Pension fund 25% cash drawdown

dunstonh

Usually insurance company drawdowns are more expensive than low-cost SIPPs.

No they are not.

Also, insurance company drawdowns often require a minimum fund of 100k.

apart from those that dont.

Also you have to use an IFA and pay his costs as well..

Instead of using an execution only SIPP provider who gets paid the same way an adviser would.

You will pay lower charges for drawdown in a SIPP at the providers I mention

Wrong. That is factually incorrect.

there is no need to get an IFA involved ( who will typically want 3% of your fund just for writing a couple of letters which you can easily do yourself.)

I like the way you have just priced IFAs all at the same basis despite there being so many different business models. As well as ruling out an internal transfer with NU and execution only basis.

why pay thousands of pounds for so-called "advice" when all that's involved is writing a couple of letters?

Better to use one of Eds SIPP providers so they can earn thousands of pounds out of you for doing nothing. At least the IFA would give you the risk warnings, help choose the best provider and funds and can still end up being cheaper. Or if you know what you want you can ask the IFA just to place the transaction and pay far less in charges for doing so than arranging your own SIPP.

whiteflag_3

whiteflag wrote: »

Oh no, here we go again!

told you !;)

edinburgher

With the greatest respect to the OP, I'd suggest chatting to an IFA instead of asking for advice like this on the forums!

Much as I like the forums, you can't really check the credibility of the advice offered. If, as you say, you're not a risk taker, you'll hopefully not take offence at this suggestion

EdInvestor

Ok, let's look at the Norwich Union income drawdown ( the 'internal transfer' dunstonh has mentioned.) It requires a minimum of 50k after tax free cash, so that's OK

But look at the charges. :eek:

Annual Fund charge (unspecified) .This will include the commission or fee for the IFA (required).Almost certain to be at least 2-3% in the first year and 0.5-1% thereafter.

Additional yearly Charge: up to 1.7% :mad: - though can be zero on bog standard inhouse funds

Fund Manager Extra Charge, Fund manager performance fee: A couple of (unspecified) extra charges applying to hedge funds and the like.

So for a selection of decent quality funds, you would pay 75 pounds upfront and 1.5% p.a at Hargreaves Lansdown

At Norwich Union you could be paying as much as 3,000 pounds upfront and then almost 3 per cent a year for the same funds, double the H-L cost.

Why would you do that?

If you're investing a fund for income and hoping to get say a 6% return, these these fund managers, IFAs and insurance companies are eating half your lunch :mad:

dunstonh

Ed is posting misinformation. HL's SIPP is an expensive option.

The cheapest option would be an insurance company drawdown. Especially for someone wanting a low risk spread.

EdInvestor

More info on the cheapest SIPPs mentioning the same ones I do..

http://www.thisismoney.co.uk/cheapest-sipps-guide

Once can of course understand why advisors such as dunstonh or whiteflag won't want to hear this because the cheapest SIPPs cut out the middlemen, so they end up with nothing.

They are thinking of their own interests.Always bear in mind that an advisor's interest may not be identical to yours.

dunstonh

More info on the cheapest SIPPs mentioning the same ones I do..

http://www.thisismoney.co.uk/cheapest-sipps-guide

No kidding. A page called "cheapest sipps guide" talks about SIPPs. Who would have thought about that. Personal pensions and drawdown plans are not SIPPs and would not be applicable to that article.

Its a bit like having an article on Sports cars and then making the assumption that only sports cars exist because that is what the article only focused on.

Once can of course understand why advisors such as dunstonh or whiteflag won't want to hear this because the cheapest SIPPs cut out the middlemen, so they end up with nothing.

Whiteflag and I earn nothing from posting comments here. The OP will do whatever they want to do.

Ed is pushing you down the SIPP route where the typical annual management charge is 1.50% p.a. and the SIPP provider gets to keep 0.5% of that for giving you no advice and therefore virtually no FOS protection.

There are options out there where the annual management charge is less than 1%.

They are thinking of their own interests.Always bear in mind that an advisor's interest may not be identical to yours.

It is pretty clear what the real agenda is. Ed would rather you pay more in charges as long as it means you dont see an IFA.

God forbid that an IFA would earn from a transaction and therefore its better that you pay more in charges where a SIPP provider gets to keep the money instead.

EdInvestor

The OP can always consult an IFA and get him to lay out the fees and charges.

Since she now has plenty of information about the different options, she should be able to understand the position fairly easily - some advisors are adept at using the "baffle factor" so that investors can't really see how much they are paying, especially if they have no prior info about what is the norm.

What the OP wants to do is quite simple, easy for her to DIY and she should pay IMHO between 75 and 150 quid to transfer the pension and put it into drawdown (depending on provider) and a maximum of 1.5% a year for fund fees, no more - and that will get her a selection of quality funds, not bog standard insurance company ones.

I am not anti-IFA - good ones can be very helpful indeed, but this is not a transaction which requires skilled help, and certainly not at the fees typically charged for drawdown which are in no way value for money in many cases.

BTW,the low cost SIPPs have a couple of other advantages - excellent customer service unlike the dire insuers, and very good online setups, ditto.Your drawdown can be managed like your bank account.This alone can be quite a revelation for anyone who has experienced the ways of the life companies.:)

MrMicawber_2

I don't think penny is looking to be pushed towards drawdown. Her question was.

"Could anyone tell me what happens to the other 75%. Do I have to buy an annuity or can I hold it in a fund until I retire."

The answer is I think:

a) You could take an annuity now - bad idea because rates are rubbish at your age and it appears you don't need to.

b) You can leave the money in your stakeholder and take an annuity when you retire at 60.

c) You could transfer your stakeholder pension to a personal pension or SIPP and take drawdown. Drawdown has risks and advantages. It leaves you in control of your capital, and your beneficiaries can take a lump sum of your residual pension if you die or they can take a pension from it themselves, again if you die. However your first responsibility is to make sure you have a sufficient income for life when you retire and Drawdown is not a panacea. It is also possible to get hideously caught out and lose money.

If this stakeholder is going to be your only source of income when you retire I'd take some serious advice before going the drawdown route, good though it can be. Annuities with all their faults provide you wth an income for life.

dunstonh

but this is not a transaction which requires skilled help

The paperwork on the transaction is not too bad at all. That is easy. The skill is knowing the pros and cons of doing it, who to use and how to invest the 75% left over.

You prefer to use the more expensive SIPP option. That is fair enough as long as you know that its not the cheapest option. However, promoting SIPPs as low cost is not correct. The providers you mentioned are low cost options of the most expensive option.

BTW,the low cost SIPPs have a couple of other advantages - excellent customer service unlike the dire insuers, and very good online setups, ditto.Your drawdown can be managed like your bank account.This alone can be quite a revelation for anyone who has experienced the ways of the life companies.:)

Thats a bit of a generalisation. You tend to find insurance companies are poor with legacy business (industrial branch and those companies which have been bought and merged over the years and had their computer systems bolted on - not always very well). Most insurers can run modern contracts and new business contracts as efficiently as any other company. Dont assume that it will always go right but then it wont for SIPP companies either.