Investment Funds Self Management / SIPPs - how easy to do ?

[kaiser78]

I have been using an IFA to manage my financial affairs for the past 10 years or so and have a wide range of investments, building up hopefully a nice little nest egg for the kiddies.

I have never been comfortable with what I see as being pretty high charges from them, although have agreed that no trail commission will be taken for policies set up. However receving my last 6 month statement for a couple of these policies, I have noticed that trail commission is being taken. I have asked the IFA to explain why this is and no comeback yet.

I have for a while been looking at moving away from my IFA and go into self or managed fund selection and management / SIPP route. I have always been put off by this due to choice of funds to choose and time primarily, not that I move things around that often.

For those who do undertake self fund management, can you advise how easy you find this to do, anything that you need to particulary consider, pitfalls etc.

TIA.

[SimonMac]

I have a SIPP (shares rather than finds) with Hargreaves Lansdown and its very straight forward, if you can do on line backing you can do this, HL have a lot of information you can research on the shares or funds, costs are a little high (£11.95 per trade) but only have a management fee of no more than £200 a year for shares

[Gonzo]

I have a SIPP with Hargreaves Lansdown (until recently, not any more but that is a long story not relevant to this conversation).

It is really easy to do but you will need the discipline to do your research and review your positions on a regular basis, bearing in mind that even the 'right answer' will change over time as you get nearer retirement.

I have always worked in Financial Services and completely understand anything that anyone says on the subject but I appreciate that not everyone has the inclination to do that. Bad decisions could cost you but then, so could the bad decisions your IFA makes.

[rootsnall]

I use SIPP, stocks and shares investment ISA and online share dealing. Investment and retirement opportunities | Sippdeal it's easy enough if you are comfortable buying your own shares/funds ( I stick to FTSE 100/250 shares ). This is cheaper than the HL option as you don't pay the £200 a year for ongoing management but not sure if that will last.

[Benny]

With a SIPP can you cash in / bequeath whatever is in there at the end -i.e. if you build up £250K of shares can you just pull out £250k in cash at retirement or do you have to buy an annuity or some other legalised bollox method of robbing you?

Can HMG get more of it's fingers in your pie by perhaps changing the goal posts mid term?

[SimonMac]

With a SIPP can you cash in / bequeath whatever is in there at the end -i.e. if you build up £250K of shares can you just pull out £250k in cash at retirement or do you have to buy an annuity or some other legalised bollox method of robbing you?

Can HMG get more of it's fingers in your pie by perhaps changing the goal posts mid term?

No you can take the income out as a drawdown

Get the most out of your SIPP plan - @SIPP

[rootsnall]

No you can take the income out as a drawdown

Get the most out of your SIPP plan - @SIPP

What is left in the pot when you snuff it can be passed to your spouse or is taxed at 55% if passed onto your kids. Sounds ridiculous but it's 100% more than they would get if you bought an annuity.

[IR35 Avoider]

I use Sippdeal. When I checked, a few years ago, Hargreaves Lansdown weren't even in the running, they were so much more expensive. Though the difference did depend on what exactly you invested in.

With regard to tax, never forget that 25% of what you take out is tax free. So if you don't buy an annuity, and what's left of you money is taxed at 55% before going to the kids, remember that 55% x 75% = 41.25% average tax you've paid on that chunk of your pension savings. Since money put into pension as employer contributions would have been taxed at either 38% (salary and NI) in basic rate band or 46% for higher rate, you actually haven't really lost out on that chunk. And of course all the pension money you actually spent will have been taxed at a lower rate than if it had been take as salary originally, on average 15% for pension incomes in the basic rate band and 30% on pension income in the higher rate band.

I think that 41.25% effective tax is outside your estate, so no inheritance tax, which could be due on equivalant savings outside of a pension.

[IR35 Avoider]

As far as investment choices go, if you restrict yourself to only funds or ETFs offered by Vanguard, you can't go wrong in terms of cost. Vanguard are the worlds biggest index fund managers, and are essentially a non-profit company. As I understand it, whenever they find themselves in danger of making a profit, they cut their fund charges further.

(This is another reason to use Sippdeal, they are one of very few platforms that offers access to Vanguard funds without requirng a £100,000 minimum investment, per fund.) Note this same problem does not exist with Vanguard ETFs, which can be held in any account that allows ETFs.

In fact I think a criterion for choosing a SIPP account should be to disqualify anyone who won't allow access to Vanguard funds without a £100,000 minimum.

https://www.vanguard.co.uk/uk/portal/home.jsp

[IR35 Avoider]

As an illustration of how rigorous Vanguard are with regard to charges, they charge a 0.5% spread (difference between buying and selling price) on their UK index tracker. At face value, this sounds like a bad thing, as far as I know no other fund has this charge. In fact the charge is there to explicitly pass on the cost of stamp duty when people trade. With other funds, the cost still exists, but is hidden within the fund and passed on equally to fund-holders regardless of how active their trading activity is. By making this explicit charge, Vanguard prevent a cross-subsidy arising whereby long-term passive investors pay costs generated by more active traders.