August 2017
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Don’t become a ‘SIPPs pension sucker’

Hundreds of thousands of savers have realised that traditional pensions are a waste of time. For a start, you pay management and dealing costs of 2% to 3% for thirty or more years. That’s a lot of money and over five times what you would pay if you lived in Denmark or Holland. Moreover, the projected growth rates (Low 5%, Medium 7% and High 9%) which the worthless FSA allows pension companies to use are complete fantasy. They have never been achieved and never will be achieved. You’ll be lucky to get 2% a year. So, many people have turned to supposedly ‘low cost’ SIPPs (Self-Invested Personal Pensions).

At first sight SIPPs look wonderful. They usually charge less than 1% (0.5% is normal) and you can choose where to put your money. Great? Well actually, no. The problem is that many SIPPs savers (pushed by commission-hungry financial advisers or using companies like Hargreaves Lansdown or Fidelity) then put their SIPPs money into things like unit trusts. So not only are they paying say 0.5% for their SIPP, but they are also paying another 2% to 3% a year in fund management fees. Even worse, some SIPPs savers are going into ‘funds of funds’ – unit trusts which invest in other unit trusts. So they are paying at least three sets of management fees for 20 to 30 years – very generous, but not the way to build up a sizeable pension pot, at least not for themselves.

So what should a SIPPer do? The key is to keep your total management charges BELOW 1%. You can do this by finding some unit trusts you fancy, looking at their sales bumf on-line, seeing which are the main shares they hold and then buying those shares directly yourself with all dividends to be reinvested in your SIPP. ‘Simples’, as a meerkat might say

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