NEWSLETTER: Issues involved in changing SIPP or SSAS Provider; the future SIPP marketplace; hidden fees and Flexible Drawdown
Contributed by MW Pensions
23 November, 2012
Contributed by MW Pensions. [www.mwpensions.co.uk]
Changing SIPP or SSAS Provider
Our proposition has always been service led. We believe in quality administration provided by professional staff, coupled with personal service. Advisors and clients always deal with the same team of administrators. We also believe we provide this at a competitive price. We may not be the cheapest but we believe we offer the best value for money.
One of our philosophies is that we remove barriers. So if someone has an existing SIPP or SSAS, we do NOT charge a take on fee. Our view is that the client will have already paid one when they set up their SIPP or SSAS, so why should we ask them to pay for a second time just so that they can transfer to us?
We must be doing something right, because we are finding an increasing number of existing SIPPs are coming to us. We always like to find out why this is and the answers are interesting.
For SIPPs, we find that the prime reason is service. We find that advisors look for efficient personal service - which is precisely what we offer!
For SSASs, increasingly we are finding that it is price led as many other SSAS Providers seem to be hiking their fees significantly (perhaps because they are concentrating on the SIPP market rather than the SSAS market: but that is their decision). Like SIPPs, SSASs receive personal service.
We appreciate that advisors have to justify to their client any recommendation to move to a new SIPP or SSAS Provider. If our fees are higher than those of the existing Provider that can be a potential problem. However, we would ask advisors to also consider:
- The service being provided for the fee is it a personal service or a call centre?
- Are they comparing like with like? For instance does the existing Provider have additional non-transparent charges eg by taking a turn on the bank account or on investments? We do not. [See also our section on Hidden fees below.]
- Is the existing Provider causing extra work for the advisor because of their inefficient service? This may mean that the advisor would be forced to increase their own fees to the client to cover these extra (avoidable) costs. These costs could be higher than the net increase in direct SIPP fees. This may be particularly pertinent post RDR.
- How strong is the current Provider? The FSA are closely looking at Capital Adequacy we have over twice the minimum FSA-required capital.
- Do you know the SIPP provider personally? One of our IFAs recently (very kindly) told us that one of the reasons they use us is that they trust us.
The future SIPP marketplace
Its a rather grandiose title, but we have been carrying out our own internal analysis of the SIPP market and the way we see it going.
Many new SIPPs in recent years have been small SIPPs typically less than 100,000 and often less than 30,000,
These have been in two main areas:
- Joe Public going direct, not using an IFA, and setting up an online SIPP with one of the well-known providers of such general public SIPPs. This is not a market we (or indeed the IFAs we deal with) are in.
- Thousands (yes thousands) of small SIPPs (typically 20,000) set up to invest in UCIS. Most of these we believe are a disaster waiting to happen. There are already well-known and public examples such as Sustainable Wealth. Most of these were not HNW or SI investors
We believe that post RDR new SIPPs will substantially be for HNW and SI clients. In other words, SIPPs will go back to what they were originally for the better off.
Accordingly, going forward, we have 3 main types of SIPP for new clients:
- Acorn Lite: which allows cash plus up to 2 regulated investments (which can include a DFM and/or platform). There is no set up fee and the annual fee is 275 VAT. We believe this is extremely competitive and will be suitable for the majority of an IFAs HNW/SI client base.
- Insight SIPP: which is effectively a full SIPP and will allow a wide range of investments, including up to 3 esoteric investments for example. There is a 200 set up fee and an annual fee of 500 (both plus VAT). This will be appropriate for an IFAs more complex SI/HNW clients. (There is no set up fee for existing SIPPs)
c. Property SIPP: for clients who wish to use their SIPP to invest in property either solely or via a syndicate. This service can include the arrangement of conveyancing via solicitors, valuations via
a RICS surveyor, mortgage via a bank and property insurance via a broker. Please ask for full
details of our fee schedule.
We believe that these 3 products will cover the vast majority of an IFAs clients. All have personal service. There is no minimum or maximum fund size, the fees are extremely competitive, and remember for existing SIPPs (and indeed SSASs) we charge no transfer/set up fee.
Please contact us for more details of any of the above.
We make no apology for returning yet again to this subject.
We have never taken any commission on investments in our SIPPs or any turn on bank interest. Many other SIPP providers do. Recently John Moret, of MoretoSIPPs has issued comments on the FSAs disclosure requirements that will force SIPP Providers to disclose interest retained on bank balances.
Moret says from my experience of the industry, interest retained on cash balances can account for at least a third of the operators overall revenues (in one or two cases I believe it may be higher) the rest comes from charges and perhaps other commissions. Note the last comment re other commissions from investments, platforms etc. We reiterate IFAs must check whether the SIPP Provider they use takes any hidden income.
As Moret says, theres one simple back of the envelope check. Multiply their total number of SIPPs with their average SIPP fee and the difference between that and their total income is what they get from hidden fees. It works for us, as the hidden fee income is a big fat zero! (see link below)
We are finding an increasing interest from some IFAs in Flexible Drawdown as a result of the low maximum income available under Fixed Drawdown. Typically it is for clients with in excess of say 500,000 and who are over 65, so they have a significant State Pension that counts towards the 20,000 Minimum Income Requirement. In many cases, the plan is for the member to withdraw as much as possible each year without going into the highest income tax band.
However, a number of SIPP providers are seemingly not offering Flexible Drawdown, so we are finding we are taking over SIPPs in order to facilitate that option. IFAs may wish to bear this in mind. Our fees for Flexible Drawdown are 250 VAT.
Gilt Yield for Drawdown
The gilt yields to be used for drawdown calculations are:
We do not give financial advice and no comments here are intended as such. The above information is based on our understanding of the legislation governing pensions at the time of writing. Before taking any action you should consult a qualified financial and/or tax adviser. Levels, bases of and reliefs from taxation may be subject to change.
This Newsletter is intended for professional advisors only, not members of the general public
MW Pensions Ltd
Oaklands Park, Hooton Road
Hooton, South Wirral, CH66 7NZ
Tel: 0151 328 1777 Fax: 0151 328 0707
e-mail: firstname.lastname@example.org Authorised and Regulated by the Financial Services Authority
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