Is it possible to transfer?

tony4147

At present I pay contributions (£1500 / month gross) into a Scottish Widows Group Pension Plan (stakeholder I believe). The funds within the plan are the pens portfolio 2 & 3. I have no choice but to pay into this plan if I want to maximise contributions via salary sacrifice as this is a Company scheme.

I don’t know if this is a good scheme or average scheme, and whether growth rates are good or bad etc, at present the plan value is approx. £60K.

My question is if anybody would know if it is possible for me to transfer money out of this scheme on a yearly basis to another pension provider that may have better growth rates, or is it a case that I would have to close the SW scheme which is something I don’t want to do because of the salary sacrifice.

dunstonh

I don’t know if this is a good scheme or average scheme, and whether growth rates are good or bad etc, at present the plan value is approx. £60K.

If its stakeholder, it will be average across the board. That is largely the point of a stakeholder. You cant go wrong with it but it will rarely be the best option but never the worst.

My question is if anybody would know if it is possible for me to transfer money out of this scheme on a yearly basis to another pension provider that may have better growth rates

Why are you looking for better growth rates when you dont know what you are getting to begin with?

tony4147

dunstohn, thanks for your comments.
I believe that this type of pension is 'one size fits all'.
I think that the growth rates over the last couple of years is 5-6%, what I don't really know if if this is average or good and if it is possible to do better, and as you say there may be a better option.
I make what I consider to be a large contribution into my pension, certainly in comparison to my peers but I'm not confident if it is working as well as it should.

Loughton_Monkey

As far as I know, Scottish Widows require the whole account to be closed when transferring the funds.

I would strongly urge you, though, to think more deeply about what you are trying to achieve. The behaviour and performance of your pension funds will be very largely dictated by your fund choice. £10,000 invested for the last 3 years in Latin America might have lost £3,500 over the same period that it could have gained £6,500 in UK Smaller Companies. Against that background, who cares whether you lost it (or gained it) with Scottish Widows, Legal & General, or Aviva?

As an employee, the 'price' you pay for a company scheme usually consists of employer contributions, salary sacrifice incentives, and perhaps lower charges. This is a very valuable net gain even if SW funds [of whatever flavour] could have performed slightly better with different management.

Scottish Widows are a 'good' company, with reasonable fund choices. A glance at Trustnet shows the range of fund performance over the last 12 months from +16% [Japan] to -26% [Latin America], with plenty in between.

If your own performance is mediochre, it's probably your fund choice rather than SW?

An alternative for you may well be to scale down your company contributions and start your own extra scheme with a provider of your choice for total control. But again, its performance will be largely down to your fund choice (and a bit down to charges as well).

atush

And given you get 32% TR with salary sacrifice, and only 20% with a PP, you'd have to do 12% better just to get to the same place?

That is the NI saving helping your fund.

Basically, get out your plan details and find out what funds you are invested in (tell us if you like) how they did, and what alternatives do you have in the stakeholder. Then investigate them and their performance. Change or dont change. Leave what has accrued, and put new money going forward in a different fund?

You have some choices w/o transferring.

jamesd

Ask whether you can make partial transfers out. My scheme didn't originally plan to allow this but did after I asked, explaining why it made sense - greater investment choice for my risk tolerance.

Investment choices are the big deal here. Your performance hasn't really matched the UK stock market but uit wouldn't be expected to because you're not invested only in the stock market. Unless you're within 15 years of the date you specified as your retirement date you're in these mixtures:

pension portfolio 4: 28% global equities, 12% UK equities, 47.5% corporate bonds, 12.5% index-linked bonds.
pension portfolio 3: 49% global equities, 21% UK equities, 22.5% corporate bonds, 7.5% index-linked bonds.
pension portfolio 2: 59.5% global equities, 25.5% UK equities, 15% corporate bonds.
pension portfolio 1: 70% global equities, 30% UK equities.

With a mixture of 2 and 3 you wouldn't expect share growth rates because you're not in shares.

If you are within 15 years of the retirement date you gave them they will reduce the share holdings more under lifestyling unless you have opted out of this. This further cuts your growth in the fifteen years before retirement and in my opinion it is highly irresponsible for them to start doing it so early.

Portfolios 2, 3 and 4 have uncomfortably high bond components in a time when interest rates in the UK and US are due to rise, leading to a likely loss in bond fund values.

Before wanting to switch you should really look into your other investment options within this plan and take control of where your money is invested. Transferring will require you to make such choices at the destination and they are where a significant gain can be made.

tony4147

The funds are the SW pens portfolio 2 & 3 funds both of which are multi asset funds, details are on Trustnet.
I'm a HRT payer and with salary sacrifice I'm getting something like 54% TR, but that is only if I stay in this Company Pension, but I'm not sure if 5-6% growth is good for a balanced investor, if I could get 8-9% that would mean that I could retire 3 or 4 years earlier if I wished.
In the past I have looked into moving into other funds with SW but have been told that I would have to move the complete pot, so it all seems very restrictive to me, but I suppose this is because it is a group pension.

jamesd

There usually are other choices in group schemes.

Given where you've chosen to be invested 5-6% is not at all unreasonable. The UK stock market long term average has been around 5% plus inflation but you'd expect less because of the bond component in the mixtures you've chosen.

I don't think that expecting 8-9% with a mixture including lots of bonds is a realistic target.

Moving the complete pot within Scottish Widows to get more choices wouldn't be a bad deal, provided you know what you want to do at the destination. If you're going to stick to the current allocations it'll be a largely pointless exercise.

tony4147

I didn't 'chose' the funds, I think these funds were the default for when I started.
The Pens portfolio 2 was when I started this scheme and when I turned 50 SW automatically started moving the pot into Pens Portfolio 3 as it is a less risker fund.

atush

Well if you didn't choose those funds, you chose to let someone choose for you (ie the default). So you did in effect choose the default option.

If you want more risk, you can put new money into option 1.

jamesd

That move probably means that you told SW that your planned retirement age was 65. If you can't turn off lifestyling I suggest that you change your planned retirement age to something like 90 to prevent them from doing this. You can't really afford fifteen years or lowered investment returns.

What would you choose if you were making the choice? Why would you choose those things? if you don't know then there's little point in transferring to another provider anyway.

Pension Portfolio 3 isn't really less risky. It's supposed to be less volatile, meaning reduced up and down movements in the short term. The catch is that it increases your overall risk of failing to meet your income needs in retirement buy sacrificing potential grow to get those reduced ups and downs. Sadly it's routine practice in much of the investment world to call risk just the short term ups and downs and ignore the bigger long term picture. In general Portfolio 1 is where I'd want to be for the reduced income failure risk long term. Assuming I couldn't pick anything but those four options.