How have you found managing your own SIPP?
It’s been time-consuming, fascinating, empowering and nerve-wracking. I’m going to talk about financial advice, choosing funds and investments, and finding portfolio balance in later blog entries.
How did you choose a SIPP platform?
There’s lots of information about SIPPs and the different SIPP platforms that are available on the MoneySavingExpert website. We went for Interactive Investor (ii).
How have you found working with Interactive Investor?
Good. Not only are the fees low, but they have generally answered the phone quickly and seem to be able to answer a whole range of queries. The funds we have wanted to invest in have generally been available, the initial set-up went smoothly etc.
Can you pay for financial advice out of your ii SIPP?
When I asked ii this, they told me that you can get up to £500 out of your SIPP to pay for financial advice in any one tax year. You can do this a maximum of three times during the life of your pension.
How useful this is I’m not sure, since financial advisers on the whole understandably feel they need to spend time getting to know you and your finances before issuing advice. The going rate for writing a report with recommendations seems to be more like £2K.
How does the timing work when you trade a fund?
Once you’ve selected a fund and requested a trade through the ii website, it becomes ‘pending’. We noticed that when we requested a trade in the evening, it continued to show as ‘pending’ all through the next day, and showed as ‘executed’ the following morning.
At time of writing, the ii web app says: ‘Funds are valued once a day, with each Fund manager having a specified cut off time for orders to be dealt that day. Should your order be placed after this time it will be traded the next working day. Cut off times vary dependent on Fund Managers. It is completely normal for Fund orders to be pending for a number of hours or days. Should you miss the cut off time it may be around 48hrs after you have placed the order before you see a confirmed trade value.’
When choosing a fund, there seem to be different versions …
I’ll talk about selecting funds themselves in another post, but funds often have multiple versions, and you need to know which one to pick. For instance, thepath (financial advisers who say they have a particular interest in using pensions and investments as ‘a force to reverse climate change’) mention a fund they refer to as ‘Sarasin Food & Agriculture Opportunities’. (It’s part of the example portfolio on the Welcome page of their website.) I’m not recommending this fund or otherwise. If you search for this fund – for instance when you are logged into Interactive Investor using the search under the ‘research’ tab – then you will see 3 versions:
- Sarasin Food & Agriculture Opportunities Fund (Class I Acc)
- Sarasin Food & Agriculture Opportunities Fund (Class P Acc)
- Sarasin Food & Agriculture Opportunities Fund (Class P Inc)
What do ‘Acc’ and ‘Inc’ mean, and does it matter which I choose?
‘Acc’ and ‘Inc’ are commonly seen in fund names. ‘Acc’ stands for ‘accumulation’ and ‘Inc’ stands for ‘income’. If you choose an ‘Acc’ fund, then any profit from the fund will be automatically re-invested in the fund. If you choose an ‘Inc’ fund, then payments will occasionally be made from the fund into your SIPP cash account. It is apparently possible in ii to set up dividend re-investment so that the cash from income funds gets automatically re-invested in the fund (see ‘divident reinvestment’ under ‘portfolio’). I haven’t tried this. In a nutshell, either ‘App’ or ‘Inc’ is OK, but for our purposes (saving for a pension we’re not yet drawing from) we’re choosing ‘Acc’ funds where possible, for convenience.
What do ‘I’ and ‘P’ and other letters mean, and does it matter which I choose?
Yes, this matters! Some clients invest in funds directly through the fund management company, in this case Sarasin, instead of through vehicles like SIPPs. Direct clients only have the ‘I’ version of this fund available, which incurs higher fees. ‘P’ is the ‘Platform’ version, which is better value as ii is bulk buying on behalf of all its clients. So we can pick the ‘P’ version because we’re going through ii. This will save some money. Yay!
Do ‘I’ and ‘P’ always mean this? What about ‘A’ and ‘X’?
‘I’ can mean the opposite. In the case of Janus Henderson Sust./Resp. – Global Sust. Eq. I Acc, Janus Henderson told me that ‘I’ stands for ‘institutional’ as opposed to retail, and is therefore the cheaper version of the fund.
Impax also have alternative funds differentiated by a single letter:
- Impax Environmental Markets (Ireland) Fund A GBP Acc
- Impax Environmental Markets (Ireland) Fund X GBP Acc
Their ‘A’ and ‘X’ apparently denote the same thing as Sarasin’s ‘I’ and ‘P’ – in this case the ‘X’ fund is the cheaper, platform version.
These are just some examples. This letter has been described to me as denoting the ‘share class’. I think that ‘share class’ refers to the terms on which the shares are sold. And I think in this case this refers to the class of share of the fund itself, rather than the shares within it.
I’m not recommending or otherwise any of the funds I’ve used as examples here.
How can I be sure I’m always looking at the same fund, for instance when I do my trade? Is there an ID number?
Yes. It’s called the ISIN number. You can find it on the KIID (Key Investor Information document), and you can also use it in the ii search box when you trade.
How can I find out detail about funds?
Getting in touch directly with investment management companies (Sarasin, Jupiter, Liontrust etc) is a good way to get definitive information about the fund you’re interested in, and its investments, from the horse’s mouth. Though of course the company may be more upbeat about the fund than it warrants. Funds always have a document called the KIID (Key Investor Information), which shows risks and charges among other things. A ‘fact sheet’ is often referred to, and this seems to have more details about a fund’s holdings/investments. There can be multiple versions of this, including the one that’s produced by the fund’s company.
How can I model a portfolio before I make any investments for real?
You can build pretend portfolios and play with them. This is great because you can see how your different funds have performed, look at the overall risk rating, the geographical spread, the top holdings, the sector spread etc etc. You can do something like this within ii, but I do it in Trustnet, which seemed to offer more functionality at the time I got going with it. It’s brilliant, and it’s free. The next blog in this series is about balancing portfolios.