Vanguard has revealed the average investor in accumulation would be almost £10,000 better off in its Sipp as it reveals account fees will be 0.15% capped at £375 annually.
The passives giant will launch the Vanguard Personal Pension in early 2020 with drawdown options being introduced in the 2020/21 tax year. Investors will be able to access 76 funds and ETFs, including the Lifestrategy range and the Vanguard Target Retirement funds.
“An individual’s savings often represent a lifetime’s effort, yet many investors and retirees continue to be charged far too much on the proceeds of their own hard work,” said Vanguard head of Europe Sean Hagerty (pictured).
“Fees can have a sizeable impact on investment returns, and consequently on the quality of life in retirement.”
Platforms will face outflows if they don’t respond to Vanguard
Altus director Simon Bussy said platforms with Vanguard investors would have to respond or face outflows. “With all else being equal, costs are one area over which consumers have some control through the choices they can make,” Bussy said.
An average British pension pot of £40,500, earning 4% annually in the Vanguard Target Retirement Fund 2045 over a 25-year period, would be £9,808 better off compared to the most expensive Sipp by the time they reach retirement, according to Platforum analysis conducted for Vanguard on its new proposition.
The drawdown proposition would also give the at-retirement market a “much needed kick”, he added. The Sipp will have no additional charges for going into drawdown.
The median savings pot of a 65-69 year old, which is £210,000, would be £3,975 better off in drawdown, if they were taking 4% annually, compared to the highest-priced Sipp.
Will investors be too limited by Vanguard Personal Pension?
Finalytiq director Abraham Okusanya did not think it was a problem that the Sipp will be limited to Vanguard products because their range of funds covers most asset classes and is typically among the most-competitively priced funds in many sectors.
“The low fees ensures that investors keep as much of their return as possible,” Okusanya said.
Bussy agreed that there was “more than enough investment choice” for most investors.
“While workplace will remain core for those eligible due to employer contributions, Vanguard becomes a strong retail alternative where appropriate, and especially for the self-employed who as a segment are severely under-funded,” he said.
