Should I swap to a platform with cheaper fees?
11 July 2019
Question by Stuart
My children are 17 and 20, and for the last couple of years I have been putting £50/month for each into a pension with Hargreaves Lansdown - so they now sit at about £2,500 each. In light of the costs of investing highlighted on this website, should I 'twist' and move to something like Vanguard, with lower charges, or 'stick' and stay-put as I like HL as a platform (perhaps this is not the place for sentiment)? Also, alternatively would I actually be better to indirectly fund both in a Lifetime ISA instead?
Answered by Holly Mackay
For the amounts of money you are talking about, I actually think Hargreaves Lansdown is very good value at 0.45% admin fee on £2,500. You're not paying them a lot every year, and the service you'll get will be extremely good, so I wouldn't feel compelled to move.
Possibly the more immediate question is whether you should be looking into a Lifetime ISA. That does give your children the added flexibility of being able to access the money and use it towards the purchase of a first property. Obviously with a pension it is going to be locked away for at least another 32 years, and probably more for both of them.
With a Lifetime ISA you will get an extra 25% top up from the government, which means the returns you're getting are not to be sniffed at. Obviously there are penalties if your children choose to access the money early, or not to use it for the purchase of a property. If they decide not to buy a property of course, they can still use it for their retirement savings, so I certainly think it's worth considering.
Really if you do go down this path, I'd still consider sticking with Hargreaves Lansdown for the £50 a month sums that you're talking about, because the service is excellent and with those sums of money you're not going to be paying above the odds.
Final thing is, if you do decide to keep it in a pension, you're investing for the super, super long-term. So do make sure you're not sticking with cash-like products as a default. At least consider the more risky types of funds or assets you can get, because you've certainly got time to ride out any ups and downs of the stock market.
Hope this helps,