SIPP Advice & Thoughts

whit_3

IME any such transfer is HIGHLY UNLIKELY. So it's very important to nail down exactly what guarantees there are on which pension. DON'T disturb any pension until this issue is clear.

The Pru have confirmed that external transfers include terminal bonus, at their discretion. They have also sent me a quote detailing the "transfer charge". This is just over £1,100. The quote confirms that the transfer value includes the terminal bonus. However they have said on the telephone and in the quote that this cannot be guaranteed. Difficult to get a firmer commitment from them at the moment.

To replace your bond investment, you might likely to consider increasing your commercial property asset allocation.CP is low risk, similar to bonds, and accessed either via pension funds or offshore investment trusts in a SIPP/drawdown.Both types of fund are run by the big insurance companies.

Very interesting. Thank you. Sippdeal state that they don't allow investment in commercial property. Is that just direct investment?

I suggest you ask this question on the Fool SIPP board when you've got a clearer idea of exactly what you're investing in, as it's quite complicated when regular contributions are involved.There are one or two maths types over there who enjoy working out this kind of thing.

From what I've read it depends very much on the size of transactions. HL are certainly more expensive trades up to £2,000 and if the SIPP is not partially invested in funds they can achieve a commission on.

EdInvestor

Whit:

The terminal bonus is not guaranteed and not what I meant.I was referring to any Guaranteed Annuity Rates ( GAR) you might have on any WP fund investment.These GARs are very valuable - they can pay you an income of as much as double figures p.a. when you retire, it's almost impossible for any other investment to beat them. So it's important to check if you've got one.

Re Sippdeal, yes that's direct investment.Via funds and trusts no problem.

Re charges you'll also need to work out the optimal way to invest your regular contributions - it may be sensible to allow them to mount up in the cash account for a month or two so you invest a larger amount which will be cheaper. HL's charges are more expensive if you're not mainly in funds, usually - their SIPP is specially designed for funds.

dunstonh

With any fund supermarket (under any tax wrapper), it is important to also see what switching costs are incurred. This is where some of the fund supermarkets make a lot of their money. They may appear cheap on initial purchase but build the charges into switches. If you are likely to be switching funds/investments then watch out.

whit_3

dunstonh wrote:

With any fund supermarket (under any tax wrapper), it is important to also see what switching costs are incurred. This is where some of the fund supermarkets make a lot of their money. They may appear cheap on initial purchase but build the charges into switches. If you are likely to be switching funds/investments then watch out.

Hargreaves Lansdown do not make an administration charge for switching Unit Trusts within the SIPP.

dunstonh

Hargreaves Lansdown do not make an administration charge for switching Unit Trusts within the SIPP.

What about the bid/offer spread on the new units purchased? Is there one? If so, how much?

whit_3

dunstonh wrote:

What about the bid/offer spread on the new units purchased? Is there one? If so, how much?

This is what HL have to say:

You do however need to take any initial charges on the fund into account as this will affect the number of units purchased and also the bid offer spread. Hargreaves Lansdown make a number of saving on the initial charges of funds for our Vantage clients. To see more information on the charges for specific funds please use the folllowing link to look at the fund information on our website: http://www.hargreaveslansdown.co.uk/siteredesign/discounts/search.asp

There is a bid/offer spread. How much depends on the particular funds.

dunstonh

The important bit is how they compare with other fund supermarket/wraps on those charges on switching. I was given an example recently, which showed one provider being cheap if you kept the same holdings but if you made one switch a year, over a 10 year period it was a lot more expensive.

It may just be worth looking at a few other providers just to see what the difference is. Even if you end up with peace of mind knowing that this is the right one for you. Another thing to note are the insured/hybrid SIPPs that will be launching after April. If you intend on having funds only, these will almost certainly be cheaper than a full SIPP as indications have been given that they will be priced on the same basis as buying funds from a fund supermarket.

cheerfulcat

whit wrote:

You'd advocate HL's SIPP for the HYP route?

It depends; a lot depends on how often you intend to trade, and the size of those trades. I think that the choice lies between Sippdeal and HL, though.

Yes, I'm also concerned but unsure on how to provide a balance for the equity allocation. Perhaps a larger cash element is appropriate until the market becomes more sensible.

I wonder whether, so far from retirement, you really need so much cash/near cash in your pension fund?

EdInvestor

Yes, I'm also concerned but unsure on how to provide a balance for the equity allocation. Perhaps a larger cash element is appropriate until the market becomes more sensible.

As mentioned commercial property funds/trusts are definitely worth a look IMHO.

As for the market getting more sensible, if you had had an HYP for the past year, I don't think you'd be too worried.

whit_3

cheerfulcat wrote:

It depends; a lot depends on how often you intend to trade, and the size of those trades. I think that the choice lies between Sippdeal and HL, though.

I'm leaning more toward a HYP and consequently Sippdeal who are a better option for a fund biased toward equities.

I wonder whether, so far from retirement, you really need so much cash/near cash in your pension fund?

I'm an ardent believer in the importance of asset allocation and keen to balance the relative riskiness of equities with a more stable component. I'd keep a cash element with a view to switching to bonds when they become more attractive. Otherwise I would also use commercial property to give my portfolio some balance.