Retirement

Vanguard Personal Pension Launches in the UK – Best Low-Cost SIPP Provider?

After much anticipation, I was pleased to notice that Vanguard has finally launched the much awaited Vanguard Personal Pension solution in the UK. This seems to be one of the lowest cost platforms for UK self-invested personal pension (SIPP) plans from the namesake leader in low-cost, world-class index investing.

I should add the reminder to this post that we are not FCA regulated, nor in any other way licensed to provide investment advice to UK residents, but we do serve many British clients living in Hong Kong and around Asia, and are ready to answer questions about how this Vanguard SIPP solution compares with other pension platforms. Unfortunately, it seems that to transfer your UK pension into the Vanguard SIPP, you must be a UK tax resident at the time, so it seems like this might not be an option for expat Brits at the moment. That said, the Vanguard SIPP fee starts at 0.15% with a cap of Β£375, so for accounts above that cap (Β£250,000 balance), the fee starts looking not that different from some of the fixed-fee SIPP platforms we’ve looked at that can handle transfers of onshore UK pensions to onshore SIPPs for expat Brits, without being limited to the Vanguard investment options.

On the investment options, the Vanguard SIPP does seem to be limited to a selection of 77 funds, which is limited, but there are a few very good ones I feel are worth pointing out on a “public list” (again, this is FYI, not advice):

  1. FTSE Global All Cap Index Fund – one of the lowest cost all-world UCITS tracker funds covering almost 6,500 global stocks for 23bp
  2. Global Value Factor UCITS ETF – oddly enough, it costs slightly less to get this “active” global portfolio with a value tilt. Tilts towards momentum, low volatility, liquidity, or small caps are also available
  3. FTSE Emerging Markets UCITS ETF – since I do not believe the Global All-Cap allocates enough to emerging markets, I would add a fund like this as a supplement
  4. For bond exposure, there is the Gilts ETF, and also hedged bond funds providing access to US treasuries and Japanese government bonds which seem to be hedged back into pounds sterling.

The biggest difference this list is likely to have from those of many UK-focused advisors is that we do not see the need for any UK-specific funds. If it’s cheap enough to go global, invest globally, and if you see a good investment opportunity in the UK, do that directly in an account outside Vanguard rather than through a UK-limited fund.

Our current view is that it does not make sense to allocate much to corporate bonds (a large part of many “aggregate” bond funds), high yield, or many EM bond funds, but that of course may change. Government bonds, hedged back to your currency, tend to provide a good offset to factors that tend to upset stock markets.

Hopefully this news was useful, and can help save someone you know some £££ on their UK pension fees.

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