Transfer work pension out

Ultima

Hi all,

I recently left my employer and because I've been with them short of 2 years they've told me to transfer my pension out by February.

The pension pot to transfer is £13k.

Initially I was planning to transfer the pension to a Hargreaves Lansdown SIPP, but after looking around the forum and seeing the Daily Telegram chart on SIPP fees I'm now planning to transfer to Bestinvest, since they seem to have the sanest fees upto £100k. Though I'm not really planning on topping up the SIPP regularly.

I've not even begun to think about what to invest in after the transfer, even though I've already spent a lot of time reading around.

Any wisdom anyone can shed if I'm making the right move or a better alternative perhaps? Any tips on what to invest in (or even a broad category of things) after the transfer?

Thanks in advance

LHW99

HL can be expensive, although they're not bad for less than about £30k.
Their website is also good when you are just starting up as its easy to use and has good research options.

Your age and attitude to risk would affect what you choose to invest in after transfer.

grey_gym_sock

for a small SIPP, the cheapest option seems to be either bestinvest, or cavendish online (fund supermarket pension), either of which charges 0.3% a year - plus the costs of whatever funds you buy.

you could sensibly put a small SIPP all in 1 "porfolio" fund. 3 ranges of portfolio funds which are often mentioned are:
- vanguard lifestrategy
- legal & general multi-index
- blackrock consensus
each of those ranges contains a number of funds at different risk level, from which you could pick 1.

BananaRepublic

You can research past performance of funds, and find a range with a good long term history. It is safer to spread money across multiple funds just in case a given fund manager underperforms. It also makes sense to spread across many sectors e.g. Europe and UK, mid cap companies and large companies. As they say, don't put your eggs all in one basket. It's worth reading online guides here, on Motley Fool and elsewhere.

MDMD

Are you going to a new employer? Could you not transfer the pension into a new plan with their pension company?

grey_gym_sock

BananaRepublic wrote: »

You can research past performance of funds, and find a range with a good long term history.

you can, but past performance can be misleading. as a preliminary, you need to distinguish sector performance vs manager performance. so for instance, if fund has had high returns relatively to funds generally, but low returns relative to its sector, then the manager is underperforming.

having seen which sectors have done well, surely you should put more money in the high-performing sectors? probably not, actually. the top-performing sectors, even over 10 years, are often some of the most volatile sectors, which are just as likely to be the worst performing over the next 10 years. if you look at performance alone, you're liable to allocate too much to some very niche sectors.

and within each sector, should you pick the highest-performing funds? not necessarily. different styles of investing do well in different periods - 5 years is definitely not long enough to tell whether a style does well in all market conditions, and even after 10 years it's doubtful. there are so many funds out there that a few are bound to do well over 10 years or even longer, even if it's all down to luck. a lot of it is down to luck - not all of it, IMHO - but how to tell the difference? certainly not from the performance tables by themselves.

and if you focus on the top historical performers in each sector, you are almost automatically dismissing the tracker funds, which will give consistent just-above-mid-table performance, due to their lower costs. and that cuts out the manager risk.

It is safer to spread money across multiple funds just in case a given fund manager underperforms.

the portfolio funds i mentioned are mostly passively managed, so there is less manager risk involved.

It also makes sense to spread across many sectors e.g. Europe and UK, mid cap companies and large companies.

a single portfolio fund does cover just about all the major sectors. some ppl prefer the L&G "multi-index" funds, because they include some direct property, which the "lifestrategy" and "consensus" don't.

basically, if you want to put pick lots of separate funds, then you can. but it is a fair bit of effort - unless you've already been picking your own funds in another account (e.g. S&S ISA), so you already know more or less what you want. and it is not likely to give more than slightly better returns than an all-in-1 portfolio fund, and it could turn out slightly worse. or a lot worse, if you don't know/learn what you're doing.

some ppl enjoy learning about how to build a portfolio, which is a valid reason to do it.

dunstonh

It is safer to spread money across multiple funds just in case a given fund manager underperforms.

Not good advice to an inexperienced investor. Its most likely that a multi-asset solution would be best suited for this person. Telling an inexperienced investor to build a bespoke portfolio increases risk. It does not reduce it.

BananaRepublic

dunstonh wrote: »

Not good advice to an inexperienced investor. Its most likely that a multi-asset solution would be best suited for this person. Telling an inexperienced investor to build a bespoke portfolio increases risk. It does not reduce it.

You've quoted out of context to change the meaning of my advice. Firstly the statement you quote is valid. Secondly I clearly advised they read online guides here, on Motley Fool and elsewhere. And as for your statement that investing in several funds increases risk, that is false.

BananaRepublic

grey_gym_sock wrote: »

you can, but past performance can be misleading. as a preliminary, you need to distinguish sector performance vs manager performance. so for instance, if fund has had high returns relatively to funds generally, but low returns relative to its sector, then the manager is underperforming.

That is why I went on to,briefly mention sector risk. :huh:

having seen which sectors have done well, surely you should put more money in the high-performing sectors? probably not, actually. the top-performing sectors, even over 10 years, are often some of the most volatile sectors, which are just as likely to be the worst performing over the next 10 years. if you look at performance alone, you're liable to allocate too much to some very niche sectors.

and within each sector, should you pick the highest-performing funds? not necessarily. different styles of investing do well in different periods - 5 years is definitely not long enough to tell whether a style does well in all market conditions, and even after 10 years it's doubtful. there are so many funds out there that a few are bound to do well over 10 years or even longer, even if it's all down to luck. a lot of it is down to luck - not all of it, IMHO - but how to tell the difference? certainly not from the performance tables by themselves.

and if you focus on the top historical performers in each sector, you are almost automatically dismissing the tracker funds, which will give consistent just-above-mid-table performance, due to their lower costs. and that cuts out the manager risk.



the portfolio funds i mentioned are mostly passively managed, so there is less manager risk involved.

a single portfolio fund does cover just about all the major sectors. some ppl prefer the L&G "multi-index" funds, because they include some direct property, which the "lifestrategy" and "consensus" don't.

basically, if you want to put pick lots of separate funds, then you can. but it is a fair bit of effort - unless you've already been picking your own funds in another account (e.g. S&S ISA), so you already know more or less what you want. and it is not likely to give more than slightly better returns than an all-in-1 portfolio fund, and it could turn out slightly worse. or a lot worse, if you don't know/learn what you're doing.

some ppl enjoy learning about how to build a portfolio, which is a valid reason to do it.

Please do not talk down to me in such a condescending manner. The advice you gave in your first post seemed good. I wanted to briefly make a couple of points and most importantly encourage the OP to read investment guides on respected web sites such as this one and Motley Fool, or even better, buy some books. I don't think a few posts in a forum is going to teach anyone the basics. All too often they learn how to squabble as you ably demonstrate. :rotfl:

Seriously, OP, do please do your homework, there are guides by people who are respected writers in their field, so you can be assured the advice is reasonable.

xylophone

Are you currently employed? If so, is a transfer in to your new employer's scheme possible?

If not, would something here be suitable?

http://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/transfers-and-repensioning/

grey_gym_sock

BananaRepublic wrote: »

Please do not talk down to me in such a condescending manner.

i could have gone for the short option, like dunston, and just said that it was bad advice to a newbie investor to buy separate funds. instead, i went for a discussion of a few of the pitfalls of doing that, while not denying that it was a viable option, if you do it right.

either way, that part of your advice was bad. and you take offence very easily.