SIPP, pay back into old pension or go with employers min contribution scheme!?

chris024

Hello.

I am 31 and have a small pension pot worth 26k with Standard Life, through an old employer, frozen for about 3 ½ years.
Split 50/50 between the Pension Millennium with Profits Fund & The Standard Life Managed Pension Fund.

I have just started a new job with small company and they are with the People’s Pension. The max they will contribute is just 1%

I have thought about making the minimum contributions at work, just so I get my employers contribution and then either starting a SIPP or restarting payments back into my SL Pension. Another option would be just to make a larger contribution on my side to the People’s Pension. I don't think they do salary sacrifice.

I also considered transferring my old SL Pension into the SIPP. Also have a few year’s contributions into the LGPS, but I understand that I should leave that where it is.

I admit that I am pretty inexperienced, that is why I am asking for people's opinions here. I already have an ISA with H & L, holding VLS 80 and would likely invest in this fund again or in a similar passive multi asset fund in the SIPP.

Spoken to SL and they have told me that I am currently paying 1% per year in charges for the managed fund, but they couldn’t tell me the charges for the with profits fund.

I guess I should contact an IFA, but maybe it is not worth it due to the small amounts involved.
SL said they had one on record that my old company used to set up the plan and they suggested I contact them.

Many thanks

xylophone

I, too, would leave the deferred LGPS pension well alone.

I would contribute as much to the current auto enrolment scheme as is required to achieve the maximum employer contribution - this will gradually increase.

The HL charges on a SIPP are reasonable for modest pots and you are already a client so know the system - you also have some experience of investing and are choosing a well diversified fund.

I can see sense in opening a SIPP, transferring in the SL and contributing as much as you can afford to it - you can lower your contributions as necessary as your /your employer's contributions to the workplace scheme increase.

http://thepeoplespension.co.uk/employees/joining-the-peoples-pension/what-is-auto-enrolment/

If you leave your current employer, it would appear that you would have the option of transferring out of the PP to your SIPP or another pension scheme.

http://thepeoplespension.co.uk/employees/your-member-information/your-pension-extra-information/

dunstonh

Spoken to SL and they have told me that I am currently paying 1% per year in charges for the managed fund, but they couldn’t tell me the charges for the with profits fund.

If there is no guaranteed growth rate then it will be the same as the internal managed fund.

chris024

Thank you both for taking the time to reply.

You have pretty much confirmed what I was thinking of doing. Should I drip feed the transfer into the SIPP or buy all the units at once?

The money will be sitting there for a long time and riding many peaks and troughs so I guess it does not make sense to drip feed?

Thanks.

xylophone

You could invest the lump sum to start - you'll be drip feeding thereafter?

atush

Drip feeding or lump sum really all depends on your own opinion of market volatility going forwards.

If it worries you to lose money on a lump sum investment, then drip feed. If you are an invest and forget type- lump sum.

chris024

Yes I will be contributing monthly, after the lump sum. Just was not sure if I should drip feed the lump sum, say over 6 months or invest all at once.

dunstonh

chris024 wrote: »

Yes I will be contributing monthly, after the lump sum. Just was not sure if I should drip feed the lump sum, say over 6 months or invest all at once.

Statistically, single premium beats phasing in most periods. So, you would be plumping for the option that is more likely to result in lower returns. However, phasing can reduce risk. That said, if you really are that worried then maybe what you are investing in is above your risk profile.

bigadaj

dunstonh wrote: »

Statistically, single premium beats phasing in most periods. So, you would be plumping for the option that is more likely to result in lower returns. However, phasing can reduce risk. That said, if you really are that worried then maybe what you are investing in is above your risk profile.

Is that analysis valid in these circumstances?

Drip feeding over six months say with an investment horizon of thirty years or more is going to make little difference to the time the average pound is invested. It would also provides little comfort that all the money wouldn't be going in at a short term high.

In practice I can't see it making much difference either way given the time horizon.

dunstonh

bigadaj wrote: »

Is that analysis valid in these circumstances?

Drip feeding over six months say with an investment horizon of thirty years or more is going to make little difference to the time the average pound is invested. It would also provides little comfort that all the money wouldn't be going in at a short term high.

In practice I can't see it making much difference either way given the time horizon.

You are right that in the scheme of things, it will make no noticeable difference. However, the anaylsis is still valid as growth periods do outnumber negative periods. My primary concern at this point would be whether the individual has the stomach for the investment risk they are taking.

chris024

I admit the last few weeks, I have been questioning my risk profile.

I have only been investing in my ISA for about 3 ½ years and seeing the large gains that my investments have made since Brexit has left me pondering how I would feel if the situation was reversed.

However, I would like to think I am not the sort of person to pull the plug if there is a downturn and say the value of my SIPP suddenly halved. I would see that as more of a buying opportunity. History has shown the market always recovers (apart from Japan I hear!) and as this money will be tied up and not needed for many years, I have plenty of time to ride the waves. Closer to retirement I will move into a less risky fund.

Seen as the general consensus is that it will make little to no difference to the rate of returns overall, I will likely invest the lump sum all at once.