US investing giant Vanguard has unveiled a self-invested personal pension which is set to challenge rivals such as Hargreaves Lansdown on value for money.
It will initially be open to those in the accumulation stage; with drawdown capabilities added in the 2020/21 tax year.
Vanguard said the offering is designed to “make saving for retirement simpler and less expensive”. As revealed in December, account fees will be 0.15% capped at £375 annually.
Elston Consulting head of research Henry Cobbe wrote on LinkedIn that the charges are “nicely below [the] ‘soft’ price anchor of 75 basis points for non-advised drawdown”.
“A big challenge to HL from a value-for-money perspective.”
While Next Wealth managing director Heather Hopkins described the move on Twitter as “excellent news”.
The announcement comes a month after the firm gained regulatory approval from the Financial Conduct Authority to provide retail advice in the UK – a move that is expected to threaten robo-advisers.
Compared the market
Vanguard commissioned independent research firm Platforum to gauge its offering against what is already on the market.
It found compared with 14 other platforms the Vanguard Sipp had the lowest cost for the average (median) British pension holder who had not yet drawn on their retirement pot.
Using case studies, Platforum stated that a 43-year-old looking to invest a pension pot of £40,500, the median for a Brit not yet in drawdown, could save up to £9,808 at the end of 25 years when compared against a higher-cost Sipp.
The research firm also looked at the fees for an investor putting the maximum £40,000 annual Sipp contribution into one of Vanguard’s single fund retirement solutions.
It found that an investor would pay £172 in total annual charges, including fund fees, transaction costs and Sipp charges.
This compared to as much as £396 on the most expensive platform.
Breaking it down
Vanguard clients will pay an account fee of 0.15%, capped at £375 across all accounts in an investor’s name on the Vanguard Personal Investor platform, including Sipp, Isa and general accounts.
People can invest from just £100 a month, or with an initial lump sum of £500. In return, they will gain access to 77 broadly diversified funds and ETFs.
Fee erosion
Vanguard head of Europe Sean Hagerty said: “An individual’s savings often represent a lifetime’s effort, yet many investors and retirees lose out on their own hard work to high fees and charges.
“Fees can have a sizeable impact on investment returns and, consequently, on the quality of life in retirement.”
Platforum head Jeremy Fawcett added: “Pension investing is a long-term activity and when fees are low, outcomes are significantly improved.
“The Vanguard Sipp is one of the lowest cost options in the market, especially for those at the beginning of their investing journey.”
