Transfer Standard Life Stakeholder Pension to Scottish Widows Group Personal Pension?

littlemissmoney

Hi

I have a Standard Life Stakeholder Pension worth about £9K that I have been paying into and my employer has been matching my contributions. My employer has now been taken over. The new employer will also match my contributions but requires me to open a Scottish Windows Group Personal Pension, which I will do. My question is, do I tranfer my Standard Life pension into the Scottish Widows one?

Useful info:

• The charges on the Standard life pension are 1% regardless of whether I'm paying in or not.
• The charges on the Scottish Widows pension are 0.35% whilst I'm paying in and 0.7% if I stop. The changes on anything transfered in are 0.5% regardless of whether I'm paying in or not.
• I'm about 40 years from retirement.

I realise the "best" option will depend on fund performance, but please can people highlight things I should consider in making this decision?

Thanks :T

Linton

Two factors lead me to merge some old pensions with my employers scheme.

1) The difference in charges is significant. Over 40 years 1% rather than 0.5% could make a difference of 20% in the final pot.

2) Accumulating a large number of relatively small pensions is a hassle.

On the other hand there is advantage in having more than one pension....

1) Having pensions outside your employer's scheme gives you access to a wider range of investments

2) Greater flexibility - eg if you semi-retire you could more easily take a partial pension early.

littlemissmoney

Thanks Linton.

Looking purely at the charges it seems like transfering is the right thing to do. My main concern is, aren't Stakeholder pensions quite good? E.g. charges are capped at 1%, they can't charge me for transfering out, etc. Could I end up in a situation in a few years time where all my pension is with Scottish Widows and they have upped their charges to 1.5% and will charge me to transfer my pension elsewhere?

EdInvestor

The Widows personal pension is a good one. The main problem with stakeholders is the lack of fund choice.Also these days their chargtes are often much higher than PPs as in this case..

dunstonh

The scot widows PPP is far superior ot the scot widows SHP. That assumes it is the full retail version and not a cut down version.

Could I end up in a situation in a few years time where all my pension is with Scottish Widows and they have upped their charges to 1.5% and will charge me to transfer my pension elsewhere?

No. The stakeholder is a defined charging structure. Personal pensions dont have to meet the stakeholder structure so can charge differently and offer different features. However, they still have to comply with the T&C they have in place when you take out the plan. Most personal pensions now offer the stakeholder fund range at stakeholder cost (or cheaper) so stakeholders are largely obsolete apart from the fact that they have to be offered (although that rule is likely to go in 2012 and stakeholders will cease to be offered for new business).

littlemissmoney

Thanks dunstonh, that's really useful. :T

dunstonh wrote: »

they still have to comply with the T&C they have in place when you take out the plan.

So the charges are guaranteed thoughout the life of my plan?

A few more questions:

• If I leave my employer, would I be able to continuing paying into the Scottish Windows Group Personal Pension (like I can the stakeholder)?
• Am I correct in thinking the SW pension has a tranfer penalty but the stakeholder doesn't?
• I'm thinking of going for the "Balanced Pension Approach" with SW. Will this take my young age into consideration and be quite adventurous in the early years or should I choose the "Adventurous Pension Approach" and then swap to the balanced in say 20 years?
• On my pension illustration for SW it shows that commision will be paid to a named IFA company which my employer must have chosen (who I have to return the forms to). I assume I just have to go with this and can't use a discount broker as it's a group pension?

dunstonh

So the charges are guaranteed thoughout the life of my plan?

No. They are able to change them but they have to give you advance notice and the right to exit on existing terms first. The only area that tends to allow some movement is the setting of the annual management charge. However, switching funds is free of charge with most modern contracts so that is easily sorted if you have an issue with a change in the amc.

If I leave my employer, would I be able to continuing paying into the Scottish Windows Group Personal Pension (like I can the stakeholder)?

Most versions can be converted into an individual plan which you can continue. The change in the charge when you contribute and if its made paid up does suggest it is not one of their conventional retail products. That doesnt happen on their retail plans. So, one would have to read the T&C of that scheme just in case there are differences in there as well.

Am I correct in thinking the SW pension has a tranfer penalty but the stakeholder doesn't?

There is no transfer penalty on the retail personal pension.

I'm thinking of going for the "Balanced Pension Approach" with SW. Will this take my young age into consideration and be quite adventurous in the early years or should I choose the "Adventurous Pension Approach" and then swap to the balanced in say 20 years?

You choose what is right for your risk profile. Not anyone elses. Although risk is diluted over time and also with monthly contributions rather than lump sum going in at a single point. Those "approach" funds are internal funds so you wouldnt be using the key benefit of a personal pension which is access to externally managed funds and the ability to portfolio plan.

On my pension illustration for SW it shows that commision will be paid to a named IFA company which my employer must have chosen (who I have to return the forms to). I assume I just have to go with this and can't use a discount broker as it's a group pension?

The IFA in question is responsible for all group members. Only one IFA firm can be appointed. It cannot be by member. So, you would need to opt out of the group scheme and that would lose your employer contribution. Only if the employer is willling to pay into an indivdiual scheme would that be an option. Although, ironically, the cheapest schemes at your age are not those from the discount brokers. IFAs can easily undercut a discount broker and take full or near full commission if they wanted when you have longer periods.