Who is the best pension provider?
Who is the best Pension Provider?
I get asked this question many times sometimes by clients and sometimes by friends at dinner parties and there is no one answer as it depends on who is asking me. A client who is looking to invest a small amount each month and is worried about charges and expenses then the answer for them will be very different to the client with a £650,000 pension pot who is concerned about investing in commercial property.Ultimately many clients when asking that question are referring to cost, who is the cheapest, or most ‘cost effective’.
Below gives you a few examples of costs of each of the providers out there;
Scottish Life 0.8% – 1.2%
Liverpool Victoria 1.1% – 1.3%
Standard Life 1.5% – 2.5%
Prudential 1.6% – 3%
Aviva 1.2% – 2.5%
Aegon 1% – 2%
Wrap Platforms 1.2% – 3%
Non-advised, Do it Yourself
Hargreaves Lansdowne 1.4% – 2.5%
Fidelity 1.6% – 3%
The charges here are all inclusive, this means they include costs for funds, platforms or the pension plan itself, adviser charges, admin fees. This is the total cost full stop.
What is very interesting is the costs of the non-advised providers such as Hargreaves and fidelity. The headline costs may well be £195 or £99 but the fund cost in each plan on average work out at around 1.8 – 2% and Hargreaves get a rebate of upto 1% some of which they keep and some they rebate back to the fund. This means you will often pay more for a plan with them and it doesn’t even offer advice with it and therefore you are not covered by the Insurance of an adviser should you not get it right.
Effects of charges
As you can see from the chart (please click on it to see it better) the effects of charges are huge but the point of the charges is to make sure your money is working so the theory is that returns will not be zero and the returns are there to make up for the costs. Really this table highlights the return over and above any investment that has to be made in order to get value for money.
Of course everyone wants something different, a SIPP provider or Wrap platform is great for flexibility but may well cost you slightly more. If its cost and efficiency you are looking for then not much will touch Scottish Life as they are ‘cost effective’ offer some great investing options and know about drawdown and the like so do allow something different. If you are keen on certain funds then an LV or wrap platform may suit you, Standard Life, St James Place are expensive and not very flexible.
The DIY pension providers such as Hargreaves and Fidelity are for the person who doesn’t like advisers and is happy to pay a premium to not be advised but should be avoided unless you are happy not to have your pension protected.