Where should I move my Skandia pension?
|Retirement | SIPP
Asked by NICO1, submitted
08 June 2010.
I read with great interest your answer about Hargreaves Lansdown or Bestinvest Sipp and this prompted me to ask how they would compare with the Skandia Collective Retirement Account (CRA).
I’m looking to move my Skandia Personal Pension (£250K +) to an income drawdown plan and take the 25% tax free over a period of time; thus leaving most of it invested for the foreseeable future. The ability to monitor the CRA funds on line is very important and the facility to do on line funds switches desirable.
Answered by Justin on 10 June 2010
Your existing Skandia personal pension offers a good range of funds from a number of different managers, so I’m not convinced there’s an argument for switching based on investment choice alone.
I’d start by checking whether you can draw an income from the existing Skandia personal pension (I think you can) and reviewing exactly what charges you’re paying, including any penalty for transferring to another pension. This will give a good basis on which to make your decision.
As for the other options, a brief comparison as follows:
Skandia Collective Retirement Account
Offers a choice of about 900 funds with an annual fee of £52.32 and a further £54.24 annual charge when withdrawing income. There are no initial fund charges and annual charges appear pretty standard, i.e. around 1.5% for actively managed stockmarket funds. Your financial adviser will receive trail commission of around 0.5% from the fund annual charges.
The main thing to watch out for is that financial advisers can elect to take initial commission of up to 4.5% (or 5.625% spread over five years) when the account is opened and this comes directly from the amount you invest.
Hargreaves Lansdown Vantage SIPP
Offers a greater range of funds than Skandia, over 2,000, although in practice I’m not sure how much extra benefit you’d derive. There are no setup or annual charges provided you invest in funds that pay Hargreaves Lansdown a trail commission. Other investments, such as shares and some tracker funds incur an additional annual charge of 0.5% plus VAT capped at £200 (plus VAT).
Unlike its ISA, the Hargreaves Lansdown SIPP doesn’t rebate any trail commission, so fund charges are likely to be very similar to Skandia, but you won’t receive advice.
The Fidelity FundsNetwork SIPP is a competitor to Skandia and used by a number of financial advisers. It charges an initial £108 set up fee followed by £269 annual administration charge and a further £130 a year when withdrawing an income. Funds have no initial charges and usual annual charges, with trail commission paid to advisers.
On the surface this looks pretty expensive. But buying through Bestinvest or Cavendish Online could provide some benefit.
In exchange for trail commission Bestinvest eradicates the initial and annual SIPP charges (but not the £130 annual drawdown fee) and also gives investment advice.
Via Cavendish Online
You’ll pay standard FundsNetwork charges, but Cavendish Online will rebate all trail commission except for the first £10 each year. Assuming a £250,000 pension fund paying 0.5% trail commission this equals around £1,240, more than compensating for the annual £399 FundsNetwork charges. This might become less worthwhile as the pension fund shrinks, but should offer good value medium term.
Skandia, Hargreaves Lansdown and FundsNetwork all offer online valuations and switching, with Hargreaves Lansdown and Bestinvest offering the added benefit of their own fund research.
So what should you do?
If you believe that transferring your existing pension is worthwhile then Cavendish Online is likely to be the cheapest option if you don’t need advice.
If you want advice then Bestinvest seems a good deal as charges should be similar to Hargreaves Lansdown (except for the extra £130 annual drawdown fee). The Skandia Collective Retirement Account could also be appealing provided you can find a financial adviser happy to provide advice in return for the trail commission. But if advisers want to take additional fees/commissions initially it could end up costing you £11,000 or more - avoid.
If you don’t require advice and also want access to shares then Sippdeal tends to come out best value. You can read our review here.
From what I’ve heard Hargreaves Lansdown is efficient and provides good customer service, but I think it needs to either throw in investment advice or start rebating some trail commission to offer a compelling deal for pension funds the size of yours.