Moving pension money into isa

wooder

I'm sure this has been asked before but is it possible and a good idea to move my pension pot into my isa and if so, what is the most cost effective way?

I'm 59 years old (60 in March), self employed company director and have an Old Mutual personal pension of about £80k. The performance of the pension has been what I would describe as lacklustre over the past five years compared to the investment in my s&s isa. I intend to retire at about 65.

My pension was set up by an Ifa before I got interested in looking at investments and I suppose part of the lack of performance could be down to fees charged for the running of the pension.

dunstonh

I'm sure this has been asked before but is it possible and a good idea to move my pension pot into my isa and if so, what is the most cost effective way?

Whether its a good idea will depend on your tax status and the tax implications.

have an Old Mutual personal pension of about £80k. The performance of the pension has been what I would describe as lacklustre over the past five years compared to the investment in my s&s isa.

Old Mutual allow you to hold the same investments in the pension as the ISA and vice versa and at the same cost. So, there is no justification to move tax wrappers on the basis of performance.

wooder

Many thanks for your reply.

My Isa is direct with Fundsmith (no platform) - so are you saying I could get Old Mutual to put my pension money into Fundsmith with no difference in cost than if I were to invest directly... also what about trail commission etc that I am being deducted, how do I stop that ?

dunstonh

are you saying I could get Old Mutual to put my pension money into Fundsmith with no difference in cost than if I were to invest directly... also what about trail commission etc that I am being deducted, how do I stop that ?

Yes you can transfer it (or the iSA to old Mutual). Trail does not exist on new business.

wooder

Ok, so do I contact Old Mutual directly (can I do that if the original pension was set up through the ifa?) and tell them to transfer the whole lot into Fundsmith and then it would be new business ?... and I would have no fees to pay, no trail commission, no management charges or anything and whatever number of shares my pot would purchase would be exactly the same value as if I had purchased the same number of shares in a direct isa ?

The other reason I had for thinking about moving the money into my isa is that it seems a whole lot easier to get at than when it's in a pension. Nobody can tell you what you can or can't take out, you don't have to pay anybody to draw down funds, it really is wysiwyg.

That, for me, is the best thing about Fundsmith (apart from the outstanding performance), the annual charge is already incorporated in the share price, you don't even see it. When you buy or cash in you are dealing with the net price. If the share price is £2.09 then you pay £2.09 to buy or you get £2.09 when you sell, it's so simple !

dunstonh

k, so do I contact Old Mutual directly (can I do that if the original pension was set up through the ifa?) and tell them to transfer the whole lot into Fundsmith and then it would be new business ?

You contact fundsmith to tell them you want to transfer a pension in. You contact old mutual to request transfer discharge forms. You send the discharge forms and the application to fundsmith.

and I would have no fees to pay, no trail commission, no management charges or anything and whatever number of shares my pot would purchase would be exactly the same value as if I had purchased the same number of shares in a direct isa ?

You will pay whatever the fundsmith charges are for you.

The other reason I had for thinking about moving the money into my isa is that it seems a whole lot easier to get at than when it's in a pension. Nobody can tell you what you can or can't take out, you don't have to pay anybody to draw down funds, it really is wysiwyg.

No difference between the two post April 2015. Other than tax.

That, for me, is the best thing about Fundsmith (apart from the outstanding performance), the annual charge is already incorporated in the share price, you don't even see it.

Lack of transparancy is not a good thing. You may actually be paying more if you are on older bundled pricing.

wooder

dunstonh wrote: »

Old Mutual allow you to hold the same investments in the pension as the ISA and vice versa and at the same cost. So, there is no justification to move tax wrappers on the basis of performance.

But on the Morningstar comparison chart over the last three years it shows the T class acc fund (which I have) seemingly to have performed slightly better than the Old Mutual Wealth Fundsmith Pension ? It doesn't look much but on a £80k pot over three years it would be about £2500 difference.




Also, would I have to pay a fee to draw money from a OMW pension fund because I don't have to with a direct investment with Fundsmith ?

Sorry for all the questions but I want to be sure to get things right and usually it's the details that matter.

Many thanks

Daniel54

wooder wrote: »

Ok, so do I contact Old Mutual directly (can I do that if the original pension was set up through the ifa?) and tell them to transfer the whole lot into Fundsmith and then it would be new business ?... and I would have no fees to pay, no trail commission, no management charges or anything and whatever number of shares my pot would purchase would be exactly the same value as if I had purchased the same number of shares in a direct isa

Am I missing something ?

You can invest your pension in Fundsmith,as already discussed,but you can't transfer your pension into an ISA without drawing it down.

After the 25% tax free lump sum you would pay income tax on any amount taken out and then transferred.Also it will take over 5 years to transfer your pension pot ,using the annual allowance of £15k ( rising by a small amount next year).So transferring your pension pot to an ISA would be tax inefficient and costly

dunstonh

But on the Morningstar comparison chart over the last three years it shows the T class acc fund (which I have) seemingly to have performed slightly better than the Old Mutual Wealth Fundsmith Pension ? It doesn't look much but on a £80k pot over three years it would be about £2500 difference.

If you were on the OMW platform, it would be the same. However, if you are comparing pension fund version with unbundled fund then you need to remember that the pension fund is the only cost. However, the unbundled fund will need you to factor in the platform charge and the fund charge to give you the total cost. Performance charts will not include the platforms charge.

wooder

Thanks for the reply Daniel

I know that I can't transfer the pension without cashing it in and paying tax - careful calculation about when and how much to take can minimise the tax paid but I am always going to have to pay income tax on a portion of it, whether I take it now to transfer to a better performing isa or in the future as income.

You might as well argue that leaving it where it is and taking it as income in the future is going to be tax inefficient and costly.

wooder

dunstonh wrote: »

If you were on the OMW platform, it would be the same. However, if you are comparing pension fund version with unbundled fund then you need to remember that the pension fund is the only cost. However, the unbundled fund will need you to factor in the platform charge and the fund charge to give you the total cost. Performance charts will not include the platforms charge.

There is no platform charge, as I said earlier, Fundsmith is a direct investment, the price you see is the price you pay is the price you get, it's a net price and there are no buying or selling fees.