Transferring personal pension to SIPP

Mojo71

Hi,

I'm considering transferring about half of my personal pension plan into a SIPP (looking at Hargreaves Lansdown), and just wondered if there was anything I need to consider about this which I may have overlooked.

Current pension value is about 50k with Norwich Union, the majority invested in their own in-house funds (it's in their "Series 3" plan).

My reasons for transfer are as follows:-

(a) Too large amounts in single funds, which doesn't fit in with my strategy for investing. (Note: I have got some of it invested in NU "external" funds, but they don't have many to choose from that I think are any good, which is why most of it is in NU's own funds).

(b) Average performance, which over the long-term can have a more considerable impact on the final amount of my pension pot, than worrying about whether the SIPP has slightly higher annual charges.

(c) I've been DIY investing in funds (PEPs, ISAs) myself for almost 15 years, and have achieved double (or more from some funds) overall growth rates than my pension plan has (and I'm not talking about high-risk funds like China or something else speculative, these are just standard equity funds but using the benefit of research and finding good fund managers, switching from badly performing funds into better ones, etc.).

Basically, item (c) is my most important factor, and it often really hits home that I've paid high start-up fees with insurance companies for managing pension funds over the years, and obtained far poorer investment performance, since that's been my only option because I have to use the pension provider that the company I work for chooses.

I would rather manage my own money, and take an active role in my pension funds, than just continuing with the mentality of "oh well, what choice have I got, paying into funds that I have little flexibility in how they are invested".

I've made enquiries to NU about the feasibility of transferring some of my plan to HL (looking to transfer about 30k), so that I have more fund choice, can split this amount into more funds (would do about 10 different funds), and basically have the freedom and flexibility to manage my own investments like I have been doing for years now in other ways.

The reason I want to transfer only some of the plan, is because, as mentioned, I need to keep the NU plan going for my employer to pay into each month.

Questions:-

1. My NU plan is split into "protected" and "non-protected" rights plans (both containing respective percentages into the same funds). Am I only able to transfer a lump-sum from the "non-protected" plan?

2. Am I right in thinking that HL charge an annual management fee % of "up to a maximum of £200"? And if so, is this taken from their % of the actual fund's annual management charge that they claim back from the fund management companies themselves? Or do I get "billed" myself this amount each year?

3. Will this have any repercussions on what I can do with the money when I retire? Can I still take 25% as a lump sum from both providers? Or can I only take 25% of the "non-protected rights" plans?

Any other points to consider that I haven't thought of?

Thanks in advance for any help,
Mojo

EdInvestor

Mojo71 wrote: »

1. My NU plan is split into "protected" and "non-protected" rights plans (both containing respective percentages into the same funds). Am I only able to transfer a lump-sum from the "non-protected" plan?

Correct.

2. Am I right in thinking that HL charge an annual management fee % of "up to a maximum of £200"?

Not AFAIK, unless you want to invest the money in shares.If you use funds, there should be no annual charge other than the fund AMC.

3. Will this have any repercussions on what I can do with the money when I retire?

It makes it easier if you plan to take income drawdown, as there is no need to crstallize the fund and transfer it, you can just stop making contributions in and start taking income out if it is already in a SIPP.

Can I still take 25% as a lump sum from both providers?

Yes.

Or can I only take 25% of the "non-protected rights" plans?

You can take 25% from both now.Hopefully before too long the PR money will be allowed into the SIPP too.

I'd say your thinking is sound.

Mojo71

Thanks Ed for the reply.

Just heard back from NU today, doesn't look like I can do a partial transfer, only a full transfer.

Trouble is, my NU pension contains about one-third in "protected rights", and the HL website mentions that I can't transfer this into a SIPP.

NU said if I did a full transfer (i.e. plan closure), I could open a new plan with them so that myself and employer can still make monthly contributions.

Not sure if this would involve start-up costs again, though.

Or whether I can "transfer" the current plan's "protected rights" fund over to the new NU plan, so that it remains with them.


Gonna get in contact with employer's third-party financial advisor who arranges our pensions to see what my options are.

EdInvestor

The best thing would be to transfer the non PR money from the existing plan and open a new plan at NU with the remaining PR money, into which the employer conts can then be paid.

dunstonh

Trouble is, my NU pension contains about one-third in "protected rights", and the HL website mentions that I can't transfer this into a SIPP.

Go for a hybrid SIPP or fund supermarket pension then. It appears that you only want access to the unit trust funds so they can do the job for you nicely. Plus get it on execution only from the right IFA and it can be cheaper than HL's SIPP. They can take employer contributions as well (although I would think HL could do that with their SIPP as most pensions can).

Mojo71

Cheers Dunston.

The monthly contribution situation is with my employer. They won't pay into another plan, too much hassle for them to write out a separate cheque each month!

So have to stick with NU in that respect.

Not really sure about other providers of fund supermarkets or hybrids. Spent time investigating HL, and like what I've seen so far (their service and facilities). Plus wanted to stick with a "large" provider, rather than an unknown. Wouldn't mind Fidelity Fundsnetwork, for example, but I've heard they're one of the more expensive.

Besides, I've been used to paying 5% initial + 1.5% annual fees on unit trusts direct from the fund managers for years, so everything seems cheaper than that. :money:

dunstonh

fund supermarket/hybrid SIPPS are the same as HL in what they offer with the exception of not taking external investments. Just unit trusts/oeic funds. Selestia is the main one on this front but Scottish Widows have one as well although it is better with larger fund values. Both of these can be cheaper than HL on execution only basis. Both Selestia and Scottish Widows are large providers. Fidelity's option is actually quite weak.

I'm not trying to change your mind or make a recommendation. Just highlighting other alternatives that could take protected rights as well as ordinary rights.

Transferring the lot and re-opening a new NU pension may be the easiest way. Or if it's a fixed amount each month, then let the providers can use direct debit and require no employer input apart from when the payment gets amended.

EdInvestor

For an experienced investor I'd have thought the availability of the full range of investments - shares, bonds and gilts, investment trusts, exchange traded funds etc will be well worth having for no extra cost over an insurance based Sipp which only offers funds and is set up for IFAs so cannot be self managed.

Mojo71

Yes, having instant access to my funds, and being able to manage them online, is my primary objective.

dunstonh

HL are IFAs. If you want to transact, you tell them. What makes that any different to other fund supermarkets?

Most SIPPS do not invest in anything other than funds. So, having pensions that offer only that side of it isnt going to be an issue for most people. Obviously for those that want the other things, then a SIPP is best but they are in the minority.

EdInvestor

dunstonh wrote: »

HL are IFAs.

They have an advisory section, but we are talking about their execution only/discount broking service.

If you want to transact, you tell them. What makes that any different to other fund supermarkets?

Can the client self invest online directly with a Selestia SIPP? Or does only the IFA have access? If there is a self invest e/o SIPP service at Selestia, what are the charges?