4 Apr 2014, 12:07pm
personal finance:
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  • Hargreaves Lansdown saves the day at the eleventh hour of the old tax year

    I’ve never had any dealings with HL, because the Ermine is a cheapskate when it comes to platforms, and Hargeaves Lansdown has the rep of being a high-cost full-service shop. However, given that that nice Mr Osborne seems to indicate that we can now draw our pension funds in full subject to regular taxation, I want a SIPP. Held in cash, possibly, though I need to reflect on that at my leisure. The rationale is here – although I can’t draw it as of yet, I’m not far from the 55 cutoff.

    When I researched the original article I looked at Cavendish Online, for a stakeholder, which would be the cheapest. But they wanted me to fill in forms sent through the post with all the money laundering fun and games of certified copies of this and that. There’s not enough time for that given that the end of the tax year is tomorrow so I didn’t fancy my chances with the post. Online is the way to go.I would have thought a SIPP wouldn’t need all that garbage because presumably they go to HMRC and go ‘have you got any records of this geezer with national insurance number xxx name An Ermine living at this address. If it matches, fine, if not the alarm bells go off and somebody sends a SWAT team out. But no.

    So I attempted with TD Direct, on the principle I already have an ISA with them, so all the know your customer malarkey has been done already. Had a go a couple of days ago, they seem to have lost the application, and certainly haven’t asked me for any money yet. In the unlikely event they find it and do something I’ll tell them they’ve missed their chance under the 30-day cooling off rule, basically for gross incompetence :) They know what the end of the tax year is all about, FFS, and although I normally expect people to get their act together about the end of the tax year for ISAs and SIPPs it’s not like Osborne gave us huge amounts of notice to process what’s changed and how to use it.

    Since I am a canonical example of somebody who can use a short DC pension to my advantage I want some. And since I have no income, the most I can lob in in a tax year is £2880, so missing out this tax year costs me £720 (less running costs). As a minor snarl, why is it that whenever I fill in a form and it has status of employment, do they have no entry of Gentleman of Leisure? I am not employed, and I am not unemployed either. I’m not down the Labour Exchange claiming JSA. At least HL had the ‘other’ category.

    So I take a leaf out of Boardgamer’s book, and figure I may as well give it a go.

    Hargreaves Lansdown know the tax year is ending

    Hargreaves Lansdown know the tax year is ending

    Obviously I simulated the effect of their charges; there are no opening charges, but there is a 0.45% p.a. hit on all investments (including shares!!!!) and there is a stupendous £354 flexible DD/exit charge. So be it, there’s still a win from the £720 the taxman lobs into the pot, and since these are savings I will be living on anyway I may as well park them in a pension and get my tax back from them – it beats the hell out of the interest on any cash savings account I can get.

    Now I have to say that as I went through the application I saw why HL gets its rep as a slick operation – they took the cash via a debit card, opened the account, allowed me to defer investment choices to later and the whole experience was a lot better than the un-joined-up mess that TD were offering. They may still manage to make a muddle somewhere but so far so good. Even with that shocking exit charge the simulation indicates I am good for about a 16% ROI on cash over the next three years after costs and assuming 3% inflation. 5% p.a. real return is worth getting out of bed for. Presumably all the know your customer crap is coming my way, but at least that can be done at my leisure after the deadline.

    Using Hargreaves Lansdown’s website brought it home to me just how crappy all the low-cost platform websites I’ve used were. TD Direct probably just about get the wooden spoon award for usability, though I don’t really get on with Charles Stanley that well either. CS looks prettier but I still get lost in it. III’s was serviceable but the funds selection was truly horrible, hopefully they’ve improved it since I told III to sling their hook for ramping charges.

     

     

    4 Apr 2014, 1:07pm
    by Nathan


    I started to use TD Direct this year, seemed relatively usable to me, try buying some Gilts at XO for some real old school face palms.
    Gilts are priced in pence, their front/mid tier thinks it’s pounds much hilarity ensures, just switch it off you muppets.

    All in all I’d agree with your assessment of low cost platforms, especially when you’re throwing around big lumps of cash; just not really fit for purpose.

    Luckily all my misfires to date have failed safely in that I bought or sold less than intended, but really shouldn’t have any misfires at all.

    4 Apr 2014, 7:02pm
    by MrBeethoven


    I have accounts with TD, Cavendish/Fidelity, Charles Stanley and Hargreaves Lansdown. I have to say that HL is in a class apart, just about everything I can think of is better with their service – apart from the 0.45% platform fees.

    Despite how good their service is I was planning to leave due to fees but I thought it was worth asking for a reduction. I didn’t hold out much hope with only just over £100k across SIPP in drawdown and a small ISA. To my surprise I was offered 0.25% within a couple of days of sending a secure message.

    I stayed and have since opened SIPPS for my adult daughter and son and my non-tax-paying wife, the latter to put in 5 tax years worth of £3600 gross before then drawing down as quickly as possibly whilst staying under the personal allowance. All 3 new SIPPS were opened immediately and up and running within hours of the start of the next business day. As far as I can tell all the identity stuff was done electronically, no requests for ID.

    The only thing stopping me using them for my 2014/15 ISA is that I’m well over the safe £50k level.

    Re the platform fees, the 0.45% doesn’t matter if you stay in cash. For my wife we will go 100% L&G All Share Index TER 0.1% for 2 years then 50/50 cash in year 3 and then 100% cash in years 4 and 5 as the inflation loss won’t matter so much in the last 2 years before drawing down.

    Re the Flexible Drawdown fee, after April 2015 the fees may be very different, hopefully lower, as drawing down should become a lot simpler due to the changes announced in the budget.

    Don’t forget that if you are investing in funds you get a loyalty bonus, which in most cases covers the 0.45% with surplus to spare.

    Most reviews I have seen seem to miss that.

    Also with shares the annual charges stop at £200.

    Love this bit: “If it matches, fine, if not the alarm bells go off and somebody sends a SWAT team out. But no.”

    Gilliam’s Brazil comes to ‘burbia!

    Interesting reading ermine.

    Thanks to your very useful comments on my own personal pension dilemma, I took another look around myself and settled on a Fidelity SIPP as they seem very low cost at 0.35%. I don’t think there are exit charges as such although they do say “Drawdown advice will need to be obtained and charges may apply” – I’m sort of hoping that may change at some point in the next 5 years before I need the money. There is no cost for switching funds.

    They took my money via a debit card and let me leave it in cash for the time being until I decide how to invest it. Things look OK so far but the paperwork hasn’t yet arrived so I have yet to see what the whole on-line experience is like.

    I take your point about iii. I use them for my S&S ISA but I have to resort to searching for fund information etc on Trustnet and HL as the iii search engine is dire, although the charges suit me and everything else in the interface works fine – too expensive for my tiny SIPP though.

    @Nathan in fairness to TD I should clarify the grizzle on usability is that I have to keep my wits about me and it isn’t user-friendly, rather than that the information is actually wrong. The whole funds experience is ghastly. However, since I trade very infrequently it doesn’t get in my way too much. For someone whose edge is calling buy and sell, I’d say the .15% premium on HL wouuld be worth it to see what you’re doing properly.

    @MrBeethoven Didn’t realise that on cash. I’m probably going to stay in cash because I’ll only be in there for two years and a month or two to get four years of tax bung. Hopefully they’ll have sorted that flexDD/exit charge – I mean how hard is it going to be – gimme all the money back HL and I’ll duke it out with the taxman :)

    @Robert ah but I’m a tightwad – I don’t normally expect to pay ‘owt at all for holding shares! At least it tops out after a portfolio of 57k. Mind you, I now see what those charges are doing for you in improving the whole customer experience!

    @Monevator – well, you have to pump up the narrative somehow. BTW, where is your take on the pension changes – the UK’s hard-pressed PF community needs some of TA’s clarity on this subject!

    @Cerridwen – well spotted – Fidelity seems to be the lowest cost! The helpful guys at Langcat show they are spot on for a modest SIPP target!

    Funny you say about iii – I still use my old iii site account to research shares and swipe charts from for here. That’s probably because I am used to their interface, I’ve used them to keep an eye on share prices since 1998. However, I’m not really a funds sort of guy, indeed the whole RDR experience has put me off funds all round. I used to love it when other people would sponsor my purchase of index funds for free but now I am meant to pay for it I am drawn to ETFs, as my holding dwell time is in terms of years not months.

    5 Apr 2014, 2:42pm
    by BeatTheSeasons


    HL refused to lower the platform fee on my ISA but, following a complaint, they have now agreed to waive the £25 per fund exit fees, as long as I piss off within a month.

    I’ll be moving to Charles Stanley, who have no exit fees if I leave before the end of the year, then rising to £10 per fund. So I’ll have 7-8 months to decide if I can cope with their website.

    @Robert – your comment reminds me of people I know who tell me they make hundreds of pounds out of cashback websites. I prefer to save 100% up front by not paying for things that are unnecessary, like expensive active fund managers promoted by HL for example.

    5 Apr 2014, 2:44pm
    by BeatTheSeasons


    PS – in fairness to HL they also bailed me out just before the end of the tax year by processing an ISA to SIPP transfer for me in double quick time.

    I agree with Mr Beethoven above, in that I have no complaint with them at all apart from their 0.45% fee. I suppose you get what you pay for. I’ll be keeping my SIPP with them for the moment as they’re a bit more competitive on this.

    5 Apr 2014, 6:23pm
    by Neverland


    Is a nice website worth high fees?

    Not in my book

    I will use the ugliest website on the world wide web to save 0.1% in annual costs

    I loved this blog. Thought you captured a lot of the problems in dealing with platforms brilliantly. No-one wants to pay more than they have to but when you’ve spent afternoons banging your head on the desk and groaning gently (or loudly) at inept service and broken links, there’s a point where price is a factor not the be-all and end-all. I think it is hard to beat Fidelity and HL today unless you’re a shares/ISA-only creature when The Share Centre, Barclays and Interactive are worth a look I think. I quite like Charles Stanley too – your comments were interesting.

    Next Tuesday I’ll be dusting off my passwords for 14 platforms and having a D2C testing day – follow me on Twitter @hamackay unless it’s sunny in Suffolk and you have better things to do!

    9 Apr 2014, 1:57pm
    by ermine


    @Neverland

    Which implies one large stake and a low turnover?

    I split mine across platforms because of the FSCS compensation limits. I’m not hugely a funds sorta guy, but TD’s platform gave me a hard time with funds simply because their display is obscure and doesn’t really show you what you have. I didn’t make the mistake Blackrock were trying to lead me into but it would have been far too easy.

    @Holly aha, TA’s adversary on radio 4 – welcome :)

    I use CS for Mrs Ermine’s account, so much of the problem is I’m not that used to it. CS’s monthly purchase must be > 1 unit even of an OEIC is stupid and a pain with Vanguard LS100.

    The trouble is those high charges add up, scaling with the amount and over time. I split my ISA across platforms because of the FSCS limit. I used to be with Barclays as a legacy Schwab ISA but left them for ramping fees!

    […] serve we well when the Chancellor decided to improve the usefulness of DC pension savings no end – just before the end of the tax year! So I needed a place to stash £2880 with a pension firm, pronto, and HL were the […]

     

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