Vanguard pension review

Originally launched in the US in 1975 with the goal of bringing low-cost investing to the masses, Vanguard opened its UK office in 2009. Since then, it’s grown rapidly in the UK, and in 2020 it ventured into the pensions market with the introduction of its no-frills, low-cost SIPP.

What is Vanguard?

Vanguard is an asset management company that offers low-cost investments directly to UK investors on an execution-only basis. It offers four types of account: a general investment account, a stocks and shares ISA, an Junior ISA, and a personal pension. With all four account types, you can either select investments from its range of 75 funds, or pick a ready-made portfolio fund put together by Vanguard experts.

How does Vanguard’s pension work?

Vanguard offers a type of personal pension known as a self-invested personal pension (or SIPP, for short). Unlike regular personal pensions, where the pension provider manages your pension investments on your behalf, with a SIPP the management of investments is down to you. This means you can choose exactly which and how much of each investment asset to buy, and when to sell them and reinvest your money in a different asset.

As with any workplace or personal pension, with Vanguard’s SIPP you benefit from tax relief on pension contributions up to your pension annual allowance. You can add to your pension whenever you like, either on a regular basis or by paying in ad-hoc lump sums.

What pension plans are available from Vanguard?

With Vanguard’s SIPP, you can go down one of two routes.

1. You can build your own portfolio from its range of more than 75 individual Vanguard funds, including exchange-traded funds (ETFs), index-linked funds, and active funds.
2. Alternatively, you can choose one of Vanguard’s ready-made investment portfolios. For example, it has a range of portfolios in which the funds are selected and adjusted based on your expected retirement age, with the asset allocation becoming more conservative (and less risky) as you approach retirement age. The vast majority of assets in these portfolios are passive funds that track an index, though each portfolio may also include direct investments in shares, bonds or similar.

How do I apply for a Vanguard pension account?

You must be a UK resident to open a Vanguard pension. Simply head over to Vanguard’s pension page and select “Open an account”. If you’re a new customer you’ll need your National Insurance number and bank details to hand. If you already have a different type of account with Vanguard, you can sign in and open a new pension account.

You’ll need to pay in a £500 lump sum, or commit to paying in £100 a month.

Alternatively (or as well) you can open an account by transferring an existing pension (or pensions) to Vanguard.

Can I transfer another pension to Vanguard?

Yes. There are a couple of reasons you might want to do this:

1. Your existing pension scheme (or schemes) have higher fees than Vanguard, and you could save money by transferring them into a Vanguard pension scheme.
2. You want to consolidate multiple pension pots into a single scheme to make your pension savings easier to keep track of.

You can transfer most types of pension to Vanguard, including personal pensions, SIPPs, and old workplace pensions that you’re no longer paying into. The exception to this rule is some public pensions, which can’t be transferred into a defined contribution pension such as Vanguard’s.

There may be some other schemes that you should think twice before transferring though, including defined benefit workplace schemes, and any schemes that have valuable benefits such as guaranteed annuity rates. If in doubt, seek regulated financial advice before transferring (in some cases this is required).

Look out too for any exit fees that an existing provider might charge to transfer your money to another provider.

To initiate the transfer, you’ll need to let Vanguard know the name and address of your existing provider, your account number and the estimated pension value. All of these can be found on your latest pension statement.

What fees does Vanguard charge?

Every pension provider charges fees for its services, and Vanguard’s are more straightforward than many. If you open a pension with Vanguard, you’ll pay two types of fee.

1. An account fee, payable directly to Vanguard for the administration of your account, including the cost of running its online service. This is is set at 0.15% of the value of your account, capped at £375 a year.
2. Fund management costs to cover things like transaction costs for buying and selling assets, plus the day-to-day cost of managing each fund. These vary depending on the make-up of your portfolio and how often assets are bought and sold, but Vanguard says fund management costs are 0.2% on average.

Vanguard doesn’t charge fees for transferring pensions to or from it, switching funds, withdrawing money when the time comes, or closing your account.

Vanguard customer reviews

You can read reviews of Vanguard’s overall service as an asset manager (rather than just for its pensions) on the Trustpilot website.

Overall, its customers have a pretty good opinion of Vanguard. It’s got an overall score of 4.1 out of 5, and 60% of its 1,600+ reviewers rate it as excellent. Positive highlights include ease of set up and management, the simplicity of its platform, and its excellent service.

On the flip side, 13% of reviewers rated Vanguard as bad. Reasons for this were mixed, though some had problems with customer support. Others were frustrated by poor performance of their investments, though this is not necessarily within Vanguard’s direct control as all investments are subject to market volatility and may take a knock regardless of your provider in turbulent times.

Vanguard has a good track record of replying to 97% of negative reviews, which is usually a sign of a company that wants to do the right thing.

Does Vanguard have an app?

Not yet. There is one for US investors, so it may bring one to the UK at some point. But for now, you can manage your pension investments on your computer, tablet or smartphone via its website.

Pros and cons of Vanguard

Bottom line

If keeping costs down is a priority and you don’t need access to a wide range of sophisticated investments or lots of bells and whistles, Vanguard could be worth a look. You can transfer pensions in from other providers if you want to and, for when you retire, it also offers a pension drawdown service for no additional cost to investors. Check how it compares to other pension providers in our pension comparison.

Frequently asked questions

• Can I add an existing pension to Vanguard?

  Yes. Subject to the pension provider’s own rules, you usually can transfer any defined contribution pension scheme to Vanguard, and many defined benefit workplace pensions too. There may be restrictions on some schemes, or you may be required to take financial advice before transferring. And watch out for any exit fees on older schemes.

• Is there a minimum contribution level to open a Vanguard pension scheme?

  Yes. To open a Vanguard pension, you either need to invest an initial lump sum of £500, or commit to paying in £100 a month.

• Is my pension safe with Vanguard

  As with any type of investment, your capital at risk because the value of investments can go down as well as up – though the idea of a pension is that, over many years, any short term volatility will be smoothed out and your money will grow. But Vanguard is authorised and regulated by the Financial Conduct Authority, so your money is as safe as with any other regulated investment firm. Vanguard is also covered by the UK Financial Services Compensation Scheme (FSCS). This means that, should Vanguard go bust, you should be able to claim compensation for any pension savings that are lost up to a maximum of £85,000.

• What if I have a complaint about Vanguard?

  If you’re not happy with Vanguard for any reason – whether that’s poor customer service, or you think that it has not invested your money in accordance with your stated preferences – you should complain directly to it. If you’re not happy with its response, after 8 weeks you can escalate your complaint to the Financial Ombudsman Service.

• Can I use my Vanguard account to withdraw my pension when I retire?

  Yes. When you decide to start taking your pension, typically from age 55, you can move your money into a Vanguard drawdown account and take out income as and when you need it. Vanguard doesn’t charge anything extra to use this service; just the same 0.15% annual fee and fund charges you were paying previously.

• Does Vanguard offer financial advice?

  As standard, Vanguard operates on an execution-only basis rather than making personal recommendations. That means you make the decisions about what to invest your pension funds in, and bear the risk of making a poor decision (provided that Vanguard invests your money in line with your instructions). In 2021, Vanguard also launched a restricted, regulated financial planning service for those with at least £50,000 to invest. For a fee equivalent to 0.5% of the value of your investments, a Vanguard financial planner will work with you to review your current situation and goals. They’ll put together a tailored financial plan with recommendations to achieve your objectives. For an additional, annual fee they will also monitor your investments daily and rebalance them as needed.

  Bear in mind Vanguard will only be able to advise on its own investment products and services. If you think you need personal advice that goes beyond the limits of this service, you may wish to speak to a regulated financial adviser that is able to make recommendations on the whole pension market.

Written by

Ceri Stanaway

Writer

Ceri Stanaway is a researcher, writer and editor with more than 15 years’ experience, including a long stint at independent publisher Which?. She’s helped people find the best products and services, and avoid the pitfalls, across topics ranging from broadband to insurance. Outside of work, you can often find her sampling the fares in local cafes. See full bio