How much will your retirement cost?

Published by Michael Trudeau on 28 April 2015.
Last updated on 28 April 2015

Retirement cost

We've all heard quite a bit about what is possible under the new pension freedoms, and even what the potential tax implications are for each option.

But how much will it actually cost you to take advantage of the new flexibilities?

Platform consultancy The Lang Cat has gathered pricing data from all major direct-to-consumer investment platforms - assuming they offer the new options at all, and that their pricing is available. The results suggest actually assessing what it will cost you is no simple matter.

First of all, Sipp charging is difficult to assess. It's made all the more difficult by the various event-driven charges - in other words, one-off prices you have to pay for taking certain actions.

Find the best pension funds available on your selected pension platform

Event-driven charges

These can include set-up fees, in-specie transfer, switching assets, charges associated with holding commercial property, and others.

When it comes to flexibly accessing your Sipp in retirement, you face a whole other layer of event-driven charges: flexi-access set-up charges, annual charges, and one-off payment charges to mention a few, each of which can vary depending on specific circumstances.

“There's an element of irony in the most complex charging structures being aimed at direct investors,” says Mark Polson, director of The Lang Cat.

“We were frankly stunned at how hard it was to track down some of the pricing details. Some were easy: simple to find, well-structured and clearly written.

“Others were impossible, with a number of providers appearing to still not have flexi-access pricing published more than two weeks after the new regime went live. This is just not good enough.”

Direct platform FAD setup Annual FAD FAD one-off payment UFPLS payment Annuity purchase Stripping out within one year
AJ Bell You invest £0 £100 if regular income, £50 if not £75 £75 £150 £295
Alliance Trust Savings i.nvest £0 £75 £0 £40 £150 Not stated
Barclays £75 £100 £0 £75 375 £250
Bestinvest £0 £0 for > £100k, £100 for < £100k £0 Not stated £75 internal, £100 external £290
Charles Stanley Direct £150 £0 £150 Not stated Not stated £200
Chelsea Financial Services £100 £120 Not stated Not stated Not stated £300
Fidelity Personal Investing £0 £0 £0 £0 £0 Not stated
Halifax Share Dealing £0 £180 (no VAT) £90 + £25 per investment £90 (no VAT) Not stated £300 (no VAT)
Hargreaves Lansdown £0 £0 £0 £0 £0 internal, £150 external £295
Interactive Investor £0 £170 Not stated Not stated Not stated Not stated
iWeb £0 £180 (no VAT) £90 + £25 per investment £90 (no VAT) Not stated £300 (no VAT)
James Hay Modular iPlan £100 (no VAT) £150 (no VAT) £0 £100 (no VAT) £0 Not stated
Telegraph Investor £0 £170 Not stated Not stated Not stated Not stated
TD Direct £0 £75 £0 Not stated £75 £250
Trustnet Direct Investing £204 (no VAT) £180 (no VAT) Not stated Not stated Not stated £302

The table above outlines the overall charges at each of the investment platforms that allow customers to take advantage of the new flexibilities - and which made their prices known.

For reference, FAD stands for 'flexi-access drawdown' - the industry name for accessing your pension pot as and when you want.

UFPLS stands for 'uncrystallised funds pension lump sum' - a withdrawal whereby 25% of it is untaxed, instead of an entirely untaxed lump sum equal to 25% of the pot.

The 'traffic light map' - wherein red means more expensive and green means less expensive - uses several assumptions for simplicity's sake: it assumes a pot of about £50,000 from which the investor wants to take a tax-free lump sum of £12,500 and a small, variable income.

Direct platform Core charge Drawdown charges Total & change
AJ Bell You invest £200 £120 0.64%
Alliance Trust Savings i.nvest £186 £90 0.55%
Barclays Stockbrokers £175 £210 0.77%
Bestinvest £150 £240 0.78%
Charles Stanley Direct £245 £180 0.85%
Chelsea Financial Services £300 £264 1.13%
Fidelity Personal Investing £175 £0 0.35%
Halifax Share Dealing £90 £180 0.54%
Hargreaves Lansdown £225 £0 0.45%
Interactive Investor £176 £204 0.76%
iWeb £90 £180 0.54%
James Hay Modular iPlan £285 £250 1.07%
Telegraph Investor £246 £204 0.90%
TD Direct £390 £90 0.96%
Trustnet Direct Investing £221 £384 1.21%

This article was written for our sister website Money Observer

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