PP vs SIPP

Heyhosilver

I will retire in 5 years time with a DB Pension that will be high enough to allow me to qualify for flexible drawdown when I take it. I have just inherited some money that is more than I expect to spend before I retire. So I an considering putting some of the cash into a PP, intending to draw down lump sums as income when I need it.


My question is about options for PP/SIPPs. It appears from the search engines that few PP allow drawdown. HL is often mentioned as a good low cost option in relation to the Vantage SIPP but the 0.5% charge seems to the same as the HL Vantage PP scheme. If the SIPP costs the same as the PP is there any point in choosing the PP since the SIPP seems more flexible? Or am I missing something? Is there a better option I am not finding in the search engines?

bigadaj

Many people believe pp are cheaper than SIPPS, and there is normally an additional fixed or percentage cost on SIPPS above that on pps. SIPPS are often quoted for use with things like commercial property and individual shares so if you only use funds then pps can be cheaper.

There's of course no reason why you can't save into a pp and then transfer into an appropriate scheme for drawdown, the only problem would be if the person pot were very small, when SIPP costs might be a significant part of any income drawn.

OldBeanz

In a similar position and with a pot of £70k at the moment, will add another £30k. Decided at my age that simplicity, cost of moving twice and good service from HL that I would go straight to them.

dunstonh

It appears from the search engines that few PP allow drawdown.

Most PPPs currently retailed allow drawdown. However, historically most did not. That is a more recent trend over the last 5 years.

HL is often mentioned as a good low cost option in relation to the Vantage SIPP but the 0.5% charge seems to the same as the HL Vantage PP scheme.

The SIPP charge is not inclusive of the investments. There are also a lot of other admin charges. The HL SIPP is quite expensive for most people now.

Is there a better option I am not finding in the search engines?

Almost certainly there is as most of the companies do not retail their main pension product via comparison sites. Those that do, typically only offer their basic version or a cut down version and it is often more expensive than obtaining the same or full product via an intermediary (whether advised or DIY)

Most of the main personal pensions have fund based discounts and if charges are a key driver for you then once you get above £20k invested, the personal pensions should be cheaper than most, if not all the SIPPs. Especially HL.

kidmugsy

Heyhosilver wrote: »

I will retire in 5 years time with a DB Pension that will be high enough to allow me to qualify for flexible drawdown when I take it. I have just inherited some money that is more than I expect to spend before I retire. So I an considering putting some of the cash into a PP, intending to draw down lump sums as income when I need it.

May I ask what you expect to invest in, and for how long? Idle curiosity, I suppose, but I'm struck that most investment advice is about accumulating your retirement money rather than how best to use it. (The obvious exception being Wade Pfau's blog.)

By the way, I see that a couple of the Investment Trust SIPPs offer drawdown: scroll down to p52.
http://www.theaic.co.uk/sites/default/files/statistics/attachment/AICStats28Feb14.pdf

Heyhosilver

kidmugsy wrote: »

May I ask what you expect to invest in, and for how long? Idle curiosity, I suppose, but I'm struck that most investment advice is about accumulating your retirement money rather than how best to use it. (The obvious exception being Wade Pfau's blog.)

Some form of relatively cautious growth funds for at least 5 years. I would not wish to draw the income until I needed it for some reason ( eg occasional holidays) so probably 5-10 years.

I am more interested in exploiting the tax benefits of putting cash earning very little into a funds with some prospect of growth so that I can draw some additional income later to supplement a FS pension.

zagfles

Have a look at Cavendish for PP's, http://www.cavendishonline.co.uk/pensions/personal-pensions/ but not sure if they offer drawdown.

Contrary to what you may read HL are good value for low value SIPPs (under about £50k or so) and their drawdown charges are amongst the lowest. For higher amounts you'd be probably better off with the likes of Interactive Investor http://www.iii.co.uk

Check Snowman's spreadsheet which compares platforms (can't find it at the mo but search the forum and you'll find a link).

Heyhosilver

dunstonh wrote: »

Most of the main personal pensions have fund based discounts and if charges are a key driver for you then once you get above £20k invested, the personal pensions should be cheaper than most, if not all the SIPPs. Especially HL.

Thanks Dunstonh. Charges are not the main driver, but that and the choice of funds seem to be one of main ways of discriminating between funds.

SallyG

http://www.investorschronicle.co.uk/2014/02/06/your-money/pensions-and-sipps/sipps/find-the-best-sipp-for-drawdown-IHzDhDL0XzsUuBfbLphijK/article.html

Are these report tables on charges/fees reliable?
Is SIPP drawdown cheaper than PP drawdown?
Just wondering because my PP drawdown involves £25 pm charges and a £300 annual review - so I'm looking for something a bit less fleecy.

dunstonh

Just wondering because my PP drawdown involves £25 pm charges and a £300 annual review - so I'm looking for something a bit less fleecy.

You are paying for a tied agent review. You need to compare like for like. Chances are the product you have is cheaper than many DIY but it is the tied agent advice that is the £300. Not the product.

zagfles

SallyG wrote: »

http://www.investorschronicle.co.uk/2014/02/06/your-money/pensions-and-sipps/sipps/find-the-best-sipp-for-drawdown-IHzDhDL0XzsUuBfbLphijK/article.html

Are these report tables on charges/fees reliable?

They look about right but they make a lot of assumptions about what makes up the fund and trading.

We need Snowman to update his spreadsheet to include drawdown charges

Is SIPP drawdown cheaper than PP drawdown?
Just wondering because my PP drawdown involves £25 pm charges and a £300 annual review - so I'm looking for something a bit less fleecy.

£600pa plus whatever the PP fee is :eek: Is it a big fund? If not it's almost certainly a lot cheaper to use a SIPP.