Investec survey makes miserable reading
A study by Investec Wealth & Investment has shed light on the fact that fewer than one in three investors feel they have the expertise to manage their personal pension effectively.
The research revealed that around 50% of Self-Invested Personal Pension holders look after and make the investment decisions either on their own or with the aid of a partner. Yet when they were asked to explain how confident they feel about getting the highest returns on their money, less than one third of them feel they have the necessary skills to deliver the result.
Incredibly, the research discovered that just 15 per cent of those who manage the investment decisions of their own SIPP said they were considering or even likely to enlist the help and the services of an investment adviser within the next year.
Just over one third of those questioned said they felt very confident they possessed the desired level of time commitment needed to get the best returns. 28 per cent believed they had the necessary skills and abilities to ensure their SIPP performed well in the face of current challenging volatile financial markets.
Head of financial planning at Investec Wealth & Investment, Chris Aitken said: ‘Many people set up a SIPP thinking they will have the time and expertise to manage it properly but they realise that theory and reality can be very different.
‘Managing a SIPP properly requires time, expertise and a strong understanding of market risk and appropriate asset allocation. Unfortunately, for many people this is simply too difficult.’
The research also unearthed the fact that only 45 per cent of the people who manage their SIPPs without the aid of a professional adviser actually comprehend how their SIPP providers levy charges on both a transaction and an on-going basis.
When questioned specifically about the level of charges being taken from their SIPPs, just over two thirds of those surveyed believed that SIPP providers should be more transparent in their dealings and come up with more simple structures for applying charges.
Aitken added: ‘This is a poor reflection of some SIPP providers and it’s also a call to action for SIPP holders to better understand what they are paying for and whether or not their current plan represents good value and is the right product for them.’
‘Many SIPP holders will probably not fully understand the flexibility and power that a SIPP can provide.’
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Over time, charges can wipe out a huge part of your fund. We like AJ Bell because there are no set-up costs. If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund. And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment). However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.
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