With Cofunds announcing changes to its Sipp charges yesterday and Aegon introducing a cap on charges, we see a return to a focus on cost in the adviser platform market. Within the space of a few days we have seen the UK’s largest platform become sharply competitive on pensions as Aegon thrust the capped fee concept into the adviser market. In light of these changes, advisers have some important due diligence questions to answer.
While the announcements specifically relate to opposite ends of the market – Aegon’s cap only affects clients with more than £250k and Cofunds’ removal of the Sipp fee only affects clients with less than £200k – together they hint at a new front in the platform price war when it comes to pensions, following the Budget.
The Platforum senior research associate Richard Bradley notes: “Platforms appear to be specifically targeting those clients looking to build up pension assets. With the new rules on drawdown giving platforms a greater opportunity to hold on to pension assets through retirement, Sipp pricing has shifted higher up the priority list. Looking over towards the direct market, at the end of February we saw Bestinvest try to lure pension investors with a Sipp fee 10 basis points cheaper than the Isa”.
Debate will be about the ‘how’ not just the ‘how much’
Aegon has introduced a cap on charges on the ARC platform which will impact clients with more than £250,000 on the platform – clients will now pay no more than £1,215 per year.
This is the first cap we have seen in the adviser platform market and we welcome this news as positive for customers.
There are a number of platforms with fee caps in the direct platform market – AJ Bell Youinvest, Barclays Stockbrokers, Bestinvest, Fidelity, Hargreaves Lansdown and TD Direct Investing have caps at different levels – however, to date fee caps have been absent in the adviser platform market, unless behind-the-scenes negotiations have taken place on an ad hoc basis.
With a tiered pricing structure meaning that clients with less than £100,000 are charged a platform fee of at least 50bps, Aegon’s ARC proposition may have been innovative with its single platform for pre and post-retirement clients but the pricing didn’t look competitive. The anticipated post-Budget reforms thrust Aegon’s platform into the spotlight and one of the responses has been to introduce a capped fee.
We watched earlier in the year as the direct platforms competed in a rather lukewarm price war, with some playing fixed fee and/or capped fee cards. Today, over in Adviser Land, Aegon has thrown down a capped price gauntlet and we expect ensuing debate to be more about the pricing ‘how’ than the pricing ‘how much’. Watch this space for competitor reaction as platforms with relatively high pricing levels for customers with large pension pots evaluate their response and advisers ask the obvious due diligence questions.
Platform pensions have become cheaper for the UK’s largest platform
Also this week we saw Cofunds make some important changes to its pricing structure, presumably seeking to re-position the platform as a serious contender for pension assets and flows.
Cofunds has a relatively low average account size and few assets are held within a Sipp wrapper (just 4.8 per cent of the total AUA). However the flat fees that were previously charged on Sipps made them expensive for pension investors with small pots but increasingly competitive as assets increase. The removal of the pension charge has gone a long way to removing this inconsistency. The platform charge now starts at 29bps and tiers down, making Cofunds highly competitive across the board.
Comparing platforms’ SIPP charges
The following tables compare adviser platforms’ charges for clients with investments held entirely within a SIPP.
As the above tables show, we believe advisers with clients in the more expensive tranche of platforms have some questions to ask.
There is now a broad choice of platforms which will administer Sipp assets for 40bps or less (for smaller accounts) and 30bps or less (for larger accounts). Advisers, and ultimately customers, paying more need to be clear on the reasons for this.
Direct platforms led the charge with both capped fees and fixed fees. Other than Alliance Trust Savings banging the fixed fee drum, the adviser platform market has been reluctant to respond to adviser demands for fixed fees, capped fees and even structures offering a fixed platform fee at adviser firm level. Although they have fired the starting pistol, Aegon will not be the only group to cap fees and we think it inevitable that we’ll see a few fixed fee structures emerge this year.
As platforms jockey for position in the post-Budget world, we fully anticipate more news on the pricing front as platform Sipps move to centre stage.