- Original Poster
- #1
I've hit the age of wind down and have started to tap into my private pension pot ahead of the State pension kicking in. At which point I will reassess how I utilise the pension fund. The pension fund is a SIPP managed by a financial advisor so incurs fees from the SIPP manager (0.5%) and the financial advisor company (0.5%). I have received a letter advising the financial advisor outfit is raising fees to 0.75% and raising the minimum to £2,250 per annum.
While the pension pot remains largely intact the 0.5% FA cut is over the minimum charge, As drawdown commences then the minimum charge will come into play. I have modelled the impact of the proposed FA charges hike:
At current drawdown (pre State Pension age) the pot will expire two years earlier under the new higher charges structure, at 79 rather than 81. I don't actually plan on maintaining the current drawdown levels once the State pension starts but this illustrates how the higher charges will impact the fund duration.
The FA fees will be 0.75% of the fund value at the outset rising to 20% in the final year of drawdown.
Assumption for the modelling - Conservative average growth of 4.5% p.a. and inflation average 3%.
I have advised the FA I'm not impressed by a 50% rise in fees that could end my pension 2 years earlier or the track to 20% charges over the drawdown period as the pot is consumed. The FA currently us Brookes McDonald managed fund options and they have consistently topped performance indices. I do have private investments in stock, ETF, commodities and currency set up in 2021 that have compound annual growth of 13.8% so a performance similar to the managed fund so I could, with some confidence manage my own funds where charges range 0.1% to 1%. The self managed option would need me to do some serious options research before moving the pension funds or just sacking off the FA but if I have one thing available now, it is time.
Any input from pensions experts would make enlightened reading.
While the pension pot remains largely intact the 0.5% FA cut is over the minimum charge, As drawdown commences then the minimum charge will come into play. I have modelled the impact of the proposed FA charges hike:
At current drawdown (pre State Pension age) the pot will expire two years earlier under the new higher charges structure, at 79 rather than 81. I don't actually plan on maintaining the current drawdown levels once the State pension starts but this illustrates how the higher charges will impact the fund duration.
The FA fees will be 0.75% of the fund value at the outset rising to 20% in the final year of drawdown.
Assumption for the modelling - Conservative average growth of 4.5% p.a. and inflation average 3%.
I have advised the FA I'm not impressed by a 50% rise in fees that could end my pension 2 years earlier or the track to 20% charges over the drawdown period as the pot is consumed. The FA currently us Brookes McDonald managed fund options and they have consistently topped performance indices. I do have private investments in stock, ETF, commodities and currency set up in 2021 that have compound annual growth of 13.8% so a performance similar to the managed fund so I could, with some confidence manage my own funds where charges range 0.1% to 1%. The self managed option would need me to do some serious options research before moving the pension funds or just sacking off the FA but if I have one thing available now, it is time.
Any input from pensions experts would make enlightened reading.
