Transfer out of Standard life DC pension

bobmorley

I have a small pension (around £800) in a company pension from a couple of years ago from a company I have now left. The pension is defined contribution and is managed by standard life and has an annual product charge of 0.75%.

Since then I've set up my own SIPP with Close Brothers that has an annual product charge of 0.25%m which I am now making regular contributions into. I'd like to transfer my standard life pension into my Close Brothers SIPP, both for the ease of managing a single pot, and also to benefit from the lower charges in my Close Brothers SIPP.

I'm quite confused as to whether or not there are any costs associated with making this transfer, as the amount is so small it may be that it is not worth it. The Standard Lift terms and conditions mentions a charge for 'taking a transfer payment', does this mean transferring to another pension or is this not this something else? I can't see any mention specifically of charges for 'transferring to another pension'.

Also I don't intend to take financial advice regarding this transfer, will I be able to enact the transfer myself or is this going to be a problem?

Edit: for those interested I rang SL and they confirmed that there was no transfer out charge in my case, which will probably be the case for many workplace schemes with them, but always worth double checking.

Linton

If it's a simple DC pension there should be no problem transferring. Just like transferring ISAs all you need to do is to ask the receiving platform to transfer-in. They will require you to fill in a form providing all the details and will then manage the whole process. You will need to ask Close and SL about the charges - just ring up their help desk and ask.

bigadaj

bobmorley wrote: »

I have a small pension (around £800) in a company pension from a couple of years ago from a company I have now left. The pension is defined contribution and is managed by standard life and has an annual product charge of 0.75%.

Since then I've set up my own SIPP with Close Brothers that has an annual product charge of 0.25%m which I am now making regular contributions into. I'd like to transfer my standard life pension into my Close Brothers SIPP, both for the ease of managing a single pot, and also to benefit from the lower charges in my Close Brothers SIPP.

I'm quite confused as to whether or not there are any costs associated with making this transfer, as the amount is so small it may be that it is not worth it. The Standard Lift terms and conditions mentions a charge for 'taking a transfer payment', does this mean transferring to another pension or is this not this something else? I can't see any mention specifically of charges for 'transferring to another pension'.

Also I don't intend to take financial advice regarding this transfer, will I be able to enact the transfer myself or is this going to be a problem?

To be fair you aren't comparing like with like, you are only quoting the close bros sipp charge so you will have fund charges on top, still potentially cheaper than standard life though.

bobmorley

Linton wrote: »

If it's a simple DC pension there should be no problem transferring. Just like transferring ISAs all you need to do is to ask the receiving platform to transfer-in. They will require you to fill in a form providing all the details and will then manage the whole process. You will need to ask Close and SL about the charges - just ring up their help desk and ask.

Part me me selecting Close Brothers was checking that they allow free transfers in so this won't be a problem. Yes I did noticed they had a transfer in page, good to know that is all I have to do and don't have to do anything Standard Life's end. I'll give Standard life a call. Thanks for your help and suggestions!

bobmorley

bigadaj wrote: »

To be fair you aren't comparing like with like, you are only quoting the close bros sipp charge so you will have fund charges on top, still potentially cheaper than standard life though.

I have looked into fund charges also. My current standard life fund is their default fund that appears to be a global index tracker hedged against the pound, and the total I am paying (so product+fund charge) is 0.77%. I realise this isn't bad, however having a Close brothers SIPP with product fee of 0.25% and say vanguard lifestrategy 100% for 0.24% comes to 0.49% in total, and provides a similar investment.

dunstonh

bobmorley wrote: »

I have looked into fund charges also. My current standard life fund is their default fund that appears to be a global index tracker hedged against the pound, and the total I am paying (so product+fund charge) is 0.77%. I realise this isn't bad, however having a Close brothers SIPP with product fee of 0.25% and say vanguard lifestrategy 100% for 0.24% comes to 0.49% in total, and provides a similar investment.

Also, a lot of SL pensions have a fund based discount or employer arranged discount from the standard retail charge. So, whilst the factsheet may say 0.75%, it is quite common for the actual charge you pay to be lower than that. The SL statement will usually show the actual charge.

With £800, a fund based discount is not going to apply though.

Another difference is that SIPPs do not get pension FSCS protection of 100% of the value. Whereas the SL pension does. Again, not likely to be a concern with £800.

Lastly, a number of SL pension versions have funds at different charges. Some of their funds on these versions would be cheaper than 0.24%.

bowlhead99

bobmorley wrote: »

I have looked into fund charges also. My current standard life fund is their default fund that appears to be a global index tracker hedged against the pound, and the total I am paying (so product+fund charge) is 0.77%. I realise this isn't bad, however having a Close brothers SIPP with product fee of 0.25% and say vanguard lifestrategy 100% for 0.24% comes to 0.49% in total, and provides a similar investment.

Well, not apples to apples as the two funds have different strategies- for example vanguard lifestrategy has a quarter of its equities in the UK markets while a typical global index tracker has under a tenth of its equities in the UK markets, so that's a 15-20% difference in exposure.

As the relative performance of UK vs non-UK could be 25%, then the performance difference in any particular year could easily be 25% of the 15-20% difference in UK weighting, which is four or five percent, which is maybe 20x the amount you propose to save by moving products.

Also, a global fund 'hedged against the pound' which is how you describe your SL fund, provides quite different results to an unhedged investment such as lifestrategy. For example if sterling strengthens against a basket of foreign currencies by 25%, an unhedged fund's foreign assets are only worth 100/125ths of the amount they were at the beginning of the year, which is a 20% loss on those assets. Hedging incurs costs of course and hedges are rarely 100% efficient so you may not save the entire 20% loss of your investment by using a hedged product, but the amounts involved are a hundred times greater than the 0.26% of your fund that you wish to avoid losing to annual fees.

Although this could be a red herring and you are just reading that the SL fund concerned has GBP in the name and have assumed it is 'hedged to GBP' rather than simply being priced in GBP for the convenience of UK investors (the latter being the massively more common situation with global equity funds).

So, maybe your fund research warrants more effort, or maybe it doesn't because £800 is not much money in the first place and the goal is just to get it broadly invested in 'the markets' without worrying about detail. But the point about it being not much money is also relevant, as a 0.25% difference on fees is only £2. After five years you've saved a tenner. Depending on how highly you value your leisure time it may not be even worth picking up the phone to sit on hold to find out whether there was an exit charge from SL, and then spend time reallocating the money when it arrives at Close. Personally I would probably just pick a suitable fund from SL and leave it there, if the amount at stake was only a pound or two every year.

The only reason to move it really is admin convenience - at the moment if you move house or want to change you expression of wishes in event of your death, SL is an extra person to contact on top of your other providers.

bobmorley

bowlhead99 wrote: »

Well, not apples to apples as the two funds have different strategies- for example vanguard lifestrategy has a quarter of its equities in the UK markets while a typical global index tracker has under a tenth of its equities in the UK markets, so that's a 15-20% difference in exposure.

As the relative performance of UK vs non-UK could be 25%, then the performance difference in any particular year could easily be 25% of the 15-20% difference in UK weighting, which is four or five percent, which is maybe 20x the amount you propose to save by moving products.

Also, a global fund 'hedged against the pound' which is how you describe your SL fund, provides quite different results to an unhedged investment such as lifestrategy. For example if sterling strengthens against a basket of foreign currencies by 25%, an unhedged fund's foreign assets are only worth 100/125ths of the amount they were at the beginning of the year, which is a 20% loss on those assets. Hedging incurs costs of course and hedges are rarely 100% efficient so you may not save the entire 20% loss of your investment by using a hedged product, but the amounts involved are a hundred times greater than the 0.26% of your fund that you wish to avoid losing to annual fees.

Although this could be a red herring and you are just reading that the SL fund concerned has GBP in the name and have assumed it is 'hedged to GBP' rather than simply being priced in GBP for the convenience of UK investors (the latter being the massively more common situation with global equity funds).

So, maybe your fund research warrants more effort, or maybe it doesn't because £800 is not much money in the first place and the goal is just to get it broadly invested in 'the markets' without worrying about detail. But the point about it being not much money is also relevant, as a 0.25% difference on fees is only £2. After five years you've saved a tenner. Depending on how highly you value your leisure time it may not be even worth picking up the phone to sit on hold to find out whether there was an exit charge from SL, and then spend time reallocating the money when it arrives at Close. Personally I would probably just pick a suitable fund from SL and leave it there, if the amount at stake was only a pound or two every year.

The only reason to move it really is admin convenience - at the moment if you move house or want to change you expression of wishes in event of your death, SL is an extra person to contact on top of your other providers.

I used Vanguard lifestrategy as an example comparison for fee purposes, however I realise they are not quite comparable. I wouldn't be putting all of my money into Vanguard lifestrategy, and would either buy some accompanying funds to diversify away from the UK, or possibly go for a truer world index fund instead like one of the fidelity world funds.

I am quite sure that the current fund is hedged as it didn't shoot up in June as the pound fell, which other unhedged funds did. Again it was a bad example as you point out the fact that I would likely be switching to unhedged is quite a difference. I would rather go unhedged though as I don't see the point of trying to predict or worry about GBP fluctuations over the next 30-40 years so would rather go for maximum efficiency.

I realise that all of this aside at the end of the day its not going to make much difference on £800. However as you say I'd rather have everything in a single pot if only for the convenience. I've got some more investigation to do on transfer out fees, which if exist I'll likely leave the pension be.

bobmorley

dunstonh wrote: »

Also, a lot of SL pensions have a fund based discount or employer arranged discount from the standard retail charge. So, whilst the factsheet may say 0.75%, it is quite common for the actual charge you pay to be lower than that. The SL statement will usually show the actual charge.

With £800, a fund based discount is not going to apply though.

Another difference is that SIPPs do not get pension FSCS protection of 100% of the value. Whereas the SL pension does. Again, not likely to be a concern with £800.

Lastly, a number of SL pension versions have funds at different charges. Some of their funds on these versions would be cheaper than 0.24%.

I realise that they do offer cheap funds too, however its the product charge that makes the pension as a whole inefficient compared to Close Bros despite what I do with the fund.

Do you have any idea about transfer out charges from Standard Life? I find their terminology very confusing, in saying "We take a transfer charge, if you take a transfer value, before the end of the charging period". Is this what simply transferring out would be?