Reorganising 2 Small Stakeholder Pensions

dunstonh

The point about low cost online (DIY discount) SIPPs is not the large selection of funds ( for heaven's sake we're only talking about 5k) but that you can invest the money in a couple of the best funds.

And what would be the point of that? If you are limiting your investment selection to say 2 funds, then the sectors you are likely to choose are almost certainly going to be available on a stakeholder. A stakeholder will be cheaper than the SIPP.

This will usually be cheaper than accessing these funds via an insurer.

No it will not.

Schroder 250 tracker on HLs SIPP is 1.25% p.a. but available on a personal pension at 0.7% p.a.

NU Property fund is available at 1% (minus fund based discounts and commission rebate if done cheaply bringing it as low as 0.4% potentially) on a personal pension but 1.2% on the SIPP.

Ed likes to compare full cost stakeholder/personal pensions against low cost SIPPs. It isnt comparing like for like as you would be buying on a low cost stakeholder or PPP vs low cost SIPP.

If you were going to stick the funds into a specialist area that isnt present on a personal pension or stakeholder, then that is different but as an inexperienced investor and only 2 funds to be picked, then a stakeholder/personal pension would be the cheaper option.

Forget about generic managed funds, they are never top performers.

No-one has mentioned them until you did.

EdInvestor

Let's say that the OP, rather than pick a managed fund as he mentions, decides he wants to put 1k each of his fund into the 5 best funds in the sectors of his choice and just leave it there.

If he goes to this site, he can choose the five he wants from the top 10 rated funds in whatever sectors he fancies:

https://www.citywire.co.uk/Funds/Home.aspx

So having chosen he needs a pension to put them in.It's very likely that any personal pension he might look at will only have one or maybe two of his five chosen funds on offer, whereas the low cost Sipp should be able to offer all of them.

At HL for instance you will normally pay something like 1.5% a year for these top Rolls Royce funds,( I'm not talking rubbish stuff here) whereas the insurers will charge you a premium - another 0.2-0.5% on top of the 1.5% for this level of quality.

It's got nothing to do with sectors, I'm tallking about the top performing funds only - there is no point in investing in the 90% of funds out there which are dross, and most of the stuff at the insurers is exactly that.

david78

So its better to pay 1.5% pa for a return of 9% pa than 1% pa for a return of 7%. This is clear, but it isn't always possible to identify the best performing funds.

Picking one of the top 10 funds won't always work out best. You could choose a multi-manager fund that does all the hard work for you, but the charges would be higher. Or you can do your own research -- the whole point of having a SIPP.

So pick a stakeholder if you don't want to do your own research, pick a SIPP if you do.

dunstonh

If an inexperienced investor goes to that link and picks from the top 10 funds then that is just is plain silly. I cannot believe that you would suggest that as it is investing purely on the basis of past performance.
Most funds in the top 10 now will not be there in 5 years time. Most funds in the top 100 wont be in the top 100 in 5 years time either.

The SIPP is designed for the experienced investor and whilst I am using hybrid SIPPs on virtually all advice cases now, I wouldnt dream of using one for someone that doesnt intend to keep it under review. That would just be a waste of money.

Here is what the FSA say on SIPPs

SIPPs are designed for people who want to manage their own fund by dealing with, and switching, their investments when they choose. They may have higher charges than other personal pensions or stakeholder pensions.

The instructions to advisers from the FSA are:

The FSA is asking advisers to establish best practice. If customers want Sipps, they must require the additional investment flexibility and not be better off with a stakeholder or another personal pension.

Here is a quote from Bestinvest who are often promoted on this site as a good buy

Justin Modray of Bestinvest said: “People who go into Sipps without any investment knowledge could choose the most exotic funds with the best past performance without understanding the risks, as they do with Isas.” He suggests building a fund of about £10,000 before moving into a Sipp, because otherwise the charges will take a big chunk of the assets.

Here is one from Norwich Union

Iain Oliver, head of pensions at Norwich Union, said: “I quite agree with the FSA’s sentiments. There is certainly a danger that people will buy Sipps for the sake of it. If you go into a Sipp, you must be sure that you will use the greater investment freedom. Sipps are not a panacea; they are just another savings option.”

Loads more where that came from.

SIPPs are great. I love them. However, they are not for everyone. It's about time you realised that Ed. You post SIPP as the answer to virtually every post in here without taking the needs or situation of the individual into account and anyone novice investor following your "advice" could easily end up paying more in charges when they didnt need to.

EdInvestor

And they could easily end up paying less

And they would have access to all the best funds, which they won't in a personal pension.

It might be the case that rubbish funds are cheaper in a PP, but I don't think Moneysavers should do rubbish, as it's a false economy.

There are three options:

*High charges high performance
*High charges rubbish performance
*Low charges rubbish performance
*Low charges high performance

It's not impossible to get the latter in a PP, but it's much easier in a low cost Sipp.

stuart264

Err Guys.......I hate to break this to you after giving me varying advice but could I possibly ask for an explanation as to how I proceed in plain english as I seem to have got lost somewhere in that explanation.

dunstonh

And they could easily end up paying less

So you are saying that a lost cost SIPP is cheaper than a low cost stakeholder? Absolute rubbish.

And they would have access to all the best funds, which they won't in a personal pension.

Most personal pension ranges include the major fund houses now. So that point is null and void.

It might be the case that rubbish funds are cheaper in a PP, but I don't think Moneysavers should do rubbish, as it's a false economy.

And there are far more "rubbish" funds available to invest within SIPPs as well.

Err Guys.......I hate to break this to you after giving me varying advice but could I possibly ask for an explanation as to how I proceed in plain english as I seem to have got lost somewhere in that explanation.

You have 4 options

1 - leave it where it is (and perhaps utilise funds that already exist)
2 - transfer the funds to a stakeholder pension which is the cheapest option available for you. Although the fund range will be limited to around 20 funds in most cases.
3 - transfer the funds to a personal pension which can utilise stakeholder funds as well as offering a range of the top regarded investment funds. Usually around 40-800 funds.
4 - transfer to a SIPP. This will be the most expensive option. It can offer the greatest flexibility and range of investments but it is not an option for a novice or someone that wants to invest and forget about it.

Ed, is not a qualified adviser. I am. Whilst we cannot give advice here and anything posted is discussion points only, when you have advisers, product providers (including those that promote SIPPs) and the regulator telling people not to use SIPPs unless they are going to utilise the features then you have to decide who you wish to believe. Ed or everyone else.

EdInvestor

stuart264 wrote:

Err Guys.......I hate to break this to you after giving me varying advice but could I possibly ask for an explanation as to how I proceed in plain english as I seem to have got lost somewhere in that explanation.

Hi stuart

You said

I am trying to sort out my finances and put them in order and I would like to know if its possible to transfer the 2 pensions into one scheme that actually makes money..

As you can see this is not as simple as it looks, and good heavens we haven't even inquired about your "attitude to risk" yet.;)

The basic point is this: only some "pensions" are a single product ( eg company final salary pensions, the state pension.)

Most pensions - like yours - are not. They consist of two things: the wrapper which enables you to get the pension tax relief from HMG, and the funds or other investments within the wrapper.

Both impact on whether or not it makes money: the first through the charges the provider makes for providing the wrapper and the second through the investment performance of the funds.

So you have to consider both.

Now we are not officially allowed to "advise" people to invest in specific funds or shares - or even tax wrappers - on MSE. We can tell you where to look, which is why I have mentioed a couple of companies which provide cheap no- fee online Sipp pension tax wrappers, and a website which rates all the funds out there, which makes it easier for you to choose the best ones.Note that the very vast majority of funds are rubbish.

What I describe above is called "execution-only" - effectively DIY investing.

If you want someone to do it for you, consult an IFA, and be prepared to pay, either via a fee or through higher charges which will mean your investment makes less money. On the other hand you do get protection from misselling.

Consulting an IFA doesn't however guarantee that your investment will make money, nor that you will end up in either a cheap pension wrapper or good funds much less both.

I'm afraid there's no real substitute for a bit of DIY.

dunstonh

A bit more balanced than usual for you Ed However, you continue to mention low cost SIPPs. Why not low cost stakeholder or low cost personal pension?

Also do not rule out advice. I could have those founds out of the HSBC into a PPP with a spread of Artemis, Schroder, Inv Perp etc and some internal fudns for the lower risk end with a reduction in yield of around 0.6 and still be paid for doing it. Making it cheaper than a DIY stakeholder with Virgin for example.

EdInvestor

A bit more balanced than usual for you Ed However, you continue to mention low cost SIPPs. Why not low cost stakeholder or low cost personal pension?

Because it's too much like hard work.First you have to pick your funds.Then you have to go round and check which pension provides them, and what the charges are, and what are the extra charges for the good funds etc. Then the providers don't want to talk to you.So you have to see an IFA and pay more. Sorry but this is all boring and time wasting ( especially for 5k!)

Whereas once you've picked the funds, you can go straight to the Sipp site,read the charges on the website, check they have the funds, fill in the form and open the account immediately. Easy

Of course you'll probably have to wait a while for the insurance company to creak into action and actually release the money.They tend to think it belongs to them, so it's really hard to extract it sometimes.

But once you're out of the actual life companies' dinosaur system and into something like a Sipp, it's much better, the admin is massively more efficient for a start, as is being able to check the investment online.You should try one DH, I'm sure you'd like it