Yet another pensions thread…increase work contributions or start SIPP?

@mattoutandabout 0.14-0.22% is the range of Vanguard funds.

0.65% extra compounding makes a difference.

0.14-0.22% is the range of Vanguard funds.

There will always be a platform fee on top of that, normally about 0.5%.

Basically you pay Vanguard to manage the fund (the fund fee) and someone to manage the pension that is investing in the fund (the platform fee)

And do those Vanguard funds have any trading fees or similar?

So Vanguard is around 0.64-0.72 in reality?

Whereas my Standard Life is just 0.8 as I’ve no trading fees or anything – just flat 0.8?

So the difference is closer to 0.14-0.08…?

No. Vanguard platform fee is 0.15% capped at £375

https://www.vanguardinvestor.co.uk/what-we-offer/fees-explained

In my workplace pension I have some invested in the bog standard ‘managed’ diversified growth fund – fee 0.35% and some in an international tracker – fee 0.08%. They are actually very similar in performance, struggling to see the point of the managed one at present.

“In my workplace pension I have some invested in the bog standard ‘managed’ diversified growth fund – fee 0.35% and some in an international tracker – fee 0.08%. They are actually very similar in performance, struggling to see the point of the managed one at present.”

The data would suggest you will be better off in the international tracker over the long term. 0.35% isn’t horrendous for a managed fund, but the chances of that fund outperforming a global tracker over 30+ years are not in its favour, statistically.

0.08% Is cheap for a UK domiciled global tracker. If your platform fee is included in that you’re laughing.

OP. Check out what you can do by paying into your workplace pension. Many already described by folks. These could include:

• employer contributions to AVCs
• subsidized management fees
• you will be able to make contributions from your gross pay. Perhaps a bigger amount in your pension with each deposit than you might manage from net pay into a SIPP
• Fund selection for contributions

Unless there’s a reason like terrible fund choices or high fees you may be better off with paying more into your workplace pension than administering a separate SIPP from the employer additions alone.

My provider is Aegon and its currently being paid into a “universal lifestyle collection” fund, which appears to be classed as an average risk with 70% of it going into a diversified fund. 1.03% charge.

If this is your workplace pension then I recently Did My Own Research and found a thread on Money Saving Expert that implied that workplace pensions cannot charge you more than 0.75%. If you look on your statement of benefits or whatever they call it, if it’s like mine you’ll see that they have a charge and then possibly also a rebate that drops it right back down again.

I also looked briefly at what funds I could choose other than the default one, and came to the (possibly incorrect) conclusion that none of them saved me enough in fees to make it worth the hassle and if I was going to play around with different index funds then my ISA would be the place to do it.

I also looked briefly at what funds I could choose other than the default one, and came to the (possibly incorrect) conclusion that none of them saved me enough in fees to make it worth the hassle

IANAE, but my understanding of compounding interest is that relatively small percentage changes can have significant effects on outcome.

IANAE, but my understanding of compounding interest is that relatively small percentage changes can have significant effects on outcome.

I think you’re absolutely right, but I only have the mental capacity/time to sort out one set of investments at once and because the Vanguard ISA is much easier to administer than the god-awful Aegon pension interface that’s the one I chose to look at first.

@soundninjauk a fair point.

My approach is to just do a little bit at a time to improve things.

Also it’s far better to get started than to do nothing at all for fear of doing the “wrong” thing.

Just on the costs thing, I plotted out a few suppliers for their general platform costs on Desmos.  It’s not perfect and it isn’t a complete picture of the market as I did it to cover consolidating my pensions.  There are no transaction costs in this because my need was to consolidate and park my pots without new contributions.

Notable that Interactive Investor (who market themselves as the cheapest because of their flat rate) are not the cheapest because: a) their flat rate isn’t flat; it is tiered b) their flat rate is higher than some others cap their percentage rate.  There also appears to be a tiered transaction pricing hidden in their fees so above a threshold a trade might be £40 instead of £3.99.  That’s a really sneaky bit of sharp practice.  Their costs are also insane if you get an ISA with them alongside their pension.

HL get two plot lines depending on whether you’re in stocks/ETFs or managed funds.  The funds option is the orange line that is far and away the most expensive on the graph, but it is really an all inclusive price.  Their stocks/ETFs pricing is actually quite acceptable (but trading charges are known to be high at £11.95).

https://www.desmos.com/calculator/6qi8hd3hnb

^^^ the plot is percentage of pot plotted on the y axis vs size of pot.  On this analysis, AJBell and Aviva were joint cheapest above a threshold size of ~£92,000.  (Caveat: do your own research)

Youtuber Chris Palmer does a round up of pension platform costs that he publishes as a Google Sheets spreadsheet.

https://docs.google.com/spreadsheets/d/1I04rPygSWLJhdMx8aBJuJfluhJmACtHOcJm4I9MZXuA/edit?gid=0#gid=0

I did some more digging around these and really didn’t feel the Fidelity pricing was accurate because at the bare price it is so limited it is almost inevitable you’ll incur some of the heftier costs (i.e. choice of ETFs)

Vanguard is cheap for small pots and massively expensive when they get big.

InvestEngine have not yet built the ability to transfer in (maybe October).

Halifax are sneaky bastards who invent charges when you’re accessing your pension (others don’t) so I wouldn’t want to give them the business

Some will not manage a pot in drawdown, so you’ll be transferring out at retirement.

I’m also keen on something that can be viewed on a wealth consolidation dashboard app like MoneyHub.  After all of the analysis, AJBell seem right for me, but I haven’t moved anything yet and YMMV.