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Isakndar

High Charges On A Contracted Out (Now In) Pension Pot

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I have a contracted out pension fund with L&G for which there are no more contributions as I have contracted back in. It is currently valued at £49K ( high because recent fund performance has been surprisingly good which I do not expect to last) and incurs changes of about £36 per month. This erosion of the units held is a nagging concern and I am stumped as to what to do with it.

I have thought about a SIPP where the charges are lower (are they?) and I may want to add some other defunct employer pension funds to it and make a regular contribution.

The thing is I do not know if I can do this with a protected rights pot - ostensibly the charges are low for the L&G product because it is a contracted out scheme and do not know whether it would be better to move it. And I have come to distrust Financial Advisers for the many lemons I have been persuaded to buy over the past two decades. If i had put all of the contributions sans tax rebates into a savings account over the past 20 years I am certain I would have larger funds now.

So I guess I am looking for other people experiences with what they did with their Contracted out funds once they contracted back in.

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You can move your protected rights pot to a SIPP and combine it with other funds (employer schemes) and regular premiums. There are very few restrictions on protected rights funds these days, and those that remain may disappear in the years to come. It sounds like for your purposes you can treat it as if it was just another pension pot.

I guess from your £36pm and £49k fund that you're paying an annual management charge of a little under 1% (or perhaps 1%, and you've rounded your figures). If so that might be beatable, but you'll also find personal pensions and SIPPs with higher charges. Some people argue that performance is more important than charges; if you're paying a 2% per annum charge but getting growth averaging 7% per annum that's better than paying 1% per annum and getting growth averaging 1% per annum, isn't it?

If you're determined to go it alone then you need to think about how important this fund is to you, how close you are to retirement, what outgoings you're likely to have when you get there, how confident and competant you are choosing where to invest the money, how much of it you could afford to lose and how much you need to gain, and how much you can and should contribute to ensure you have the right level of income in retirement. And whether you'll be supporting anyone else on that income. And probably a few more things I've forgotten.

A good financial adviser will help you consider the above and put a strategy around your retirement planning. You might consider speaking to a few, at the very least they'll give you some tips. Remember that a company like Hargreaves Lansdown will offer to accept your money without anyone earning "commissions" but they'll also offer you very little help. Good advice is worth paying for, the problem is working out whether the advice you're paying for is good or not.

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Take a look at Hargreaves Lansdown.

I moved a personal pension into their SIPP last year and am pleased with the outcome.

Their fee's are low, the options to self invest are huge and they send interesting, thought provoking newsletters each month for those prepared to take control of their own investments.

http://www.h-l.co.uk/

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You can move your protected rights pot to a SIPP and combine it with other funds (employer schemes) and regular premiums. There are very few restrictions on protected rights funds these days, and those that remain may disappear in the years to come. It sounds like for your purposes you can treat it as if it was just another pension pot.

Thanks for the input - I understand that the last of some restrictions will be removed in 2012, but I do not understand what these are.

I guess from your £36pm and £49k fund that you're paying an annual management charge of a little under 1% (or perhaps 1%, and you've rounded your figures). If so that might be beatable, but you'll also find personal pensions and SIPPs with higher charges. Some people argue that performance is more important than charges; if you're paying a 2% per annum charge but getting growth averaging 7% per annum that's better than paying 1% per annum and getting growth averaging 1% per annum, isn't it?

I actually cannot find in my literature what the actual annual management charge is but something around 1 to 1.2% sounds about right - the fund charge though is low at 0.15%pa. My experience is that it is rare to get growth at 7% pa for years on end it seems most funds perform less well, therefore in my book minimising charges is significant. I guess I am a cautious person, if it were not for the tax advantages I may have put my cash elsewhere.

If you're determined to go it alone then you need to think about how important this fund is to you, how close you are to retirement, what outgoings you're likely to have when you get there, how confident and competant you are choosing where to invest the money, how much of it you could afford to lose and how much you need to gain, and how much you can and should contribute to ensure you have the right level of income in retirement. And whether you'll be supporting anyone else on that income. And probably a few more things I've forgotten.

He he - Yes that is a long list - I have another 15- 20 years to go before retirement and have managed to acrue a large fund of made up of 4 seperate pension funds and some investments, I feel this is a 'risk' I should be able to take.

Good advice is worth paying for, the problem is working out whether the advice you're paying for is good or not.

Well there's the rub.

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I have a contracted out pension fund with L&G for which there are no more contributions as I have contracted back in. It is currently valued at £49K ( high because recent fund performance has been surprisingly good which I do not expect to last) and incurs changes of about £36 per month. This erosion of the units held is a nagging concern and I am stumped as to what to do with it.

I have a SIPP with Hargreaves Lansdown, which I started in 2008. No transfer, just contributions, plus tax relief and investment performance. Its current value is more than three times yours, while their monthly charge is less than half yours.

Having said that, we may not be comparing like with like. Your charge might be legitimately paying for something more than mine, or might be just a ripoff.

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I have a SIPP with Hargreaves Lansdown, which I started in 2008. No transfer, just contributions, plus tax relief and investment performance. Its current value is more than three times yours, while their monthly charge is less than half yours.

Having said that, we may not be comparing like with like. Your charge might be legitimately paying for something more than mine, or might be just a ripoff.

I'm as much a fan of HL's offering as anyone, in fact I have some of my own investments with them, but I'm surprised at this. Most funds you can invest in via HL seem to have annual charges of at least 1%, often more. If you don't mind me asking Porca Miseria, which funds have you invested in for less than 0.5% annual charge?

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I have a SIPP with Hargreaves Lansdown, which I started in 2008. No transfer, just contributions, plus tax relief and investment performance. Its current value is more than three times yours, while their monthly charge is less than half yours.

Having said that, we may not be comparing like with like. Your charge might be legitimately paying for something more than mine, or might be just a ripoff.

If that is the case then I will transfer at least this pot to H&L but Voice to Reason suggests the costs are comparable to the L&G scheme.

Even so I would like to revitalise the fund and take control rather than let it languish uncontributed to. I could do this with L&G I am sure but I already have a PP with them with a much larger fund which I intend to keep funded. So diversity is also a goal.

Has anyone had a poor experience fo HL they would be willing to admit to?

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I'm as much a fan of HL's offering as anyone, in fact I have some of my own investments with them, but I'm surprised at this. Most funds you can invest in via HL seem to have annual charges of at least 1%, often more. If you don't mind me asking Porca Miseria, which funds have you invested in for less than 0.5% annual charge?

That's H-L's own charge for shares directly held in the account (they're - from memory - 0.5% capped at £200/year).

Charges within a unit trust are separate, which is also why I suspect it may not be directly comparable to L&G's charge (not having any information on what that covers).

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That's H-L's own charge for shares directly held in the account (they're - from memory - 0.5% capped at £200/year).

Charges within a unit trust are separate, which is also why I suspect it may not be directly comparable to L&G's charge (not having any information on what that covers).

That makes more sense.

Isakndar, HL won't be cheaper than what you have already. There's a 0.5% charge for HL plus the charge for the funds you invest in which is likely to be at least 1% per annum and I've seen funds with 1.75% per annum charges. If you're currently paying 1% all in then it's clear you'll be charged more.

What you will get with HL is a vast array of investment options, and some of those options will perform very well. You said earlier (correctly) that many funds underperform though, and that as such you value cost over everything else....??

Incidentally diversification doesn't really apply to pension providers. Your money isn't actually held by L&G or Hargreaves Lansdown, they're just administrators for it so you don't need to diversify and you're not at risk if either fail.

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Isakndar, HL won't be cheaper than what you have already. There's a 0.5% charge for HL plus the charge for the funds you invest in

in HL SIPPs - the 0.5% charge only applies to certain funds - the stand out fund (for me) lacking this charge is the institutional HSBC index fund at 0.25% AMC WITHOUT the additional 0.5% HL charge

Edited by Si1

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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