SIPP or Stay?

colinjd

Hi,
I'm 52 and a recent change in personal circumstances has allowed me to re-evaluate my financial situation. I've got my ISA situation sorted and I've now moved on to my pension (or more accurately, lack of) and would be interested in peoples thoughts.

I have 4 deferred pensions as follows:
1 - <5K pension pot, no GMP or final salary scheme, no transfer penalties
2 - 13K pension pot, no GMP or final salary scheme, no transfer penalties, final pension of £300pa!
3 - £65K pension pot, current value of pension is £3Kpa (incl, GMP of £1.4Kpa), no transfer penalties
4 - Final salary pension of £10Kpa which will stay where it is, thank you!

I'm thinking of moving pensions 1,2 & 3 into a SIPP in order to get the money working a bit harder as I currently do not have any other pension. To complicate things a little, I started my own business last year and don't expect much of an income in the near future...not enough to consider a new pension plan anyway.

I'm not expecting to retire early so I'm looking at the next 14/15 years or so.

Move them into a SIPP or leave alone? Thoughts are welcome.

Thanks

dunstonh

Are you sure they are deferred pensions? They sound like money purchase schemes. Number 3 sounds like a section 32 buy out bond or a money purchase occupational scheme. The guarantees would need to be investigated as well as terms.

Basically all terms would need to be compared. You seem to have eliminated PPP and stakeholder. The latter is understandable as that is largely beaten in all areas by a PPP but what makes you want a SIPP?

How would your SIPP compare to existing and alternatives?

colinjd

This is where my lack of understanding of pension terminology lets me down. I thought any 'frozen' pension was a deferred pension. A lack of pension & general financial education has become clear to me in recent weeks!

I need to do some further investigation once all my paperwork requests have come through (waiting for 2 more) and check those details you are suggesting, but what attracted me to a SIPP was the ability to take control of things myself. I'm not suggesting I would necessarily do a better job than a PPP but I'm open to trying.

dunstonh

I thought any 'frozen' pension was a deferred pension.

Frozen and deferred are two different things. None of those are likely to be frozen.

but what attracted me to a SIPP was the ability to take control of things myself. I'm not suggesting I would necessarily do a better job than a PPP but I'm open to trying.

There is no fundamental difference between a PPP and a SIPP. SIPPs can include things that PPPs do not typically include but the average consumer would not utilise those things anyway. PPP providers tend to offer a level of due diligence on the funds they offer. Whereas SIPPs do not. Unless you are going to use the features and options of a SIPP, a PPP may be better. It may not be but you shouldnt eliminate it on the basis of control as there are plenty of PPPs that give you equal control if you are staying on the mainstream.

atush

To a large extent, with a PPP you are still in charge in that you decide which funds/sectors/types of things to invest in.

SIPPS do the same, but allow you to invest in things like single shares and commercial property. They can take more time to learn about/do than perhaps a PPP.

So, do you have the time to learn or not?

colinjd

atush wrote: »

So, do you have the time to learn or not?

I do at the moment which is why I'm in the process of doing just that. Still plenty that I'm unfamiliar with but the basics are beginning to become a little clearer to me. This is part of a consolidation process to help me get things in order, after so much neglect.

I'm not looking to be doing lots of trades on a regular basis, just do something relatively conservative with the SIPP that I can leave to it's own devices for most of the time, making the odd tweak here and there.

I'll be a little more adventurous with the ISA, but not crazy, stupid.

atush

I would suggest a low cost PPP with looking to transfer to a Sipp later after your research as you will want collective/even life styling funds while you do so. Can take some time/.

you need to learn everything from collective to single, to funds vs trusts, to binds vs gilts to asset allocation, risk assessment- it wil take some time.

colinjd

Okay, so I received some more information today...

Pension #1 is an S32 Buyout with no guaranteed annuity option, a protected tax-free lump sum of <2k, a fund value of <5.5K and a transfer value of <4.8K.

Pension #3 is a deferred pension (Diageo have called it a Defined Benefit scheme) with a current pension of approx £3kpa incl of GMP of £1.4K. GMP will be revalued annually at 7.5%, the rest at RPI upto max of 5%. They've awarded a CETV of approx £64K to this.

I'm definitely considering moving #1 & 2 into a PPP or SIPP, leaving #4 in its final salary scheme but I'm undecided what to do with this Diageo one (#3).

For someone who doesn't intend taking early retirement, should I leave it alone or move it with the others? Thoughts?

dunstonh

I'm definitely considering moving #1 & 2 into a PPP or SIPP, leaving #4 in its final salary scheme but I'm undecided what to do with this Diageo one (#3).

I would have thought leaving number 1 was better too as it has a greater than 25% tax free cash payment.

GhIFA

colinjd wrote: »

Okay, so I received some more information today...

Pension #1 is an S32 Buyout with no guaranteed annuity option, a protected tax-free lump sum of <2k, a fund value of <5.5K and a transfer value of <4.8K.

Pension #3 is a deferred pension (Diageo have called it a Defined Benefit scheme) with a current pension of approx £3kpa incl of GMP of £1.4K. GMP will be revalued annually at 7.5%, the rest at RPI upto max of 5%. They've awarded a CETV of approx £64K to this.

I'm definitely considering moving #1 & 2 into a PPP or SIPP, leaving #4 in its final salary scheme but I'm undecided what to do with this Diageo one (#3).

For someone who doesn't intend taking early retirement, should I leave it alone or move it with the others? Thoughts?

Based on those figures, you have tax free cash in excess of 25% of the fund value on the S32 plan. Be aware you will be giving this up should you transfer it to a SIPP.

The Diageo scheme is a Final Salary scheme - again, based on what you have written here, it is very unlikely that you would match these benefits if you transferred it (you would need to get this signed off by an IFA anyway). Approx half of the income that the scheme will provide is guaranteed to increase at 7.5%pa.

colinjd

GhIFA wrote: »

The Diageo scheme is a Final Salary scheme - again, based on what you have written here, it is very unlikely that you would match these benefits if you transferred it (you would need to get this signed off by an IFA anyway).

Interesting you say this...I received the paperwork from Diageo outlining the what's and wherefor's and included in the documentation was a Discharge form and a Transfer Questionnaire (to be completed by the receiving party).

Nowhere does it say anything about having this signed off by an IFA, I just need to complete the forms and send them to my new provider, which leads me to ask how would I know about that without someone like yourself telling me?

As it stands, I haven't decided what to do with this pension yet anyway I'm just interested about this IFA signing-off that Diageo haven't told me about, just in case.