice, so save on national insurance.
Happy to be corrected if that's wrong.
Where I work does not currently do salary sacrifice but it is something I am involved in trying to change. I believe employers can contribute to an indivuals SIPP instead of workplace penionsHappy to be corrected if that's wrong.
If there is no NI saving through salary sacrifice or employer match, the only other thing to check for is any other benefits associated with the scheme (although by and large these are associated with older schemes, not DC) - but you should check anyway.
If none of the above, it sounds like direct into a SIPP is cheaper.
If you are getting NI savings and employer contribs, I’d do a partial transfer (some schemes will have a minimum balance you need to maintain) once per year.
All above board.
If none of the above, it sounds like direct into a SIPP is cheaper.
If you are getting NI savings and employer contribs, I’d do a partial transfer (some schemes will have a minimum balance you need to maintain) once per year.
All above board.
Ok, sounds like I need to double check with Standard Life that I am not missing some invaluable service they offer and if not, then set about doing yearly partial transfers. I am involved with arranging for salary sacrifice to be an option for employees to utilise so if I can get that through I'll then be able to make some savings with salary sacrifice and some savings through the partial transfer to theVanguard SIPP with the lower fees. Thanks all.
Option 2 sounds like the sensible option.
Vanguard fees are the same for SIPP as ISA. In fact it adds up your total portfolio and if you are above £250k then the platform fees are capped at £375. Below that then it is 0.15%
So these platform fees are in addition to the investment fund fees. The SL one is total annual fee.
With option 2 you are maximising the benefit of having a work pension i.e. employer contributions and possibly some life insurance coverage via the pension fund (you need to check your employment pension scheme docs for details of the benefits).
If like you say, you are able to get the company to make the SIPP payments from your salary then that would be better then you get tax relief at source for higher rate tax (assuming you are HR tax payer).
Vanguard fees are the same for SIPP as ISA. In fact it adds up your total portfolio and if you are above £250k then the platform fees are capped at £375. Below that then it is 0.15%
So these platform fees are in addition to the investment fund fees. The SL one is total annual fee.
With option 2 you are maximising the benefit of having a work pension i.e. employer contributions and possibly some life insurance coverage via the pension fund (you need to check your employment pension scheme docs for details of the benefits).
If like you say, you are able to get the company to make the SIPP payments from your salary then that would be better then you get tax relief at source for higher rate tax (assuming you are HR tax payer).
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