Recently I had reason to rank the funds available via a Hargreaves Lansdown Vantage SIPP by their TER. Of course, it isn’t in HL’s best interests to make this easy so I ended up having to work it out the hard way. I’ve compiled a list that is correct as of around Friday August 1st, a portion of this is below. What I was looking for was a list of funds with a “real” TER of 1.1% or less. To get “real” I’m calculating the max of HL’s advertised TER and Annual Charge with their special magic additional charge factored in where it is applicable. HL add another 0.5%+VAT (0.5875%) to the AC for some funds, as far as I can see this mainly because they don’t like people investing in index-linked funds.

What’s the point? Comparing the HL SIPP to stakeholder/personal pensions. Why this criteria? Because the cheaper stakeholders and personal pensions are generally available at a flat/average annual charge <1% if acquired via a discount broker. Mostly these pensions offer only a small range of funds you can include in your pension portfolio. So, this list aids a like-for-like comparison of what is supposedly the cheapest SIPP (supposedly offering >2000 funds) on the market with market-leading non-SIPP pensions (typically offering from 10 to 300 funds.)

I chose 1.1% as within this range, with appropriate investment weightings, you could put together a fund portfolio with an average TER of <1%, thus somewhat competitive with the stakeholder/personal pension options. I’ve also filtered the results to include only accumulation funds, and to leave out any funds where the net initial charge is greater than 0.

My verdict? Given my filtering parameters the HL SIPP has about 60 investment options with which you could possibly put together a pension portfolio similar in overhead to good stakeholder or personal pensions. This typically has much more choice than a stakeholder, but less than many personals. However, it can be observed that the selection of investment choices mainly focus on local equities and bonds with a bit of money market thrown in. Notably this selection contains no property investment funds, which are generally considered an important part of a balanced portfolio (though how happy you’d be with that idea right at this moment is debatable!) I seems that the lowest TER property fund is the L&G General UK Property Trust with a TER of 1.29%, so if a small part of your portfolio it could be possible to include this and still average <1%.

Anyway, the list:

So, if you put a large weighting into the HSBC FTSE All-Share fund you could potentially bring down the average significantly (and several sources of advice do suggest having a sizable proportion of your portfolio in local equities, especially when 20+ years from retirement.)

I don’t know if all these funds are valid for investment in a SIPP, I do know that their minimum investment levels vary (some are 1000+.) This is, after all, a fairly rough assessment made by a total armature! It is also worth pointing out that several funds in HL’s index link to “fund not found” pages, I have no idea what’s up with that. Additionally, few of the funds are index based anyway, so for the majority the usual quality considerations for actively managed funds apply.

Finally, note I’m comparing an apple to oranges by taking into account just the parts of the apple that are orange-like. The important difference ignored here is that the HL SIPP allows equity investments with relatively cheap trading fees. If you want fully flexible trading within a SIPP then, from what I’ve heard, the HL SIPP is hard to beat. But my interest at the moment is comparing a SIPP to other options as purely a fund-container.

The above said, it should be noted that the HL SIPP’s trading capabilities can also have some relevance to holding funds! This is thanks to ETFs of course.

Complicated, no?

Based on this very, very rough consideration I think I’d prefer stakeholder or personal pensions over the HL SIPP if my investment focus was entirely on funds. I’d consider a strategy of beginning pension investments in one of these and holding that until it has a value high enough to consider the possibility of using a SIPP to provide access to ETFs. (Since HL’s dealing charges for larger transactions are reasonably good. That said, I haven’t got around to weighing up the pros and cons of ETFs in a SIPP wrapper. On the face of it you could invest in, for example, the iShares FTSE 250 ETF with its TER of 0.4% and only ever pay HL the initial trading fee. To have a better idea of this would require a survey of all the ETFs available.)

Disclaimer: this is not financial advice, I’m just thinking aloud (and am entirely unqualified to offer advice anyway!)

“British Gas has raised the price of gas by a massive 35%, piling misery on to millions of customers.”

I know the media is no stranger to hyperbole, but really? In the time of “credit crunch” and “mortgage crisis” I’d expect to be immune (they may not be exaggerated terms themselves, but they sure spawn many words of doom and gloom.) It seems I’m not actually desensitized to financial melodramatics however, I had to shake my head at this one (I’m a BG customer, through laziness, as opposed to love of them.)

Piling misery onto millions of customers? That’s a lot of misery. I think BG supplies around 16 million households (~47% market-share), so “millions” does cover its customer base, but I suspect it is over the top on the “misery” front.

Our gas bill is £30 per month, the 35% rise adds another £10.5. This is below average for UK households, since there’s only two of us. The average annual gas bill is apparently a whopping £630, making the average monthly increase just over £18.

So, is £18 quid a month misery? Maybe for a few who’re already right on the line, but for millions? Are things in the UK that bad? It does make one wince when looked at over the whole year: £220. Another thing to remember is the regressive nature of energy costs, the utterly destitute get some financial breaks, but the majority on low incomes do not. If we earned half our salaries we’d pay the same gas bill, as we would if we earned twice.

To put the rise in some sort of context: £18 is equivalent to about 6 pints of beer, or a generous Indian take-away for two, or 3 20-packs of cigarettes (I had to look that one up of course!) Even if you double that to £36 it seems, while significant, unlikely to be a cause of misery for millions of BG customers.

All the same, maybe I should look into switching gas suppliers. Misery it may not be, but a £ is a £.

(All gas and electricity suppliers are upping their prices at the moment of course. Wholesale gas/oil/coal prices are way up, so no surprise. BG does tend to just rely on the entrenched customer-base though, thus they’re usually one of the worst on prices. The joys of business as a former government monopoly!)