Am I being charged fairly for my pension or should I change provider?
12 October 2021
Question by Martin
I have a question regarding pension charges. There is a lot of news regarding Vanguard's low charges for its new SIPP pension. I have a pension with True Potential based in Newcastle. I just wondered if I was being charged fairly or would it be worth changing provider. Fees are platform fee 0.40% pa, fund management fee 0.80% pa and ongoing advice/advisor fee 0.75% pa investment is a balanced portfolio.
Answered by Oliver McDonald
Thank you for your question.
It is difficult to answer this question fully, without knowing further details but the information below should help.
The SIPP market has become incredibly competitive in recent years, with many advisers also having preferential rates with platforms. Platform costs can range depending on the level of funds you hold/preferential rates through financial planners, but 0.40% is at the higher end.
Fund management fees - This can vary wildly from the likes of Vanguard at 0.22%pa up to some funds charging around 2%pa. It is important to understand what you're paying for and the type of investment. At Engage Wealth Management, we support passive investment but Vanguard are not the only answer. 0.80% will really depend on the underlying funds and making a like-for-like comparison. Are these actively managed funds, for example, or a sustainable/ESG fund?
Advice fee - 0.75% pa is fairly standard in the UK market. The average is slightly lower, but we know many firms moving over to 1.00%pa. Some firms will charge a fixed fee and many have a cap on these ongoing charges.
A benefit of a SIPP is having access to a huge range of investment funds, under one platform. The Vanguard SIPP, from my understanding is limited to Vanguard funds only. Additionally, from wider reading it will depend on the value of your funds as to whether accessing Vanguard through their SIPP is the lowest cost option.
The Vanguard SIPP is certainly a low-cost option to access their funds, but certainly not the only option. Any investment should suit your risk tolerance and fit in with your retirement planning in future.
I hope that helps.
*This answer is for information purposes only and should not be relied upon for advice.
Director & Independent Financial Adviser
I have worked in financial services for 15 years gaining extensive experience in financial planning. I am a people person. You will rarely find me explaining complex spreadsheets or using jargon. I keep my conversations at a high level and realised early on that financial planning is all about helping my clients achieve the lifestyle they want in future. I work with individuals, business owners and entrepreneurs. I specialise in retirement planning, investments and business protection.