Wealth managers can charge up to £2,220 to run a £100,000 personal pension over the first year, data from Nutmeg has revealed, with its chief executive stating that providers need to do more to ensure they communicate their costs as clearly as possible.
Analysis conducted by Compeer found that customers of both Investec Wealth and Management and Killik and Co (for their discretionary offering) would be charged £2,200, due to a mix of management and commission fees.
Investec’s management charge is £1,800 alone, while Charles Stanley Alpha Sipp holders must pay a range of fees totalling £1,290; £150 in transfer in charges, a £300 administration fee, £540 in management fees and a £300 UK equities commission’s fee.
Nutmeg of course countered this by pointing out a pension of £100,000 invested with them would cost just £630 in fees in the first year – the cheapest option from the wealth managers examined and more comparable with those charged by execution-only stockbrokers.
For example, for a £100,000 investment, Interactive Investor charged £276, while at the other end of the scale, Barclays Stockbrokers charged £488 for its offering.
However, the research noted that these providers still bill customers for a range of different measures, such as account administration, platform fees and commission, with the onus on the investor to make all investment decisions, rather than utilising the investment expertise provided by a wealth manager.
Nick Hungerford, founder and chief executive of Nutmeg, commented that the industry is still embroiled in complexity and there is still widespread confusion amongst the public.
“When choosing a pension, customers must navigate a maze of charges in order to work out how much they will have to pay back in fees, and this is no mean feat for even the most experienced investor.
“There’s just no excuse for this - providers must do more to ensure they communicate their costs as clearly as possible so the customer gets the full picture.”
He added that the analysis demonstrated that certain pension providers are charging over the odds for their service.
“At Nutmeg, we charge just one single annual management fee for our personal pension and still provide an expertly managed investment service for all of our customers.”
A spokesman for Killik & Co stated that while transactional costs are higher in year one as a portfolio is constructed, a comparison of fees between peers in year two would give a more accurate comparison. “As the initial investments are made in year one, there is likely to be little need to alter a well-constructed portfolio, and therefore little or no transactional commissions paid.”
“In year two on a £105,000 portfolio, Killik & Co’s fees could be as little as £1260 (1 per cent plus VAT) on a discretionary basis, or £260 on an advised portfolio (12 lines of stock at 20 per annum and £20 account charge),” he added.
| Charles Stanley Alpha Sipp | £150 | £300 | £540 | £300 | £1,290 | ||
| Investec Wealth & Investment | £1,800 | £280 | £140 | £2,220 | |||
| Killik & Co (Advisory) | £320 | £740 | £740 | £1,800 | |||
| Killik & Co (Discretionary) | £1,260 | £480 | £480 | £2,220 | |||
| Nutmeg | £630 | £630 | |||||
| Barclays Stockbrokers | £90 | £155 | £147 | £96 | £488 | ||
| Bestinvest | £315 | £60 | £375 | ||||
| Charles Stanley Direct | £120 | £255 | £80 | £455 | |||
| Fidelity | £61 | £147 | £72 | £280 | |||
| Hargreaves Lansdown | £200 | £189 | £96 | £485 | |||
| Interactive Investor | £60 | £176 | £40 | £276 | |||
| JPMorgan | £300 | £80 | £380 | ||||
| TD Direct Investing | £240 | £126 | £100 | £466 |
The methodology for the research breaks down as £60,000 invested in equities and £40,000 in funds, with eight equity trades (at £5,000 each) and four fund trades (at £10,000 each) made within the first year.
It was assumed the value of the pension is £105,000 at the end of the year (prior to any annual charges), with the same proportion of equities and funds as at the start of the year.
The charges quoted are inclusive of Vat, but the additional charges and external manager fees are excluded, as they can vary from one fund manager to the next.
peter.walker@ft.com
