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Vanguard pension review

Discover the pros and cons of Vanguard's pension scheme to help you decide whether to trust Vanguard with your retirement savings.

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.

Who should consider using Vanguard?

Zoe Stabler

Finder expert Zoe Stabler answers

Vanguard’s SIPP offers pension holders a bit more choice and control over the specific assets their pension is invested in than they’d get with a regular personal pension, but the range on offer is more limited than some SIPPs. So if you want a wider choice of more sophisticated investment options, you might want to choose an alternative SIPP provider. You can head over to our SIPP comparison page to see your options.

On the plus side, costs are transparent and fairly low, and its ready-made portfolios could be a good option for those that like to keep things simple. So if you’re after an uncomplicated, balanced portfolio to hold your pension savings, it’s worth a look.

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. Its 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

Pros

  • Low account fees. Vanguard charges just 0.15%, capped at £375 a year
  • No set-up, exit or drawdown fees
  • Ready-made portfolios keep things simple for those that want this, but there is flexibility to choose your own funds if you wish.

Cons

  • Relatively high minimum investment compared with some other SIPP providers
  • You can only choose your portfolio from 75 of Vanguard’s own funds; other SIPP providers have much wider choice.

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.

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