Hargreaves Lansdown or Bestinvest Sipp?
|Retirement | SIPP
Asked by tonyg, submitted
04 May 2010.
I am about to move £200,000 from an L&G personal pension into a SIPP. I am torn between Hargreaves Lansdown and Bestinvest.
I would like initial advice on funds and HL charges 1%. It's free at Bestinvest! can one have a free lunch?
Which company will offer the best advice? How can I measure the value of which is the best?
Would i expect to get low double digit growth from investments in SIPP?
I have been told the reason its free is Bestinvest don't give back any of the trail commission, but this is only a small % as I understand it?
I can see you had something to do with them hence I got to your site.
How would you chose the funds in a SIPP yourself? Risk profile for me is "a bit risky".
Very interested what you think I have the L + G transfer form and value made out.
Answered by Justin on 07 May 2010
Thanks for an interesting question. I’m sure you’re not alone in deciding which self-invested personal pension (Sipp) would be the best home for your personal pension.
I’d start by checking that your L&G personal pension doesn’t already offer access to a wide choice of different fund managers – as one of its pensions offers this facility via the Cofunds fund supermarket. If so, you might be better off staying put unless L&G doesn’t apply a penalty for transferring your pension elsewhere. Note: if you haven’t checked whether there are transfer penalties then please do, it could affect your decision.
Anyway, I’ll assume that you’re happy transferring your Legal & General (L&G) pension and believe that the extra performance potential from using a Sipp (because of greater investment choice) more than outweighs any transfer penalties L&G might apply.
When using a Sipp there are three charges you need to consider; Sipp ‘wrapper fees, charges on underlying funds and the cost of advice (both initial and ongoing).
Hargreaves Lansdown (HL) doesn’t charge either set up or annual fees on its Vantage Sipp provided you invest in funds that pay HL trail commission, otherwise you’ll have to pay a 0.5% (& VAT) annual fee capped at £200 (&VAT). Funds typically have no initial charge but HL doesn’t rebate trail commission on its Sipp (unlike its ISA), i.e. it keeps the full 0.5% a year that is typically paid. From what you’ve said HL charges 1% for initial advice, I’d check whether this includes ongoing advice too and, if not, how much HL will charge for that.
Bestinvest uses the FundsNetwork Sipp and wipes out the initial and annual wrapper fees that normally apply using some of the trail commission it receives. There are no initial charges on fund investments and Bestinvest also gives investment advice for no additional charge on portfolios above £50,000, paid for by the trail commission it receives.
So if you only plan to hold funds the overall costs of a Sipp held through HL or Bestinvest should be pretty similar, but you’ll also get initial and ongoing advice from Bestinvest for no extra charge (although bear in mind Bestinvest would expect to receive trail commission of around £1,000 a year on your £200,000 pension fund – as would Hargreaves Lansdown). There is no catch, provided Bestinvest provides you good advice and service.
The advice is the crucial part as a Sipp is only as good as the investments you hold within it. It’s impossible to predict what kind of returns to expect as it depends on the investments you hold and markets moving forwards. Very simply, the more risk you take the more you’ll probably stand to make or lose. Low double digit annual growth is not too far-fetched as a long term average for higher risk investments, but equally you could face double digit losses too in a bad climate.
Both companies devote a fair amount of resource to fund research (I can certainly vouch for Bestinvest in this respect as I’ve worked there and my impression is that HL takes this seriously too despite appearing ‘salesy’ at times), so provided their advice reflects this you should be in relatively safe hands. If either tries to fob you off with a handful of ‘funds of funds’ then beware, you’ll end up paying higher annual fund charges and it suggests the advisers are just being lazy – look elsewhere.
When choosing investments I’d aim for a broad spread that suit the risk you’re comfortable taking. Within that you can bias areas you’re particularly keen on. For example, in my pension I have a bias towards commodities and emerging markets as I believe these sectors will outperform others over the next 20+ years. However, if I were taking my pension in 10 years I’d probably be rather more cautious.
I hope this helps you come to a decision and good luck whatever you decide.