Cheapest Sipp: build yourself a low cost DIY pension article

nickcheatle

hi
Advice sought please.
My wife and i have 5 various sized company pensions from early years of work before we both settled for long term employers.
We want to move them to a single SIPP.
Firstly is this possible and secondly, what do we recommend, advise?
Thanks in advance
Nick

cloud_dog

nickcheatle wrote: »

hi
Advice sought please.
My wife and i have 5 various sized company pensions from early years of work before we both settled for long term employers.
We want to move them to a single SIPP.
Firstly is this possible and secondly, what do we recommend, advise?
Thanks in advance
Nick

Firstly, what are the pensions? Are they all DC (pot of money/no guarantee) pensions, or might they have some guarantees attached to them?

If they have guarantees, what are they?

cathybird

I would like some advice. I am in the process of setting up a SIPP. I have run various scenarios through comparefundplatforms and invariably iWeb is coming out the cheapest, followed by Halifax Sharedealing (which provides iWeb's platform). However, my Isa is currently with Lloyds sharedealing, and Halifax is a subsidiary of Lloyds'. Is it worth paying a little bit more to Interactive Investor (which is third cheapest) to diversify providers? I know I would own the underlying assets anyway, but if my SIPP and Isa were both in effect with the same provider (Lloyds/Halifax) I would feel very much as though I had all my eggs in the one basket - though there is no reason at this point to doubt the ongoing health of Lloyds as an organisation, but even so. Unless it's not quite as simple as that? ...

funkyronster

nickcheatle wrote: »

hi
Advice sought please.
My wife and i have 5 various sized company pensions from early years of work before we both settled for long term employers.
We want to move them to a single SIPP.
Firstly is this possible and secondly, what do we recommend, advise?
Thanks in advance
Nick

First I would suggest that you get an idea of how they have been performing. If you have kept your annual statements, then you should easily see how they have each performed year on year. You will either be surprised or disappointed - it all depends!

You can easily transfer them all to a SIPP, but remember that once they are in a SIPP, you will be responsible for what the money is invested in, so think twice before transferring any that are performing well - anything about 5% a year is decent. If you already know what you want to invest in within the SIPP, then all well and good. Many SIPP providers like HL and Bestinvest have model portfolios which you can choose depending on your age and attitude to risk. My SIPP is with Bestinvest and generally I have no complaints, although this is not a plug for them. HL seem to be the market leaders, but i think their fees are a bit high.

You can call up all your existing pensions and ask for a transfer value, and also ask if there is any penalty for transferring. There usually isn't, but you should ask.

funkyronster

Depends on how much you have and whether you think there might be a catastrophe or not. The govt guarantee is £85k per institution (I believe), so it would make sense to spread it around if you have more than this.

RedMonty

I'm self-employed with no pension. I'm a big fan of Vanguard LifeStrategy, and have ISAs on Vanguard's platform. I've been patiently waiting for Vanguard to launch their SIPP, which doesn't seem to be happening any time soon.

Now I'm ending self-employment and moving to full time employment quite soon. If I do nothing, I'll end up in the company pension scheme which is with NEST. So it seems I have to set up a SIPP right now instead of waiting, so that the SIPP is in place before I start at the full time job. I am in a senior role, so setting up employer contributions to the SIPP rather than the NEST should be feasible.

- I aim to kickstart the SIPP by transferring about 20k from my ISA into the SIPP via salary sacrifice of about 1K per month.
- I aim to put pretty much all of the SIPP into the Vanguard LifeStrategy range and just leave it, perhaps a rebalancing every few years.

I already have other ISAs at Hargreaves Lansdown, so it seems a natural choice to start a SIPP there. However I've seen comments that their charges are rather high.

Would you suggest I go with HL or Interactive Investor instead if the goal is the lowest possible starting / annual charges on a static SIPP portfolio of Vanguard LifeStrategy funds? (and the pension pot will be under 100K for a few years.)

EDIT: Thanks for advice. It seems HL is far cheaper for under 100K, and has a much better service for the process of setting up a SIPP, getting through the salary sacrifice paperwork etc. Above 100K I will move (assuming fees stay the same) to Interactive Investor. Much cheaper and by then, I will be more experienced in dealing with SIPPS.

cloud_dog

RedMonty wrote: »

I'm self-employed with no pension. I'm a big fan of Vanguard LifeStrategy, and have ISAs on Vanguard's platform. I've been patiently waiting for Vanguard to launch their SIPP, which doesn't seem to be happening any time soon.

Now I'm ending self-employment and moving to full time employment quite soon. If I do nothing, I'll end up in the company pension scheme which is with NEST. So it seems I have to set up a SIPP right now instead of waiting, so that the SIPP is in place before I start at the full time job. I am in a senior role, so setting up employer contributions to the SIPP rather than the NEST should be feasible.

- I aim to kickstart the SIPP by transferring about 20k from my ISA into the SIPP via salary sacrifice of about 1K per month.
- I aim to put pretty much all of the SIPP into the Vanguard LifeStrategy range and just leave it, perhaps a rebalancing every few years.

First - Why? Unless there is some reason that you haven't explained.

Second - Are you sure it is feasible? It is possible the company may have different schemes for different groups of employees but you need to confirm, as it is not usual for a company to allow a pension contribution to be directed to a scheme an employee wishes. It does happen but is not the norm.

Third - Are you sure they operate 'Salary Sacrifice' or are you assuming that all companies operate this payment scheme?

EDIT: Are you going to be a HRT payer?

RedMonty

cloud_dog wrote: »

First - Why? Unless there is some reason that you haven't explained.

Looking into NEST, it seems relatively low charges but not an excellent choice of funds. I will probably be moving employers every couple of years. I don't want to end up with a bunch of pension pots. I'd rather keep it all in index trackers of my choice.

Second - Are you sure it is feasible? It is possible the company may have different schemes for different groups of employees but you need to confirm, as it is not usual for a company to allow a pension contribution to be directed to a scheme an employee wishes. It does happen but is not the norm.

Thank you. I've been reading about UK company pension schemes in general, and the wording is very vague about whether company contributions are the same for opted in and opted out employees. If you can direct me to better information, I'd be grateful.

It's a small company with a few employees & I'll be in a senior position. I'm likely to be the one dealing with the pension paperwork, with the help of the external accountant.

Third - Are you sure they operate 'Salary Sacrifice' or are you assuming that all companies operate this payment scheme?

They've probably never heard of it. I will have to set it up with the accountant and get it cleared by the Board.

I'm supporting a family member (a senior worker at another small company) through claiming salary sacrifice. Her company has agreed to it, but there are issues with the optional company NI contribution (on top of the sacrifice) coming out of the company's taxed income (that's what her Chair said). Negotiations over how to split the last few percent are ongoing. So I'm aware it's not always smooth or as simple as it seems.

EDIT: Are you going to be a HRT payer?

No, but am on the way there, plus I have very low outgoings, so it's time to start building up my pension. I have none right now, and am midway through my working life.

dunstonh

Looking into NEST, it seems relatively low charges but not an excellent choice of funds. I will probably be moving employers every couple of years. I don't want to end up with a bunch of pension pots. I'd rather keep it all in index trackers of my choice.

Why would you end up with a bunch of pension pots? You just consolidate into your main one each time you leave.

I've been reading about UK company pension schemes in general, and the wording is very vague about whether company contributions are the same for opted in and opted out employees.

There is no vagueness. If you opt out, the employer doesnt have to pay anything into your individual pension. Most will not.

cloud_dog

RedMonty wrote: »

Looking into NEST, it seems relatively low charges but not an excellent choice of funds. I will probably be moving employers every couple of years. I don't want to end up with a bunch of pension pots. I'd rather keep it all in index trackers of my choice.

As dunstonh says.

RedMonty wrote: »

Thank you. I've been reading about UK company pension schemes in general, and the wording is very vague about whether company contributions are the same for opted in and opted out employees. If you can direct me to better information, I'd be grateful.

Ignoring the opting out (why would you?), the specifics for each scheme can differ slightly, and the devil is in the detail. You need to check with the company.

RedMonty wrote: »

It's a small company with a few employees & I'll be in a senior position. I'm likely to be the one dealing with the pension paperwork, with the help of the external accountant.

Even so, don't assume. Verify.

RedMonty wrote: »

They've probably never heard of it. I will have to set it up with the accountant and get it cleared by the Board.

I'm supporting a family member (a senior worker at another small company) through claiming salary sacrifice. Her company has agreed to it, but there are issues with the optional company NI contribution (on top of the sacrifice) coming out of the company's taxed income (that's what her Chair said). Negotiations over how to split the last few percent are ongoing. So I'm aware it's not always smooth or as simple as it seems.
No, but am on the way there, plus I have very low outgoings, so it's time to start building up my pension. I have none right now, and am midway through my working life.

If you are a BRT payer, and if SS isn't an option currently then you may want to consider utilising a LISA for longer-term / retirement planning instead of a pension. Obviously if SS becomes available or you become a HRT payer then pension wins hands down.