Another FSAVC to SIPP Question

Rheumatoid

Hi,

would appreciate any thought on this from someone who knows more about it than I do - probably most on here

I have an FSAVC that I have been contributing about £40 a month to since the late 80's / early 90's. It was with HSBC but is now with ReAssure.

It is invested in 'Pensions Balanced Pension Accumulator Series 01'. There are about 4350 Units currently valued at £21200.

I have contacted ReAssure and they say there are no transfer / exit fees and no guarantees associated with the policy.

Latest statement indicates estimated Fund value at age 55 (which I am this year) of £23000 with a transfer value of £23200 (not sure why it is higher!) and 27600/27900 at age 60.

Annual income at age 55 estimated to be £456 and at 60 = £642.

Those payouts look pretty low to me and wondered if it might be better to pull the plug and stick it in a SIPP?

I also have a good Teachers pension from age 55 if I want.

Thanks

dunstonh

Latest statement indicates estimated Fund value at age 55 (which I am this year) of £23000 with a transfer value of £23200 (not sure why it is higher!) and 27600/27900 at age 60.

it is not an estimate. It is a example projection.

Those payouts look pretty low to me and wondered if it might be better to pull the plug and stick it in a SIPP?

The payouts reflect the assumptions used in the projection and may or may not reflect real life. In fact statistically, you will not get those figures.

Are you an experienced investor looking to invest in assets that you cannot get in a stakeholder or personal pension? If no, then why are you looking at SIPP? Why have you eliminated stakeholder and personal pensions?

zagfles

Have you asked them if they offer any of the new flexibilities eg cashing it in at 55, drawdown etc? Might not be the best option as there's tax issues and the money purchase annual allowance, but what are you looking at doing with the money, keeping it invested for a while longer or taking capital/income from it at 55?

Rheumatoid

zagfles wrote: »

Have you asked them if they offer any of the new flexibilities eg cashing it in at 55, drawdown etc? Might not be the best option as there's tax issues and the money purchase annual allowance, but what are you looking at doing with the money, keeping it invested for a while longer or taking capital/income from it at 55?

Although I intend to retire some time between age 55 and 60 I was going to leave it until I wanted it at whatever point in the future and thought a SIPP might offer me more flexibility to do that and be better for any beneficiaries if I conk out young! I would prefer not to contribute to the FSAVC or SIPP post 55. I have not asked about any flexible options they may offer as I don't know much about them.

zagfles

Rheumatoid wrote: »

Although I intend to retire some time between age 55 and 60 I was going to leave it until I wanted it at whatever point in the future and thought a SIPP might offer me more flexibility to do that and be better for any beneficiaries if I conk out young! I would prefer not to contribute to the FSAVC or SIPP post 55. I have not asked about any flexible options they may offer as I don't know much about them.

I would have thought your current pension would offer the same death benefits - have you checked? You should be able to stop paying into it if you want.

A SIPP may give you more flexibilty, but obviously you'd need to decide what you're going to invest in. For a small amount HL may be a good option as they have % charges not fixed charges, and their CS is excellent.

If you don't want to make investment decisions, look at personal pensions eg Cavendish have a range of cheap ones.

Rheumatoid

zagfles wrote: »

I would have thought your current pension would offer the same death benefits - have you checked? You should be able to stop paying into it if you want.

A SIPP may give you more flexibilty, but obviously you'd need to decide what you're going to invest in. For a small amount HL may be a good option as they have % charges not fixed charges, and their CS is excellent.

If you don't want to make investment decisions, look at personal pensions eg Cavendish have a range of cheap ones.

Thanks. The policy only seems to pay out the fund value if I die before I take benefits. I am not sure it will pay an income to someone financially dependent when I die (would need to check) but even then by my probably over simplistic calculation me or my beneficiary would need to live to about 90 to claw back the fund value at 55 if I start taking the income then

I am happy making investment decisions and have been managing a lot of S&S ISAS for a long time.

zagfles

Rheumatoid wrote: »

Thanks. The policy only seems to pay out the fund value if I die before I take benefits.

That would be normal and what happens afterwards depends how you take the benefits, eg annuity, drawdown etc.

I am not sure it will pay an income to someone financially dependent when I die (would need to check) but even then by my probably over simplistic calculation me or my beneficiary would need to live to about 90 to claw back the fund value at 55 if I start taking the income then

The figures you've been quoted will likely assume you buy an annuity - the provision for spouse etc would depend on the type of annuity you buy.

I am happy making investment decisions and have been managing a lot of S&S ISAS for a long time.

In which case managing a SIPP should be no problem, you can generally make exactly the same investments in a SIPP as a S&S ISA. They're basically the same other than tax treatment and contribution limits etc.

dunstonh

Although I intend to retire some time between age 55 and 60 I was going to leave it until I wanted it at whatever point in the future and thought a SIPP might offer me more flexibility to do that and be better for any beneficiaries if I conk out young!

No. A SIPP offers you no more flexibility. Indeed, a personal pension or stakeholder pension may actually be more cost effective and easier to sort on that front (although marginal). For reference, FSAVCs were abolished in 2006 and existing FSAVCs were reclassified as personal pensions.

I would prefer not to contribute to the FSAVC or SIPP post 55. I have not asked about any flexible options they may offer as I don't know much about them.

So, as it stands, there is nothing standing out for you to pick a SIPP over the other options.

The policy only seems to pay out the fund value if I die before I take benefits. I am not sure it will pay an income to someone financially dependent when I die (would need to check) but even then by my probably over simplistic calculation me or my beneficiary would need to live to about 90 to claw back the fund value at 55 if I start taking the income then

That is the same for all pensions. They will also pay out after you take benefits if you use drawdown but not if you purchase an annuity as the annuity is a new product and you will get the terms the annuity provider will offer.

Rheumatoid

dunstonh wrote: »

So, as it stands, there is nothing standing out for you to pick a SIPP over the other options.

Looks to offer more flexibility in choosing what to take and when and gives me more control over investments from what I can see.

dunstonh

Rheumatoid wrote: »

Looks to offer more flexibility in choosing what to take and when and gives me more control over investments from what I can see.

No different in flexibility. Possibly higher in cost (depending on investments). Control over investments only if you cant use the hundreds or thousands that many personal pensions offer.

AlanP_2

Rheumatoid wrote: »

Looks to offer more flexibility in choosing what to take and when and gives me more control over investments from what I can see.

A true SIPP is a specialised, advanced form of DIY pension that, for example, allows small business owners to put their commercial property into it and effectively rent it back to themselves and so on.

Unsurprisingly the providers charge a hefty fee for this more complex service.

The majority of people do not need a SIPP as they just want to invest in vanilla stocks, funds, bonds and the like so a straightforward pension with the likes of HL, Cavendish / Fidelity or one of the other platforms meets their needs at a much lower cost.

Is it the latter option you are meaning when you say "SIPP"?