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I know there's been tons of pension threads lately but thought I'd start a new one to avoid going off tangent on the other threads.
My current workplace auto-enrolled pension consists of me contributing 3%, with work contributing 5%. I'm becoming more conscious of my pension as I get older and also with all the news surrounding pensions at the moment. I'm in my late 20s so still have time on my side and want to put more into it now to try and take advantage.
My question is, would I be better increasing my workplace pension contributions and take advantage of the tax/NI relief, or to start a SIPP which I would have more control over which funds it is invested in but lose out on the relief? Not massively clued up on pensions so any advice welcome.
Depending on your current contributions (total amount and vs your earnings), i would expect you can claim tax relief on SIPP contributions too. You should get 20% at the point of contribution with any further amounts claimed through the annual tax calculation if you pay more than basic rate tax and fill in a tax return. As you note, the SIPP has advantages of diversification, flexibility and more control over the investments, but you need to have the appetite to manage your own investments.
In your 20’s, the company scheme will be directing funds towards growth rather than stability. As you near retirement age (like most of us), the investment funds switch to stability and away from stocks and share and into bonds and cash.
Personally, I would just continue in your company scheme if it’s administered by a well-known provider. If you would like a little more risk, you could put it in a tracker fund if offered by the provider. If not offered, and you are happy with a little more risk, then go for a SIPP tracker fund.
The forum pensions evangelist checks in...
Check whether your work will do any matching of additional contributions - many do. If so, upping your work contributions is a no-brainer. There's also probably an NI saving if it's done via salary sacrifice.
To be honest, upping your work contributions is a no-brainer anyway. Someone will be along in a minute to tell you to open a SIPP so you can actively manage your own portfolio and they've made a killing in Guatemalan cucumber futures yadda yadda yadda, but unless you're actually going to be an active investor (and the overwhelming chances are you won't), then it's a waste of time.
Your age?
Your tax band?
Your employer?
Your health?
If you increase salary sacrifice you get a reduction in the national insurance contributions you make. This is usually 2%. You don't get that in a SIPP. Huh? 2%? Why is 2% important? a) Because it is certain; b) because it might not be the whole story; your employer might offer something back on the employers NIC that they pay (proportion of 13.8%)
The other real benefit of salary sacrifice is that it is set and forget. You don't have to pay too much attention. This is especially true if you're a high rate tax payer as you don't have to claim back the extra tax relief.
Next thing though is to look at how the workplace pension is invested. Usually you're dumped into a default fund which is seldom the right answer for most people. If you were investing through a SIPP you'd be making your own choices for investment, so this is no different.
Default funds across the pensions industry are set up to be moderate in all regards. Why? Because the industry has a regulatory responsibility to assess investors attitude to risk (ATR). ATR is individual, so if you're a company setting up a workplace scheme you're not permitted to take excessive risks so, instead, everybody gets the moderate risk option... but then we need to translate the industry's definition of risk into you and me terms. Risk in investing is all about volatility. Stuff goes up and stuff goes down. Non-risky is usually reserved to things which don't go up and down... like cash. But holding cash is actually "risky" because of inflation. You will never beat inflation with cash. So the things that go up and down the most (equities), evened out over a broad diversification and over a longer period of time do go up and beat inflation. And that is without historical exception. So the risky investment is actually the "safe" (go figure) investment... with a few caveats.
The caveats are: "longer term": the market will drop from time to time and recovery from a drop might take months or a few years. In most instances, you as an individual are ill-placed to determine if the market is going up or going down, so the behaviour that nets you the most certain beneficial outcome is to ignore the market and just keep tucking money way into your pension, into the same diversified investments.
The second and most important caveat is with how long you have to go until retirement. This is because if the volatility strikes in the early years of retirement, you will be cashing out "distressed investments" and your retirement will suffer because of this. So on the approach to retirement you need a plan (do your research and consider getting advice).
Once again, if you start a SIPP you'll be making all these decisions. You will underperform the market if you get sucked into "trading", because 98% of actively managed funds underperform in the long term and you're not a top 2% fund manager (after survivorship bias) on a run of luck. So you need to park your money in something that (warning) will go up and down but if you hold it in the long term it will go up and outperform inflation.
So log into your workplace pension account (98% of people don't ever do this) and see what it would take to change your investments to some sort of broadly diversified low cost ETF. Think about what you'll be happy investing in for the next 30 years (i.e. no single company; but a low cost index fund probably ticks the boxes). Why 30 years? Because if you're miles away from retirement you have this much time anyway and if you're closer to retirement, retirement isn't the end of your investing (unless you take an annuity). 30 years is a good amount of time to think about and it gets you out of the mindset of thinking that this month, next month, last month have any significant importance. They don't.
Low cost does have an impact over 30 years. Make sure the investment is low cost.
All SIPPs cost money. The workplace pension charges a fee as well. So think carefully about whether you want to pay for both and whether you have the discipline to put money away every month. Set and forget is the winning argument for the workplace pension. Just don't forget it when you leave your job - that is the time to maybe consolidate that pension into a SIPP alongside any workplace pension from your new job.
Are you sure it’s you 3% and work 5%? Usually the other way around I think. Minimum employee contribution is 5%.
Nah. Employer minimum is 5% these days.
i have a work pension, they match upto 10%, so i've always ensured max contribution from my employer,
i had a few older pensions that during covid seemed to be doing nolt and when i researched them prices were not available, so i setup a SIPP , i contribute a few hundred a month, for £200 a month you get £50 top up 60-65 days later, and if you pay high rate tax you can then claim the additional 20% (of £250) (assuming you have sufficient 40% tax contributions available)
for example if you invested £1k, you get £250 top up on sipp and then can reclaim another £250 in your tax return or if you are PAYE employee, then write a letter to HMRC and they will send you a cheque or bank transfer.
a proforma letter is available on martin lewis mse website, TIP: state gross contributions on letter (not net), as hmrc messed up my refunds (see earlier thread). and i had to reclaim again..
hence for £1,250 investment you'll have paid over £1,000 and you can claim back £250
= for £750 you have £1250 in your sipp.
ps check fees as they are high than ISAs for example.
pps. have you a steady nerve, I've lost a sh1t tonne on stock market since thursday morning, everything has died.
all my stocks have recently issued good updates/profits, huge share buybacks and increased dividends..
ppps one advantage of the SIPP i've found is if you get a bonus from work, is you can lump in late march april into your sipp,
were as on a company pension, you have to submit form to put your bonus into your pension, before you know what it is
Nah. Employer minimum is 5% these days.
It's 3%, the employee minimum is 5%.
ps. if you do go down the sipp route, download the "Tip Ranks" app. its £150-300 per year sub, but i've found a work around on the free app version which allows viewing info on more than the max 3 stocks per day limit.
setup a portfolio, then you get message alerts for the latest broker recommendations and price targets.. click on the name and it'll give the broker price target and rating (buy/sell/neutral) and other metrics
may as well follow broker recommendations [who in theory are the rich experts] to invest although it doesn't help when everything crashes
It’s 3%, the employee minimum is 5%.
My mistake. The other rule is that the minimum total contribution for auto-enrolled is 8%. I'd been with my employer since before the rule and I paid 3% and they paid 6% which skewed my understanding.
may as well follow broker recommendations [who in theory are the rich experts] to invest
Nope. Diversified trackers with minimal charges are the best strategy for investing.
@kramer it has brokers recommends on ETFs too. one tracker isnt as good as the next tracker, minimal fees may not always get the best results.
despite them aiming to do the same thing, again IMHO it helps to follow experts
as always DYOR
click on the name and it’ll give the broker price target and rating (buy/sell/neutral) and other metrics
What's in it for the broker? They cynic in me is saying they'll be tipping things to sell, as that drives the price down and they're looking to buy, or tipping to buy, as that drives the price up and they're looking to sell.
Diversified trackers with minimal charges are the best strategy for investing.
Correct. A 'tip' from a broker is not that different from a 'tip' from a bloke down the pub for the 3:10 at Epsom.
@IHN the broker has his/her client base, they do number crunching and research to pass this advise onto investors to earn commission, that app makes money from subscriptions to its app, it just holds data from all the majors like
citi / ubs / morgan stanley / kepler cap / DZ bank/ BOA / barclays / hsbc / RBC cap / jp morgan / jefferies / berenberg / goldman sachs / dbs/ deusche bank .. et al
cant disagree with your comment "A ‘tip’ from a broker is not that different from a ‘tip’ from a bloke down the pub for the 3:10 at Epsom.",
but if nine blokes all independent of each other told you a horse named 'not a chance' was going to win at epsom 310, would it peak your interest ??
and how do you think these tracker managers pick stocks?
yes, diversification matters..
and how do you think these tracker managers pick stocks?
Tracker managers don't pick stocks, that's the point of a tracker - it simply has the same makeup as the index it's following, there's no active management, which is why the fees can be so low.
You might be confusing trackers with actively managed funds, where, yes, the managers pick stocks that they think will do well, and 90%+ of the time they do worse in the long run than a tracker.
Very dodgy analogy, but an actively managed fund is a punter at Epsom, a tracker is the bookie...
and how do you think these tracker managers pick stocks?
Tracker managers pick stocks? What does tracker mean then?
Edit: beaten to it by seconds. IHN will you get out of here with your level headed well reasoned thoughts, this is a thread for wild claims a pyramid scheme would blush at (smiley smiley)
citi / ubs / morgan stanley / kepler cap / DZ bank/ BOA / barclays / hsbc / RBC cap / jp morgan / jefferies / berenberg / goldman sachs / dbs/ deusche bank .. et al
If this lot are tipping to buy, and giving that tip to people who's money they are not managing, they have stock to shift.
tracks the market, but a global tracker cannot own every stock in the world, it picks the best performing companies across regions and sectors.
I've a Standard Life Pension that is left-over form a previous job. It lets me choose from wide range of managed funds to invest in, to meet my needs. Also autoatically adds the 20% tax relief for any additional contributions I choose to make. I'd assume the same would be the case if you opened one privately/independantly.
I ike it as it gives really good visibility of the funds you are invested in, and in turn where those funds are investing, and is clear about teh cost opf those funds. (ililarly perfomring funds can cost awide rance of % per annum).
But yes, look to max out any work contributions (they'll often double up on employee contributions (3/6, 4/8, 5/10 percent upto a limit).
You may also be able to choose your risk profile within your workplace scheme - if I were in my 20's again I'd put it in the highest growth/risk optiona possible and let it ride the wibbles in the market for the next 30 years, reducingt the risk profile as you get older.
See if work offer any pension planning sessions? Larger employers often do.
how do you think these tracker managers pick stocks?
Tracker managers? Passively managed ETFs largely replicate the index holding (and it is this that makes them good ones). There is no-one calling "Buy! Buy! Sell! Sell!". They run a system of staying inline with the indexed securities coping with fund inflows and outflows.
It is a doddle to find index ETFs that track their respective index. It is a doddle to find a diversified index that trends upwards because the market has trended upwards for over a hundred years. The counterargument to "trading" is that most traders do not beat market indices. In a thread about pensions started by an OP whose decision is about whether to pile in more on a workplace pension vs a SIPP, I'm not sure what the tipster vs ETF discussion is adding.
I'll just leave this here
As I think had been mentioned above I don't think you need to sacrifice the tax relief by getting a SIPP, you would get a percentage automatically and then can claim any additional higher rate.
As has also been mentioned above look into what options you have for selecting funds for your workplace pension to invest into if that's enough to scratch the control itch.
Then also, I think some workplace pensions allow you to transfer out into a SIPP really easily, so you pump money into the work scheme in the 1st of the month say, saving all the tax and NI at source, then sweep it out into the SIPP almost immediately each month
I use a workplace one with Scottish Widows, it's on salary sacrifice, so all the hard work is done by employer. I can vary the amount I put in monthly, and the tax all sorts itself out (higher rate taxpayer). I aim to max out my contributions whenever I can. Annually I empty it all, bar a few quid to keep it open and working, into a managed SIPP, with Investec. This has much better performance than the Scottish Widows scheme, though fairly hefty fees too.
tracks the market, but a global tracker cannot own every stock in the world, it picks the best performing companies across regions and sectors.
Honestly, that's not how it works
ok, I'm no expert @IHN i guess i'm mixing up ETFs ucits and other tracker index style stocks.
we all have different attitudes to risk, i've got plenty of time to retirement so happy to buy individual stocks and shares, plus i'm only putting in what I'm prepared to lose. had a few dogs, but seeing good compound growth now from mainly dividend stocks.
tracks the market, but a global tracker cannot own every stock in the world, it picks the best performing companies across regions and sectors.
as per IHN, that's really not how it works. It picks a sample (usually a good majority) of stocks that the fundmanager best thinks will track the chosen index (the tracking error will be in the information provided...somewhere)
To the OP - I would research the quality of your workplace scheme, default investment choice, composition of default choice, costs (should be 0.3% or lower TCO).
If there are self select options, are you happy with them? (a global index fund should be a minimum, IMO)
If you are satisfied then sticking with your workplace scheme is probably the sensible choice for the majority of people. It doesn't mean it's there forever - you can make a full or partial transfer to another scheme / SIPP at a later date.
My workplace one is with aviva and I have the choice of lots of different funds. As it happens I stuck with the default fund as it looks fine (circa 80% equity and no home bias) and fees are competitive. Can't see any advantage in moving to a SIPP and having to mess around claiming tax relief etc.
To the OP – I would research the quality of your workplace scheme, default investment choice, composition of default choice, costs
Very much this. I know my workplace scheme has a fee discount which means it good value. Plus they match up to 10%. Limited range of funds but still some good performers.
I get very low fees on my workplace pension, so have a look at the total fees if you have an additional SIPP. Mine is a standard life one and does allow certain flexibility. Old Scottish widows one (same employer) had pretty high fees. These things at up over time.
Many company schemes allow 1 transfer a year out to a SIPP so if you are not happy with your company scheme this an option to consider
Slightly against the normal recommendations but do you actually want it all in a pension? A lot can happen between now and your retirement. Changed to tax rules, retirement age, personal circumstances, etc. While not quite so tax efficient I think it's still worth having some more accessible savings. Put some in a stocks and shares ISA and you can still save it until retirement or access it earlier for emergencies, buying a house, retiring early. If you already have this then crack on with the pension.
Whilst we're on this topic - is there a decent online calculator that you can play with varying your amount you pay into a Pension and the effect on your net take home pay? Presumably the more you pay into a pension, the more tax you avoid therefore it's not quite a 1:1 ratio in reduction in take home pay...
Thanks all for suggestions so far.
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.
Based on the comments here, I'm thinking of moving it to a higher risk fund (If aegon will let me) and increase my work pension contributions as I'm not sure if I'll have the time or knowledge to actively manage my funds if I move it to a SIPP. Then I can move it to a lower risk fund when I'm nearing retirement.
1% charge is huge!
have a look around as to what the likes of Vanguard would offer! You can pay into your workplace pension via salary sacrifice for the tax benefits then once a year, sweep it into a SIPP to reduce on fees.
A podcast that's really quite good and I found on here is the Meaningful Money podcast. Well worth a browse through Pete's back catalogue and listing to a few that seem appropriate to your needs
I was recently offered a workplace pension. At the same time work moved to salary sacrifice, but offered to pay into work scheme or any scheme of our choice.
I did some research.
I decided to stay with my Standard Life Stakeholder with 0.8% fee. It gives me lots of choice of funds, which I check quarterly and have actively shuffled a few times. It's a reasonable performer. It's an ethical be wrapper, so the funds I've got access to are broadly better 'for the world'.
I've now upped my contributions above what work will match maximum, which being salary sacrifice have reduced my tax burden.
I didn't want two different pensions with twice the faff factor, particularly when one *just works* and it's working over the 15-20 years I've had it.
I decided to stay with my Standard Life Stakeholder with 0.8% fee.
That’s a lot.
But the alternative was the same amount. 0.8%.
What would a good fee look like?
As a pensioner, I'd add this into the discussion.
It's nice to have a good pension pot to look forward to, but I've known so many people who've given up so much that they may have enjoyed, and which would have enriched their lives in order to get a good pension "we're waiting till we're retired and we're going to have all these adventures" and who've conked out or become frail before they've had the opportunity to enjoy it.
And you can get by on a lot less once you've retired.
Get it done now. Never leave your widow regretting all the things you didn't do.
@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.
Nope. Diversified trackers with minimal charges are the best strategy for investing.
after considering advice on the MSE forum, ive just moved over from HL to II (interactive investor) for this reason after realising HL's quarterly charges are higher than most. II seem to be capped at a lot less. i had 6 different funds in HL so sold them all to transfer the cash to II, and now have that cash waiting to be invested.
my aim is to set up a DD for around £100 p/m into II, and invest it in just one diversified fund/tracker (?). i dont really understand financial terms so youll have to excuse me if i get the wording wrong.
i assume something like vanguards lifestrategy 80 is a 'diversified tracker'? so i aim to invest in something like that, and keep adding £100 to it each month.
question is, is this the most cost-effective way of investing? i dont mean the LS80, i realise nobody can predict which one is best, i mean the investing each month by DD. im not sure if theres a charge each month, or whether id be better off still chucking the money in each month, but then waiting 12 months and investing that lump sum in just one transaction and one fee. gut feeling is pay the monthly charges but just curious as to whether theres a better method.
thanks
Lifestrategy 80 is a decent fund. It's a global tracker with a slight home tilt and 20% in defensive assets (gilts and bonds).
Not sure about the interactive investor fee system, but generally you're better off putting money into the market as soon as possible rather than waiting so that it has longer time compounding, however over the long term the difference isn't huge.
The professionals call it "pound cost averaging" and it's a perfectly reasonable way of putting money into the market as you will buy a few more units if the markets have been weaker (and therefore become cheaper) and you'll buy a few less units if markets have risen (and therefore look a bit more expensive). It saves you having to decide if the time is right and regretting it if the you get your timing wrong.
looking at monthly fees https://www.ii.co.uk/our-charges#monthly-fees
you are paying a fee to hold the account pretty much £5-6 each for an isa or sipp under £50k value, and then double that for £50k plus.
you are paying a fee to hold the account pretty much £5-6 each for an isa or sipp under £50k value, and then double that for £50k plus.
thanks, so yep, £13 per month for II now. i was paying quarterly charges of £75+ before, so have halved my monthly fee now. and that wasnt capped with HL so the more my SIPP was to grow the more it would rise. i wasnt sure if id pay more for each monthly DD transaction/investment but i dont think they charge for that.
is this the most cost-effective way of investing?...., i mean the investing each month by DD. im not sure if theres a charge each month, or whether id be better off still chucking the money in each month, but then waiting 12 months and investing that lump sum in just one transaction
You're correct to buy on the set day each month.
I do this with II. Even if it's a lump sum I'm investing, for example if I sell some Sharesave at work, I set up my following month DD to buy the fund for free rather than buying the fund at the time. This is why the big flashing menu item at the top of your screen says "Free Regular Investing!"
I presume they do it for free as they have hundreds of people buying the same stocks on that exact date and time each month so they just buy the total amount and then split it between the hundreds of people
Next buy in is 9 January BTW so you have a while left to set it up
🙂
Do hope I haven't included any info I shouldn't ! 🙂
So you set up a DD into the account each month if you want
Them you chose a set of funds/shares that you want to purchase an amount of each month.
Then order them by priority ( in case your wishes are bigger than your means)
Then you can also specify an additional one off payment each month on top.
Then on the 9th of every month it buys what you've told it to buy. And doesn't charge for the privelige
is the 9th a date youve set, or is that their set date for trading
They set the date. ( TBH I'm not 100% sure it is the ninth, but you can easily check,,). My guess is that it's a few days after month end to allow people time to shift the cash
so do you set your DD to go in a week earlier say, so its in there waiting to be invested?
I don't do DDs. I just chuck a bit in every now and again if I've not wasted it all on ice climbing gear and holidays:-)
But yes, that's what I'm suggesting you do ( the DD not the ice climbing)
I don't actually use the system the way it's supposed to be. I use it to avoid paying transaction fees. But it's exactly what you're after IMHO
< Edit to say that I messed up when I wrote this:
I set up my following month DD to buy the fund
I should have said
I set up my following month subscription to buy the fund
I put the money into hand account via Debit card rather than DD. Like I said above, I'm just abusing the system 🙂
Generally speaking, the bigger the company you work for, the lower the fees you will get from the fund provider.
i work for BA, and with over 50,000 uk employees, our Aviva scheme is ridiculously cheap. I pay 0.09% platform fee, and with a the in-house black rock trackers, the TOTAL fee is 0.1%. I had to check as it sounded too good to be true. That includes a US tracker, a global tracker and a money market fund.
I also pay no trading fees, and all tax relief is worked out at source. It is Salary Sacrifice too, including any extra contributions I make.
I don’t actually use the system the way it’s supposed to be. I use it to avoid paying transaction fees. But it’s exactly what you’re after IMHO
I put the money into hand account via Debit card rather than DD. Like I said above, I’m just abusing the system
sorry, i dont really understand that. i suppose i dont need to if im setting up a DD anyway, but why would i not pay transaction fees via DD, but you should if you just input wedge manually?
and er..... why dont you just set up a DD anyway if youre still putting the same in each month anyway? :-). i dont really understand why/how youre 'abusing the system'.
and that screenshot ^^^^ is that your 'subscription' then? you tell them you want to 'buy' those amounts each month, and then manually put the money in, and they use it to fulfil your wishes? and if you forget to put any in then they just dont, simple as that?
just a bit confused by it really, altho as you say, it doesnt affect me if i set up a DD anyway.
thanks
I'm with Aegon too. I just stick my entire pension into the Aegon Blackrock Global Equity Index. Its a decent enough fund and fees are low. Certainly there's no better fund that beats the NI/Student loan savings I get from salary sacrifice so I personally wouldn't consider a SIPP.
sorry, i dont really understand that. i suppose i dont need to if im setting up a DD anyway, but why would i not pay transaction fees via DD, but you should if you just input wedge manually?
You're right. The way the money gets in the account is immaterial. The transaction fee comes into play when you buy the funds/ shares. Basically on occasions when I want to buy a fund, instead of doing it there and then, and paying £15 or whatever it is, I just log in, ensure there's some cash available and set up my free regular investment to buy that fund on the next monthly occasion, which is 9th.
and er….. why dont you just set up a DD anyway if youre still putting the same in each month anyway? :-). i dont really understand why/how youre ‘abusing the system’.
I don't pay the same each month. Most months it's nothing but every now and again mine or missus' shares might mature and I'll have a chunk spare.
and that screenshot ^^^^ is that your ‘subscription’ then? you tell them you want to ‘buy’ those amounts each month, and then manually put the money in, and they use it to fulfil your wishes? and if you forget to put any in then they just dont, simple as that?
Yep. Exactly that.
The screenshot probably shows what I bought last time around. As you say, there's no cash in the account at present so each month it just ignores my instructions.
I’m with Aegon too. I just stick my entire pension into the Aegon Blackrock Global Equity Index. Its a decent enough fund and fees are low. Certainly there’s no better fund that beats the NI/Student loan savings I get from salary sacrifice so I personally wouldn’t consider a SIPP.
Are you sure about that? Anyone who has a workplace pension should look at this short video -
I’ve just watched that video and it’s misleading at best. A workplace pension doesn’t have to be one stock fund. You can have an index tracker inside the wrapper of the workplace pension.
If he was slagging off default funds, I would agree, but the whole workplace pension market……..?
Looks like a sales pitch to me.
Just to clarify ref II - the platform fee is £12.99 per month. Assuming you use regular monthly investments there are no other fees apart from the standard fees for whichever funds you end up investing in. As soon as you have more than a certain amount invested, it becomes cheaper than most other options, including Vanguard.
To use Vanguard as an example, fees are 0.15% capped at £375 per year. II flat rate is £155.88 per year. So as soon as you have more than £104,000 invested, the platform fee is cheaper than Vanguard, and if you want you can still invest in Vanguard funds. So provided you have enough to invest, it is cheaper to invest in Vanguard via II than it is to do it direct with Vanguard, plus you have access so loads of other global funds and ETFs.
I’m not sure there is much value in trying to time investments to beat the market so I have never paid any transaction fees, just leave it to free monthly investing and then when tax relief comes through I just assign that as an extra top of my free monthly purchases.
Perhaps there are some fees hidden away if you use other ways of investing but if you use the SIPP as it is designed, fees are very low.
I would agree ref ISA though, the extra fee for an ISA doesn’t make it worth my while to transfer. I use InvestEngine for that.
sounds like im on the right track then with II, as thats what i intend to do, invest in vanguard lifestrategy 80 through them, and keep topping up monthly.
out of interest, i was just about to press Go on investing the full balance (135k) and it prompted me to look at the charges, so thought id have a quick look even tho i believe the costs will be £12.99 pm to II, and 0.22% of LS80 fund only.
im guessing that last one is the 0.22%. middle one is negligible anyway but i still dont understand it, but that top one shows a fee of £291 (for 100k, so more for my 135k). are these extra charges that ill be hit with too? or can i indeed ignore them and just press ahead and yes, the fees will be £12.99 plus 0.22%?
thanks
I have some Vanguard funds in my II and as far as I’m aware I just pay the overall £12.99 but the standard fund management fee which for one funds I’ve got is 0.1%. I’m not aware of any other fees.
Worth considering other global tracker funds - I’ve got L&G global 100, Fidelity Index Workd and Schroder QEP Global Core which are all similarly low fees and have performed better than the Vanguard 80% Equity blended funds. Also if you want you can go with some market trackers - S&P 500 Info tech trackers have done particularly well in the last few years although potentially are due a downward correction.
I did consider sticking just with Vanguard blended funds (I came from a Vanguard Target Retirement fund) but spreading investments across global funds and trackers has so far produced much better returns than I would have achieved had I stayed with Vanguard alone.
I’ve just watched that video and it’s misleading at best. A workplace pension doesn’t have to be one stock fund. You can have an index tracker inside the wrapper of the workplace pension.
If he was slagging off default funds, I would agree, but the whole workplace pension market……..?
Looks like a sales pitch to me.
Its just his style and the key point is making sure you know what you are invested in which many people don't or just assume the employer is doing the right thing. As I've said before nobody cares more about your pension than you.
He is correct that loads (if not the majority) of workplace pensions have terrible performance. There are a few decent ones like Scottish Widows and Royal London that have performed well but there are a lot of terrible ones. Plus he’s quite correct that a lot of people just assume that they’re good products and don’t look at available funds / performance etc.
I did consider sticking just with Vanguard blended funds (I came from a Vanguard Target Retirement fund) but spreading investments across global funds and trackers has so far produced much better returns than I would have achieved had I stayed with Vanguard alone.
does the vanguuard LS80 not cover global funds then? when i switched from HL to II, i 'cashed in' 6 funds with HL and thought id just consolidate all of that money into one fund with II which covered a wide variation. is that not the case?
thanks
With a Vanguard product like LS80 or Target Retirement you’re just sticking with Vanguard products. Plus obviously a fair percentage of bonds, which are doing better now but tanked for a few years across Covid.
I don’t currently have any bonds as I’m happy with potential volatility for now. Plus even if you look just at Vanguard LifeStrategy, the performance of the 100% equity one is by far the best.
I’m not sure about the II blended fund options - I’m sure they do have ready made portfolios you could use.
Edit - looks like for ready made portfolios they’re now just recommending Vanguard or Royal London.
I do have a significant amount of my pension in Royal London funds which have higher charges but have done extremely well.
I guess with a work place pension, your employer matching your contributions up to a certain percentage is a huge benefit.. Even if the scheme itself isn't the best?
But if you are already doing that I guess a sipp in addition would then start to make more sense.
The only thing about sipps is you can't access the money until a certain age so it depends on your circumstances and goals.
So at the moment I'm maxing out my ISA allowance but it's just a cash ISA currently, so I'm thinking of doing an S&S ISA in addition to that next year with new money probably some sort of global fund without too much exposure to the US tech market.
A lot of them seem heavily weighted toward US tech companies and I'd rather spread my bet a bit wider, even if it means potentially lower returns, as to me the SP500 seems to be a bit of a narrow spread..
But if you are already doing that I guess a sipp in addition would then start to make more sense.
I think I posted this earlier, or on another thread, most workplace pensions allow a once a year transfer out to a SIPP, so best of both worlds !
My point is that it isn’t “Aviva” or “Royal London” that is doing badly, it’s a particular fund chosen as the default by the scheme trustees. There will be plenty of Aviva and RL funds doing amazingly well. The message of “workplace pensions are sh@t, join a SIPP instead” is very dangerous advice. Giving up salary sacrifice NI gains, plus at source Higher Rate tax relief. Is not good.
if he had said “check the default fund of your workplace scheme and see if you can move it to better options” I’m with him, but it came across as “buy my book & put it in a SIPP”
I think the article on which the video is based makes some questionable points and the video doubles down on them. For instance:
The latest analysis by Investing Insiders revealed that 26 out of the 29 funds analysed underperformed the FTSE All Share tracker over the past five years.
That's what you'd expect since the FTSE all share is 100% equities while pension funds typically contain some bonds. Bonds are a drag on long term returns but act as diversifier which reduces volatility so that investors don't have to feel the full force of equity crashes. Bonds themselves had a rare crash in 2022 which makes their recent performance look particularly bad but the purpose of them in a portfolio is still valid for the majority of investors, who may be inclined to make bad decisions in the midst of an equity crash when their portfolio is down 40%+.
The data published exclusively today (November 25) by FT Adviser also found that 13 of the funds investigated did not beat the benchmark aligned to their fund risk category.
So when you compare like for like, 16 overperformed and 13 underperformed. Again you'd expect the performance of index funds to be clustered around the benchmark with some slightly above and some slightly below over any given period. Unless there's evidence that some funds are continuously and significantly underperforming a valid benchmark then there's no problem.
FTSE all-share is not a great benchmark - when I first looked into my pension rather than assuming my financial advisor had my best interests at heart was when I realised that using this as a benchmark is comparing to a globally poor performing index, in order to make a fund look good even when on a global scale it is doing terribly.
FTSE all share index has gone up by 25% in 10 years!