SIPS Selling Out - What do I do?

AMO

Hi all,

I have a pension with the Shipbuilders Industries Pension Scheme (SIPS).

They are having a trustee buyout with Standard Life.

They are giving me 4 options:

1) Go with Standard Life whom will initially put the money into a Standard Life Strategic Lifestyle Passive Pension Plus Pension Fund IV with charges at 0.42% (this seems good as the standard literature is 1%).

2) A personal arrangement I have to organise myself.

3) A Pension Scheme I belong to with my current employer.
My current employer use Scottish Widows stakeholder pension.

4) Early Retirement. I am 39, so this does not look like a good option.

5) Cash option. This isn't a good option either - makes my saving into my pension pointless.

I think I am too young to go for 1) which is a passive pension.

If I go for 2) I think I may go for a SIPP but I don't know whether I'll be able to get the pension transferred out into a new SIPP without a pension advisor (some pension providers won't move pensions without an IFA - at least that was the case a few years ago).

3) seems okay I guess, but it means putting a past pension into my current pot making it difficult for me to see how Scottish Widows is doing.

Any suggestions?

Thanks

dunstonh

If I go for 2) I think I may go for a SIPP but I don't know whether I'll be able to get the pension transferred out into a new SIPP without a pension advisor (some pension providers won't move pensions without an IFA - at least that was the case a few years ago).

This would almost certainly require an IFA to sign off on it as it is an occupational pension transfer.

3) seems okay I guess, but it means putting a past pension into my current pot making it difficult for me to see how Scottish Widows is doing.

You invest in the invesmtets available. You dont invest in Scot Wid. So, it is very easy to track what the investments are doing. They are published on various sites.

jamesd

A trustee buyout? Where can we read more about exactly what this means? Normally with a defined benefit pension you would get preserved benefits, still defined benefit, and it would be a bad idea to change from that to any of the options 1-5 that you have listed.

But SIPS has two schemes, one is defined benefit and the other is defined contribution. Are you in the defined contribution one?

AMO

jamesd wrote: »

A trustee buyout? Where can we read more about exactly what this means? Normally with a defined benefit pension you would get preserved benefits, still defined benefit, and it would be a bad idea to change from that to any of the options 1-5 that you have listed.

But SIPS has two schemes, one is defined benefit and the other is defined contribution. Are you in the defined contribution one?

Yes, I am in the defined benefit one. It's called the Money Purchase Plan.

hyubh

AMO wrote: »

Yes, I am in the defined benefit one. It's called the Money Purchase Plan.

Money purchase = defined contribution, not defined benefit.

AMO

hyubh wrote: »

Money purchase = defined contribution, not defined benefit.

Sorry, I meant I'm in the defined contribution one!

jamesd

Thanks. Then pick 1, 2 or 3 based on the investments you want to use, the cost of those investments in each place and the various other factors like customer service levels.

I have reservations about seeing how well Scottish Widows is doing. You are the person responsible for picking the investments and performance reports and charts are available for the investments you can choose, so it's easy enough to look at those and see how you did.

The SIPP type of personal pension would have most investment options and might have higher or lower costs, depending on which provider you use and which specific investments you use.

Given the options and your age I'm inclined not to go with Standard Life just because it'll create another pension pot to watch over. Only low costs would really prompt me to change that and I doubt they will be particularly low cost. If it's a section 33 buyout that would be a strong reason not to go with them because that would require advice to transfer out after it was in there, while transferring out now may well not.

The SW one might or might not take transfers in. Some will, some won't, easy enough to ask to find out whether this is possible. Then if it is, you can consider charges.

If you're interested in paying attention to your investments and learning about investing, an independent personal pension of your own may well be the way to go, perhaps the SIPP type if ETFs and shares as well as funds interest you.

Early retirement might or might not be interesting. The potential advantage is if you can take the pension income then reinvest it to get a second chunk of tax relief on the same money. But I'm not sure how this can be possible for a person of your age with a defined contribution pension, it might be an option open only to those in the defined benefit part. It is worth finding out, because it just might be the most attractive option.

AMO

If I choose early retirement to get at my money, I'll be taxed. I can't get a second chunk of tax relief.

I've decided on a SIPP. Just not sure if the rules governing how much money SIPP providers have to keep will change the SIPP landscape.

Any recommendations on SIPP providers?

My pot isn't large - it's only £16K.

Thanks.

kidmugsy

AMO wrote: »

... Standard Life whom will initially put the money into a Standard Life Strategic Lifestyle Passive Pension Plus Pension Fund IV with charges at 0.42% (this seems good as the standard literature is 1%).

I think I am too young to go for ... a passive pension.

I don't think you need rule out Standard Life. "Passive" just means that they'll try to match a stock exchange index by holding all the shares that make up the index (or try to get that effect indirectly). It contrasts with "active" investing where someone reckons he's got the skill and luck to trade chosen shares so that he beats the index. Experience shows that active investing is more expensive and rarely results in sustained outperformance of the index if we are talking about large company shares on mature stock exchanges. (I don't know whether that's what the SL fund invests in; that's an assumption you'd want to check.)

So one thing you could do is take the Standard Life deal while directing part of your other pension fund into investments that are different e.g. smaller companies, private equity, property, commodities, emerging markets, corporate bonds or whatever.

atush

AMO wrote: »

If I choose early retirement to get at my money, I'll be taxed. I can't get a second chunk of tax relief.

I've decided on a SIPP. Just not sure if the rules governing how much money SIPP providers have to keep will change the SIPP landscape.

Any recommendations on SIPP providers?

My pot isn't large - it's only £16K.

Thanks.

Yes, you can get a second lot of tax relief if you put that extra income into a pension now.

but with a transfer value of 16K it would be low, so i'd transfer it to your current pension or open a new PP for it depending on your current scheme.

The fact that you don't even know what your current pension is invested in, means to me that a SIPP is not the right choice for you.

jamesd

Why can't you get a second chunk of tax relief? It's usually easy: take pension income, add that much to your ongoing pension contributions.

But whether it would make sense would depend on how much the income would be. If it would be produced by buying an annuity it wouldn't make sense to do it.