Is a SIPP protected?
Options
normanna
Posts: 172 Forumite
Hi
Looking for some advice please. My husband and I are thinking of transferring our defined benefit pensions to SIPPs. We will be speaking to an IFA and getting up to date transfer values. The values last year were in the region of 800k to 900k each. We are 50 and 51.
We want to retire at 55 and our company will impose a 20% actuarial reduction and we want a bit more freedom to use the money and leave what remains in our wills hence us considering a transfer. How can we ensure our monies are protected in terms of pension company or funds going bust?
Thanks
Looking for some advice please. My husband and I are thinking of transferring our defined benefit pensions to SIPPs. We will be speaking to an IFA and getting up to date transfer values. The values last year were in the region of 800k to 900k each. We are 50 and 51.
We want to retire at 55 and our company will impose a 20% actuarial reduction and we want a bit more freedom to use the money and leave what remains in our wills hence us considering a transfer. How can we ensure our monies are protected in terms of pension company or funds going bust?
Thanks
0
Comments
-
My husband and I are thinking of transferring our defined benefit pensions to SIPPs.
Why SIPP and not PPP? (nothing wrong with SIPP. Just asking why you eliminated PPP)How can we ensure our monies are protected in terms of pension company or funds going bust?
If you use direct investments in the SIPP then you get no FSCS protection (unless you use an adviser and the advice was wrong). If you use unit trust/OEICs you get £50k protection per fund house.
It isnt really a worry about FSCS at SIPP level, which you get £50k, as the SIPP is not who you are invested with. Your investments are ring fenced from the SIPP provider.
PPPs get 100% FSCS protection with no upper limit.
Unit linked funds, in the mainstream, invest in many different areas. You will likely have a portfolio of funds. Overall, your portfolio is likely to hold no more than 2% in any one investment within the funds. So, you would need a catastrophic failure to lose the lot and at that point, you will be boarding the windows, getting weapons and a large stock of water and baked beans as we re-enter the dark ages.
If you go off mainstream or into daft things like Cape Verde property, biofuels, forestry, student accommodation, storage pods etc then the chance of you losing the lot is extremely high and you get no FSCS protection on those things (unless an adviser put you in them).
So, if you want the most protection, use a PPP. If you happily accept unit trust/OEICs as being safe enough (and in reality they are) then they are fine in a SIPP. Just avoid non-mainstream and do not use Shares, ITs or ETFs (and as a new investor, no adviser is likely to recommend such things).I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Hi
Looking for some advice please. My husband and I are thinking of transferring our defined benefit pensions to SIPPs. We will be speaking to an IFA and getting up to date transfer values. The values last year were in the region of 800k to 900k each. We are 50 and 51.
We want to retire at 55 and our company will impose a 20% actuarial reduction and we want a bit more freedom to use the money and leave what remains in our wills hence us considering a transfer. How can we ensure our monies are protected in terms of pension company or funds going bust?
Thanks
A pension company or fund company going bust is very different to a bank going bust. When you deposit money in a bank, the bank owns your money and they can do what they like with it. All you have is a promise by the bank to pay it back. If the bank goes bust and cant pay you back you lose all your money unless you are covered by a compensation scheme.
Pension companies and funds dont own your money, they cant use it to pay their debts. The invested money remains yours, the companies just have the right to manage it in line with their remit. If they go bust some one else will take over responsibility for managing your money. The risk is the possibillity that this may take a while to sort out.
So it's difficult to see where a compensation scheme would come in. The only situation people have thought of is fraud. Which is why you should only invest with regulated companies.0 -
So, if you want the most protection, use a PPP. If you happily accept unit trust/OEICs as being safe enough (and in reality they are) then they are fine in a SIPP. Just avoid non-mainstream and do not use Shares, ITs or ETFs (and as a new investor, no adviser is likely to recommend such things).
Why not IT's? I know they can be more volatile but they also have a lot of positives going for them. I don't consider myself an experienced investor but nevertheless, I do hold some IT's in my portfolio.0 -
Why not IT's? I know they can be more volatile but they also have a lot of positives going for them. I don't consider myself an experienced investor but nevertheless, I do hold some IT's in my portfolio.
As they have no FSCS protection whatsoever. They also have increased risks over the closest equivalent UT/OEC (NAV pricing and gearing).
So, for a new investor showing the concerns the OP is, they are best avoided.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Would an IFA ever recommend investment trusts? FSCS protection is a red herring.As they have no FSCS protection whatsoever. They also have increased risks over the closest equivalent UT/OEC (NAV pricing and gearing).
So, for a new investor showing the concerns the OP is, they are best avoided.0 -
Why SIPP and not PPP? (nothing wrong with SIPP. Just asking why you eliminated PPP)
OK, I'll bite - what is the difference between a PPP and a SIPP? Can you do drawdown from both? When would you use one and not the other??
Thanks"For every complicated problem, there is always a simple, wrong answer"0 -
Would an IFA ever recommend investment trusts?
Yes they would. They are not as common as UT/OEICs but they are certainly used by IFAs.FSCS protection is a red herring.
its not a red herring. It is certainly not as important as it is on savings accounts but it does need to be a consideration depending on the person. An experienced investor is likely to not give it a second thought though.OK, I'll bite - what is the difference between a PPP and a SIPP? Can you do drawdown from both? When would you use one and not the other??
Not a lot of difference nowadays. Both can offer exactly the same features (drawdown etc). Indeed, the UK's largest provider of drawdown is a personal pension.
PPPs stick to investment funds only as they cannot offer unregulated investments. SIPPs can go wider than that.
PPP providers pre-fund tax relief and switches and most cover pre-fund withdrawals as well. Only a few SIPPs do some or all of those. That is not type specific but more provider specific.
PPPs getting better FSCS protection is the other difference.
In terms of distribution, the DIY providers have virtually all gone SIPP. This is because the SIPP does not have the same solvency requirements that a personal pension provider has to put aside. Also, personal pension providers have to do greater due diligence on the investments they offer (which is why FSCS protection is 100% with no upper limit). SIPPs are having to increase their solvency levels and increase their due diligence but there is still a gap between the two.
The intermediary side is still heavily PPP. Even some of the platforms use a PPP instead of a SIPP. However, there are not as many "traditional" non-platform PPPs you would use nowadays. But there are some very good ones. For example getting 0.4% p.a. in total for fund and provider with some good investment options (passive and managed available).
If you are a DIY investor, then expect a SIPP and don't be concerned about PPPs. If you are using an IFA then expect either a SIPP or a PPPI am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thanks for your views folks. I haven't ruled anything out but was using the term SIPP in a generic sense for a personal pension. I'll certainly be considering PPP also. Having been in a defined benefit scheme all our lives we haven't had any exposure to other pensions and other options haven't been on my mind until now.
We have sizeable exposure to the stock market, (in ISAs) which we manage ourselves so we wouldn't be looking for anything risky with the pension. We also don't want to pay huge management fees either if we are looking at low risk but my main concern was protection0 -
If the transfer values are truly 800k to 900k are you not going to run into problems with the lifetime allowance of £1,000,000?0
-
The actuarial reductions will give an increased buffer with regards to the LTA.0
This discussion has been closed.
Categories
- All Categories
- 343.3K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608.1K Mortgages, Homes & Bills
- 173.1K Life & Family
- 248K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards