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Pension costs comparison - How we worked it out

How we worked it out

The lang cat used the following criteria to find out how investing in a SIPP with ii's fair flat fees and investment range compares with older style workplace and individual pensions.

For all example case studies, the lang cat assumed:

  • Future investment growth will be at 5%. This is for illustration only and is not guaranteed. Investment returns can go down as well as up.
  • An inflation rate of 2.00% throughout the period. Inflation is applied to regular contributions and to instances of fixed fees, but not used to adjust final projected values.
  • The transfer is to an ii SIPP on the Investor service plan.
  • For customers who prefer active investment, their annual investment costs would be 0.77%. This is the annual investment cost of the Royal London Sustainable Diversified Fund from the ii ACE 30 ethical investment range.
  • For customers who prefer passive investment, their annual investment costs would be 0.22%. This is the annual investment cost for the Vanguard LifeStrategy range from the ii Quick Start investments shortlist.
  •  Trading and other event related charges are not covered.

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For Hilary:

  • She was in a trust-based, defined-contribution occupational pension scheme.
  • That 0.62% in total product and investment charges is reasonably representative.
  • See Hilary’s case study

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For Satpal:

  • As Satpal was in a stakeholder pension the total product and investment charges assumption used in his case is based on the price cap set for those.
  • After a stakeholder pension has been held for 10 years or more (which would be the case for Satpal) this is currently 1%.
  • See Satpal's case study

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For Lena:

  • Her older workplace pension schemes were both Group Personal Pension contracts.
  • That 0.81% in total product and investment charges is reasonably representative for this type of scheme, also based on Department for Work and Pensions (DWP) research in 2015.
  • See Lena’s case study

For the typical workplace pensions comparisons, the lang cat also assumed:

  • An initial value of £150,000
  • Ongoing contributions of £200 each month
  • A total ongoing cost of 0.75% is a fair representation of the kind of charges applicable to a 2000s era personal pension contract and an unbundled structure, typical of this generation of contracts. For this example, a tiered product fee working out at 0.3% at the outset of the comparison and representative ongoing investment cost of 0.45%.Of course, depending on the funds chosen, these investment costs could be higher or lower.
  • That 1.05% in total product and investment charges is reasonably representative of a 1990s era personal pension contract. For these, a single investment led charge, was typical. So this figure was based on a sample of balanced managed fund costs from the ABI Pension Sector.

Passive investment example:

At the end of year 20 Product fees Investment fees Total fees Value of pension
interactive investor £5,828 £12,515 £18,344 £474,405
2000s personal pension £14,338 £24,552 £38,890 £442,320

Active investment example:

At the end of year 20 Product fees Investment fees Total fees Value of pension
interactive investor £5,828 £41,251 £47,080 £429,101
1990s personal pension £55,176 £0 £55,176 £414,722

 

Could you save £1,000s in fees?

You’ll need to review the costs of your own pension to discover exactly how much you might save, but the findings of our study are clear. If you have built up a good pension and are confident making your own investment decisions, you could be significantly better off with an ii self-invested personal pension (SIPP).

1.

Use our toolkit to find how to review your old pensions.

get started

1.

Open a SIPP or add one to your existing account.

apply now

3.

Start your online transfer when you are ready.

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Act now and save an extra £60

Open a SIPP by 30 September 2020 and pay no SIPP fee until April 2021. This means your service plan fee covers you for all of your investment accounts. Following the offer period, the ii SIPP fee is only £10 a month more.  Terms apply

The ii SIPP is aimed at clients who have sufficient knowledge and experience of investing to make their own investment decisions and want to actively manage their investments. A SIPP is not suitable for every investor. Other types of pensions may be more appropriate. The value of investments made within a SIPP can fall as well as rise and you may end up with a fund at retirement that’s worth less than you invested. You can normally only access the money from age 55 (age 57 from 2028). Prior to making any decision about the suitability of a SIPP, or transferring any existing pension plan(s) into a SIPP we recommend that you seek the advice of a suitably qualified financial adviser. Please note the tax treatment of these products depends on the individual circumstances of each customer and may be subject to change in future.

£0 SIPP fee promotion terms and conditions¹

  1. No SIPP fee shall be charged to all new ii SIPP accounts until April 2021 (the “Offer”) that are opened from and including 3 March 2020 to and including 30 September 2020¹ (the “Offer Period”). This shall include instances where a participant has submitted a full and complete application for a new ii SIPP account during the Offer Period but the account is not yet opened, where such delay is not attributable to the acts or omissions of the participant.
  2. The Offer is open to new and existing customers.
  3. These terms and conditions should be read in conjunction with the ii SIPP Terms. In the event of a conflict between these terms and conditions and the ii SIPP Terms, these terms shall prevail.
  4. After the Offer has ended, the SIPP fee you will be required to pay will be as set out in our Rates and Charges.
  5. All other fees, for example a drawdown fee which is applied once you start to take retirement benefits, are not subject to this Offer and shall continue to apply notwithstanding.
  6. We reserve the right to alter, withdraw or amend this Offer and/or these terms and conditions at any time without prior notice.
  7. All participants to this Offer agree to be bound by these terms and conditions.
  8. Interactive Investor Services Limited (“IISL”) is the promoter of this offer. The registered office for IISL is Exchange Court, Duncombe Street, Leeds LS1 4AX.

¹ Updated 28 August 2020