Saturday, 10 September 2016

Rearranging my YouInvest SIPP

I have had a YouInvest (formerly Sippdeal) SIPP (Self Invested Personal Pension) wrapper since 2011.  It came about when I first started transferring expensive insurance company based Stakeholder and Group Personal Pensions across to SIPP’s to save on expenses.  Over the years this SIPP has grown steadily to become a significant portion of my wealth as it now contains circa £200,000.

Within the YouInvest SIPP I was holding the following three investment products:
  • The Vanguard FTSE U.K. All Share Index Unit Trust with annual expenses of 0.08%;
  • The Vanguard U.K. Inflation-Linked Gilt Index Fund with annual expenses of 0.15%; and
  • The iShares European Property Yield UCITS (IPRP) with annual expenses of 0.4%.

For the privilege of using the YouInvest SIPP wrapper I was also paying annual expenses of £300 which was coming in the form of:
  • A YouInvest SIPP custody charge of £25 per quarter as my SIPP value was greater than £20,000; and
  • A YouInvest Funds (Unit trusts and OEICs) charge of 0.2% per annum but which was capped at a maximum of £50 per quarter

Life was good and even though I didn’t like paying the £300 per annum I didn’t do anything about it as to correct it I would have had to be out of the market and might lose significantly more than I gained.  That was until I received a notification from YouInvest in early August 2016 that they were intending to change their charging structure from the 01 October 2016 which included a great reason [sic] for the change – “We believe this will be easier to understand, whilst maintaining AJ Bell’s commitment to offering some of the lowest charges in the market.”

Now in life I have learnt that anytime somebody changes T&C’s on you it is worth your while to sit down and understand what they are changing as more times than not it is better for them than you.  In the YouInvest instance this was proven very correct.  My annual charges were about to go from £300 per annum to £505 per annum, a 68% increase, via the following new expenses structure:
  • A YouInvest SIPP custody charge (Shares inc. investment trusts, ETFs, gilts and bonds) of 0.25% per annum but which is capped at £25 per quarter.
  • A YouInvest SIPP custody charge (Funds inc. unit trusts, OEICs and structured products) of 0.25% per annum for the first £250,000 but which important is not capped.  This was the critical change that affected me greatly.

So for me the killer was my OEIC/mutual funds with YouInvest effectively moving from a pseudo flat fee platform to a percentage fee platform.  It was time to make a move.  I looked at leaving YouInvest as well as restructuring my products within the YouInvest wrapper.  Having crunched some numbers I realised if I could change the products with YouInvest from OEIC/mutual funds to ETF’s they remained competitive so that was the route I took.  The problem was that I was unable to find a low cost FTSE All Share ETF to replace my Vanguard fund.  Time to get creative...

I’ve written previously about the structure of the FTSE All Share Index.  In short:
  • 78% is actually the Top 100 (the FTSE100 which is actually 101) companies;
  • 16% is the next 250 (the FTSE250 which is actually 251) companies;
  • 3% is the next 291 (the FTSE Small Cap Index) companies; and
  • 2% remains via 258 companies.

Eyeballing that and knowing that there were low cost FTSE100 and FTSE250 ETF’s about I created myself a pseudo FTSE All Share with the following products:
  • 75% VUKE (Vanguard FTSE100 ETF) with annual expenses of 0.09%; and
  • 25% VMID (Vanguard FTSE250 ETF) with annual expenses of 0.10%.

I also sold my Vanguard U.K. Inflation-Linked Gilt Index Fund and replaced it with INXG (iShares Index Linked Gilts ETF) which unfortunately carries annual expenses of 0.25%.

The end result was that instead of my wrapper and product expenses going up by £205 per annum I was able to reduce them by £139.  Total time invested was about 2 hours.  I’ll also add that to reduce market moving while I was out of the market risk I completed the shift in 2 tranches a few days apart.  Total cost to complete the move was £79.50 which will pay for itself in about 2.8 months.

The end result on my total wealth is that total expenses have reduced from 0.254% per annum to now stand at 0.243% meaning I am still paying some £2,559 per annum in product/wrapper expenses.  Much better than some but hopefully with time more opportunities will open up to further reduce.

For me a worthwhile use of my time but as always DYOR.  Finally, for anyone interested in the full maths here it is:

Turning a £205 AJBell YouInvest expense increase into a £139 reduction
Click to enlarge, Turning a £205 AJBell YouInvest expense increase into a £139 reduction


  1. They are very similar to HL with their new charging structure and it certainly encourages ETFs instead of funds. I reckon the payback period will be higher as there are bid-offer spreads to factor in (0.17% on INXG, 0.05% VUKE, 0.21% VMID). Keeping buying and selling to minimum also keeps charges low.

    1. Two very good points. I paid no bid-offer spreads on the OEIC's but certainly saw a spread on the ETF's.

      Last unforced sells (had a forced AML sale) for me prior to this one was the transfer from expensive insurance company pension to HL SIPP in August 16. Prior to that was:
      - Jun 2014 again in YouInvest SIPP and TD Direct ISA to again save a big chunk of total portfolio expenses
      - a VOD sale in Jan 2014 just before the Verizon sale.

      Then I have to go back to Aug 2011 which was a gold sale which was a forced mechanical rebalance as I'd become overweight in gold.

    2. Much lower turnover than most actively managed funds. You must be very disciplined to ignore all the noise. Boring investors are the best!

    3. It's been one of the pillars of my investing strategy. Go mechanical with preset rebalancing bands then go fishing.

  2. Why did you buy an ILG ETF with annual expenses of 0.25% instead of just buying a single suitable ILG?

    1. Possibly because I'm sometimes naive and sometimes make investing mistakes :-)

      Do you (or do any readers) buy gilts/ILG's directly in your ISA's or SIPP's? If yes, would love to know a little more. Buy/sell spreads, availability, liquidity.... Also, what's the process? Just like a share?

  3. Hi RIT,
    Just a quick question:

    Why are you working out the £values of the expense charges for the funds and ETF's? You're not being charged by AJBell to pay those, aren't you? These charges are being settled by the fund or ETF in question out of the dividends/income they receive/make over time, as far as I understand it.

    I had exactly the same email and drawn the same conclusion - ETF's, investment trusts and individual shares it is! Need to find another SIPP for holding funds though.

    Regards, Pinch

    1. I do this as I'm always interested in the total expenses = product costs + platform costs. In this example you can see that I save on the platform costs but I do have to pay more for the ETF's vs the OEIC's. In total it was a reasonable cost saving so I went for it. Hope that makes sense?

      Re a SIPP for OEIC's. To hopefully speed that up for you are you aware of the excellent Monevator Compare Brokers tool. Personally, I now no longer hold any OEIC's in UK low cost broker accounts (Trading, ISA or SIPP). Full disclosure: I still do have funds with my work pension and held directly with Australian providers - Vanguard and Perpetual (a mistake that I've written about before).

    2. This is another advantage of holding assets in an ISA - what happens to those assets on death.

  4. Sorry - it looks like the above is not going to work as a direct link - but I think this one will.Otherwise just google subject yourself.

  5. This benefit of ISA transfer on death is significant - especially if the portfolio is large . No CGT is payable on death - but under the "old " system the assets held in the deceased's ISA would immediately lose their ISA wrapper and then start accumulating potential capital gains- and the income becomes taxable.
    Now - the next change to ISA's that we can all dream about is that HMG make them completely tax free ie free of ALL taxes - and discount assets held in an ISA from IHT ! It might happen - but unlikely.
    As regards ILG's - they are free of CGT if purchased as an individual gilt - but not gilt funds.

  6. This may be helpful and of interest. Relates to which assets to hold in your ISA and SIPP to benefit most from taxation quirks. The point about the size of the total ISA holding is clearly very relevant. The article suggests that AIM shares might be best placed in a SIPP - but NB AIM shares held in an ISA for at least 2 years become free of IHT. So - you could end up with an IHT free ISA - but you would need to accept the extra risks of holding some AIM shares in your portfolio. I am not sure if- when you sell an AIM share held in an ISA after 2 years - you have to re-invest the proceeds in another AIM share to preserve the IHT benefit - or whether the proceeds are somehow " cleansed " of IHT and you can re-invest in anything you choose.

  7. Sorry - omitted the link . If it does not work - google save tax by not putting shares in your ISA

    1. Thanks for this stringvest. It nicely demonstrates the complexity (unnecessarily so IMHO) and craziness of our tax system. You really should not have to read for many hours or pay for taxation advice. Taxation is a necessary evil and our faithful leaders should focus on simplicity to leave us maximum time for entrepreneurship and pursuits that give us wellbeing but I'm moving off topic so I'll stop now.

  8. For comparison my current fund+broker expenses are 0.21%, but will fall to 0.12% once I move my work SIPP from Scottish Widows to HL after I resign

    1. Nice work vicarage. Why don't you do a partial transfer to HL now though? Gives you the low expenses now and by transferring multiple times you minimise market move risks while the transfer/s is in progress. I'm doing exactly this and it seems to be working ok with no downsides that I can see.

    2. SW do partial transfers, but as I'm resigning (at the 3rd attempt) tomorrow, I can wait until the last payment goes in November

    3. Ahh now I understand. Thanks for clarifying. Are you FIRE'ing or moving on to another work opportunity?

    4. I hate my job, am bored with the field, am not prepared to commute or relocate due to caring commitments, and have enough cash, so it may well be FIRE. We'll see how pottering around goes.

    5. Congratulations and I'd love to know more...

    6. I'm 4 years older than you, richer and with less earning potential. I've not enjoyed a range of jobs for the last 15 years, so suspect its me, not them. I moved back in with my housebound mum in outer London. We get on, she pays all the bills, and I can still go on nearby holidays, so that's working out well, but I hated a dull remote working test job I took on 4 years ago, as it meant all my interaction with colleagues was negative "you have forgotten to...", but my options are limited as my IT skills are dating.

      I want to do a range of different things, especially things outdoors and involving exercise, so gardening when its sunny, internet in the rain.

      My one-more-day concern about finances has always been because of the uncertainty over mum's lifespan, when I might get an inheritance that would boost my finances by 50% or require my contribution to care home fees. And I want to travel the world, up to 6 months a year, which is very hard to budget when the time window to do it could be 10 years or 40.

      But I got up fed up living a lie at work, so I'm off, to potter for a bit.

    7. Many thanks for the added detail vicarage. Wishing you much success with it all.

  9. This is interesting. I have always used VWRL for equity exposure and to which I add 10% in European and USA small co's. If I sell VWRL and buy the individual ETF's (ie world market weight) it would save me around £850 p.a The rationale for buying VWRL was that it eliminated rebalancing risk and whether I would hold my nerve and rebalance into the worst performers on the rebalancing date. But £850 is quite a lot of money for that insurance. Know thyself I suppose..........

    1. This was also one of the reasons I never bought the Vanguard LifeStrategy Funds and I also wouldn't buy them now because you're now adding 'high' HL/YouInvest etc wrapper expenses on top. As an aside I wonder if Vanguard will respond by introducing LifeStrategy ETF's...

      Interesting thought on VWRL. To do an 80% VWRL with it's 0.25% OCF you'd need:
      - VUSA with OCF 0.07%
      - VEUR with OCF 0.12%
      - VJPN with OCF 0.19%
      - maybe VFEM with OCF 0.25%
      So I could see someone easily being able to halve expenses. Of course probably not so good for small portfolio's as trading costs would probably start to have an impact in costs.

  10. I just calculated the cost of various holdings in £ rather than % and it has renewed my commitment to cutting costs. Property is the worst. REITs all charge ~1.2%. If everyone has to pay this, must the returns on property be commensurately higher to satisfy the EMH?

    Also, do REIT etfs have the expense ratio of the underlyings baked into their own? I believe UCITs compliant funds are not allowed multiple layers of fees.

    Finally, beware YouInvest investors, of the FX charge. A whopping 1% (so 2% once you've sold). Totally disproportionate to the cost on the exchange (about 1% of 1%). So never buy foreign currency items.

  11. Hi,
    Well done on flipping the problem round.

    I had a peek at the numbers and saw you have your UK exposure split between FTSE 100 and FTSE 250, with 3x the amount in FTSE 100 vs FTSE 250.

    Are you 3x more confident in the FTSE 100 vs FTSE 250? If you don't have a strong view, have perhaps you might allocate 50/50 instead?

    Thanks for all the posts.

    1. No, not more confident in the FTSE 100 vs FTSE 250. I've proven previously my crystal ball is very firmly broken. I was simply trying to replicate the FTSE All Share as closely as possibly using only low expense ETF's.

    2. I suppose the point is that you are by default (based on the All Share) placing 3 times more emphasis on the FTSE 100 vs FTSE 250. But you don't think the FTSE 100 is better than the FTSE 250, so why the higher weight? Just because the All Share has that weight doesn't necessarily make it logical to replicate it.

  12. I'm going to have to do something similar with my HL SIPP soon. I either leave HL and go somewhere where keeping funds is flat fee or I make a switch to some small collection of ETFs, maybe as few as two. I was thinking VWRL and VGOV as a very simple starter

    You have an HL SIPP as well right? what do you keep in that one?

    1. Yes I also have a HL SIPP. It currently holds:

      Total value is about £200k meaning I'm seeing total annual HL costs (ETF's obviously extra) of £200.

    2. Hi
      Thanks, very helpful post.
      I face a similar large increase in my Youinvest Sipp fees for holding Vanguard funds.
      Can anybody let me know how I can identify Vanguard funds on the Youinvest platform are classified as ETF's and therefore avoid the 0.25% charge ? Alternatively the Ishares core funds look to be another option.

    3. This link should give you the list of Vanguard ETF's. The ETF's also have a 4 letter London Stock Exchange ticker while the funds do not. For example VUKE, VMIF, VUSA, VEUR, VJPN, VFEM etc

  13. I might open an AT sipp and do a transfer so I can stick with funds. Maybe buy a few unwrapped etf s in the hl acc rather than close it completely

  14. I have stayed solely with ITs and ETFs ever since getting an AJBell SIPP, being wary of the fund charges. I was holding XBUI ETF linkers recently (0.20% annual expenses) and then they delisted with a forced sale! Will be buying INXG at the next regular savings day. They have all increased rather suddenly recently.