Contractor SIPP (advice for 2013)

[jlo1983]

Hello all,

I'm the sole Director of my Ltd Company (an Oil & Gas contractor) in my early 30's looking to set-up a pension. This will be paid from my Ltd Company to save on 20% Corporation Tax.
I wish to save approx. £600/ month but also have the flexibility to change the payment amount should my contract situation change for the better or worse in the future.
I've been contracting now in the Oil & Gas sector for 12 months, previously being a staff employee for circa 7 years.

I've recently received a quote from a Contractor IFA specialist to set up a pension plan, and the result recommended an Aegon Retirement Choices plan (SIPP).

The followings set-up/ ongoing costs were quoted for the Aegon SIPP:

(1) The IFA stated that they have negotiated a substantial discount from the standard terms on my behalf. This will be a flat charge of 0.4%

(2) They will receive 1% of the fund per annum, which is paid monthly, for their active management service. This covers the cost of on-going servicing, implementation of our quarterly investment committee decisions and rebalancing of your funds, annual risk profiling and review.

(3) The total TER (Total Expense Ratio) which would apply to my funds is 0.19%, plus their ongoing 1% for participation in the Active Management Service, as mentioned in point (2).

(4) A one-off fee of £750 to set up the pension.

Being a newbie to SIPP/ pensions, and after reading the previous SIPP related posts on this forum, I often see the likes of Hargreaves Lansdown (HL), Alliance Trust and SIPPdeal etc. recommended again and again….
I wondered how overall costs of the above Aegon SIPP compare to these.. Would I be much better off with setting up my own "DIY" pension with HL etc, and cutting out the IFA???

Any advice would be very much appreciated.

Thanks!

[ctdctd]

Set up costs nothing at HL but you have to do your own investing.

Do you want to spend the time and DIY or let someone else do it and earn a fee?

[SimonMac]

Go to H&L and buy a mix of funds if you want the lazy way, I do my own investing and A) find it really enjoyable and B) do a lot better than the average fund*




*Yes I know this could change any time, but in the last 12 months I am getting a 6% dividend yield and 28% capital growth

[jlo1983]

Thanks for the advice - most appreciated guys!
Completely new to this and there is so much information out there.. so apologies in advance for the many questions...

I guess as a 30 year old Contractor looking to set up a SIPP and retire at say 60, I am trying to get an appreciation of the costs of the IFA recommendation (as per my first post) versus e.g. the HL Vantage SIPP (DIY option).
At first glance the IFA management/ set-up fee seems very high for the work involved. I’m not sure how these costs would compare over a 30 saving period, but has anyone looked at a similar comparison in terms of potential savings – when saving £500/ month? It’s just so I can get an appreciation of costs to see of the extra effort is worthwhile.

I do like the idea of setting-up and managing my own SIPP with HL. I have a few questions that those who have gone down a similar route may be able to help with:

1. As a 30 year old, am I correct is assuming it could be wise to accept a more adventurous portfolio initially moving towards less risk as I near retirement?
2. Can anyone recommend a good initial set-up portfolio with HL for someone in my position?
I have book looking at their website (SIPP investment ideas | SIPP investment ideas from our research team | Hargreaves Lansdown) and was considering something similar to the ”adventurous” portfolio to begin with?
3. Once the initial portfolio is set up, typically how often/ much work is involved in changing the portfolio? I appreciate this can be as often as you like, but I guess based on peoples experiences?

Thanks again.

[SimonMac]

Thanks for the advice - most appreciated guys!
Completely new to this and there is so much information out there.. so apologies in advance for the many questions...

I guess as a 30 year old Contractor looking to set up a SIPP and retire at say 60, I am trying to get an appreciation of the costs of the IFA recommendation (as per my first post) versus e.g. the HL Vantage SIPP (DIY option).
At first glance the IFA management/ set-up fee seems very high for the work involved. I’m not sure how these costs would compare over a 30 saving period, but has anyone looked at a similar comparison in terms of potential savings – when saving £500/ month? It’s just so I can get an appreciation of costs to see of the extra effort is worthwhile.

I do like the idea of setting-up and managing my own SIPP with HL. I have a few questions that those who have gone down a similar route may be able to help with:

1. As a 30 year old, am I correct is assuming it could be wise to accept a more adventurous portfolio initially moving towards less risk as I near retirement?
2. Can anyone recommend a good initial set-up portfolio with HL for someone in my position?
I have book looking at their website (SIPP investment ideas | SIPP investment ideas from our research team | Hargreaves Lansdown) and was considering something similar to the ”adventurous” portfolio to begin with?
3. Once the initial portfolio is set up, typically how often/ much work is involved in changing the portfolio? I appreciate this can be as often as you like, but I guess based on peoples experiences?

Thanks again.

I decided against funds, and have looked into solid value shares (ie those that pay a regular dividend income)

[ctdctd]

There is a lot to be said for the Vantage Lifestyle range of tracker funds.

Choose your exposure level to equities and bonds, buy the funds and forget about them.

Low fees and trackers beat most managed funds anyway!

[IR35 Avoider]

My advice is do not touch the IFA option with a barge pole, set up a cheap SIPP with e.g. Sippdeal and use cheap funds, e.g. Vanguard UK funds or ETFs.

In particular, the 1% management charge is money straight down the drain, for zero benefit to you, you are giving away about a quarter of your investment returns (assuming real expected return of 4%.)

[IR35 Avoider]

1. As a 30 year old, am I correct is assuming it could be wise to accept a more adventurous portfolio initially moving towards less risk as I near retirement?

That is a common approach, though it's not what I would do, for reasons to long to go into here.

The problem with generic advice is that often the most important significant factor that should determine a strategy is the mind of the individual investor: you are potentially the biggest obstacle to your own success. A perfect strategy that would work if the investor had no emotions is no good if the real-life investor is unable to stick to it. What you can implement depends on your investing beliefs and your emotions.

I suggest reading some books to arm yourself with some appropriate beliefs. "A Random Walk Down Wall Street" is a classic.

Once you've read some books, write down your investment strategy. If at any time after you start saving you find yourself having to make a decision about what to do buy or sell, that's a sign that your investment strategy was insufficiently specified. (The idea of writing down is that you are tying your own hands so you won't screw up at a later date by reacting to current events.)

[IR35 Avoider]

Rather than contribute a fixed monthly amount, I suggest you make single employer contributions once a quarter or once a year, based on your circumstances/propects at the time.

[TheFaQQer]

Rather than contribute a fixed monthly amount, I suggest you make single employer contributions once a quarter or once a year, based on your circumstances/propects at the time.

Interesting - the approach recommended by my advisor was to do things regularly rather than in larger lump sums.