Protected rights drawdown

EdInvestor

At the moment it's very difficult (and may soon become impossible) to move a protected rights (contracted out) pension fund to a SIPP, so as to take income drawdown instead of an annuity.

Does anyone know of a life company that offers a drawdown facility with reasonably low charges and a choice of decent funds for smaller PR pensions (less than 40k?)

TIA.

dunstonh

You cannot put protected rights in a SIPP and I dont believe you can take drawdown on them either at this time.

EdInvestor

Hi Dunstonh

You can do drawdown from a PR fund, here are the GAD rates:

http://www.gad.gov.uk/pensions/income_drawdown.htm

But who offers it? I had heard Scot Eq mentioned but only in the context of large overall funds (PP+PR).

Some SIPP providers have set up companion APPs to take PR funds but you can only invest in cash, so that's not much use.

Debt_Free_Chick

dunstonh wrote:

You cannot put protected rights in a SIPP and I dont believe you can take drawdown on them either at this time.

Apparently you can transfer PR into this one

http://www.freedomsipp.co.uk/index.html?l1=7&l2=82

EdInvestor

HI DFC, thanks for that. The problem (isn't it always ) is the charges.

http://www.freedomsipp.co.uk/index.html?l1=85

For my fairly small fund I need low charges of the kind offered by the e-sipps.

I also hear that the DWP is actually planning new legislation to close this loophole.It's holding a consultation on the subject now.

Apparently the DWP thinks if we're allowed to put out SERPS pensions in SIPPs then we'll all punt them on risky shares and lose the money.

So they want us to keep the money in a pension fund at a "safe" life insurance company. As if life companies weren't even better at losing our money than we are! :mad:

I plan to suggest a "halfway house" to them, where the money can be moved to a SIPP, but invested in a restricted range of investments (mainstream funds,UK FTSE shares, that kind of thing.) That would do the trick for most people IMHO.

I can't think of many people who really want to invest their pensions in Mongolian oil companies or Japanese warrants, but I can think of a few who might like some shares in Lloyds TSB, or Boots the chemist, say.

Neither of which are any riskier than stuff like With-profits which is what most people are in now.

ianjemmett

PR Drawdown is offered by Merchant Investors & Transact.

Currently, PR drawdown is not available pre-60, unless you are the member's surviving spouse/spouse equivalent, you are pre-60 & the member has died before vesting his PR pot.

Transact's establishment & maintenance procedures are online.

MI offers wider self-investment as they include property for PR as well as non-PR monies.

Transact allow all approved assets where a daily price feed is available.

EdInvestor

Thanks Ian for those two suggestions.I couldnt get any details from the Transact site but the MI one at first glance has the same problem as the Freedom SIPP - charges are too high for a smaller fund.

Is the Transact PR drawdown in a SIPP, or direct from an Approved Pension Plan?

I see MI offers a SIPP that will take PR money - but they do say that this could stop without warning any time.The DWP is consulting on a formal ban on PR pensions in a SIPP at the moment, as you probably know.

How come they will allow PR drawdown but want to ban SIPPs? Isn't drawdown almost always done via a SIPP?

ianjemmett

Editor wrote:

Thanks Ian for those two suggestions.I couldnt get any details from the Transact site but the MI one at first glance has the same problem as the Freedom SIPP - charges are too high for a smaller fund.

If you go to Transact, click 'Online Demonstration', follow the logon steps & then click on 'Transact information,' (or a similarly named folder) on the left, one of the documents offered has a section headed 'The clear case for costs'. That gives you some examples for fund purchases. As I understand it, the cost of the pension wrapper is £12 per 1/4.

Is the Transact PR drawdown in a SIPP, or direct from an Approved Pension Plan?

The Transact pension is not strictly a SIPP as it doesn't permit the full range of investments permitted to a SIPP. It is a Personal Pension Plan.

I see MI offers a SIPP that will take PR money - but they do say that this could stop without warning any time.The DWP is consulting on a formal ban on PR pensions in a SIPP at the moment, as you probably know.

How come they will allow PR drawdown but want to ban SIPPs? Isn't drawdown almost always done via a SIPP?

I don't know the proportions as far as the whole drawdown market is concerned, but many are done within insurance company plans, using only the funds they offer. I don't adopt a 'one approach suits all' attitude but think I have only set up one insurance company drawdown (& that was Skandia, with its large range of external funds) in about the last 5 years. I have probably set up 10-15 SIPP drawdowns in that period.

The DWP attitude does seem to be driven by a trust in insurance companies to look after investors. You don't have to actually know what you're talking about to run the country, apparently. I also understand that every government department hates the treasury fairly intensely, so the DWP may just be being grumpy.

Ian

EdInvestor

ianjemmett wrote:

The DWP attitude does seem to be driven by a trust in insurance companies to look after investors. You don't have to actually know what you're talking about to run the country, apparently. I also understand that every government department hates the treasury fairly intensely, so the DWP may just be being grumpy.
Ian

Yes, they seem to think the Sipp is risky.People might make bad investment decision and lose the Govt rebate money. I find this amusing considering how hard it is to get most people to put their money in anything riskier than a Bsoc.;) They are also narked about people heping firms like MI to break the rules, it seems. Following in the spirit of the FSA, perhaps? I can't criticise that, it was all far too lax in the past, as long as they get the principle right, which they haven't here


Tried the Transact site again, but still couldn't get through to the section on the charges, I guess it's IFAs only.

ianjemmett

I have a spreadsheet that factors in the charges, if you would like a copy, let me know.

I should also have mentioned in my original email that GE Life permits PR drawdown, but you have to use insured funds (ie theirs, which are not great).

Ian