Stay or Transfer?

leahcim17

Hi,

Need some help and advice whether to move a pension pot or not.

The company I work for has recently moved the DC pension from Aviva to Scottish Widows. I currently invest in 9 funds (quite happy with my choice and logic) which have charges ranging from 0.22% to 0.9% for the Japanese and Asia funds. Overall the charge equates to 0.42%. There are no charges to buy and sell funds. I tend to switch funds maybe once every year or two when I do a full review. Often this this may only involve switching one or two funds at most. I also periodically rebalance all 9 funds. Finally there is no penalty or cost to transfer this pension to another provider. I’m 50 and looking to retire at 55/56. The pension pot is currently £450k. Some of my funds look to be pension only funds (e.g. Aviva Pension European NGP Pension Fund). Not sure if this matters.

My first contribution has now gone into the Scottish Pension default fund that has a charge of 0.23%. I don’t want to remain in the default fund but there are around 160 funds to choose from. After a lot of research I settled on 9 equivalent funds that offer similar performance, volatility, risk etc. The issue is that the charges are very high in comparison to Aviva. The average for all the funds would be just over 1% which is not acceptable.

There is no option for my and the company contributions to go to Scottish Widows so I’ll just have to live with that (and pick the best fund(s) for new contributions). However what is best for the Aviva fund. Leave it where it is or move it to a SIPP.

My OH has a relatively new SIPP with Hargreaves Lansdown (£14k) and I also have a S&S ISA (£60k). As has been said on here many times service and website facilities are very good. But transferring £450k would mean an effective charge of 0.36% (still slightly better than Aviva unless I’m missing something).

What are my best options for the Aviva pension?

Thanks in advance.

cloud_dog

Have a 'play' with Snowman's most excellent platform charges spreadsheet to see which may offer you a better deal. Obviously, with retirement / draw down in the back of your mind you probably need to consider the costs associated with this aspect as much weight as the ongoing charges.

It may be that a flat rate charging structure together with transaction charges suit / fits better?

ewaste

leahcim17 wrote: »

But transferring £450k would mean an effective charge of 0.36% (still slightly better than Aviva unless I'm missing something).

Does that include both the custody or platform charge as well as the individual fund or ETF charges? It looks like that's only the platform charge for £450k held in a HL SIPP. Therefore you'd still have fund charges to pay for as well.

I'd also guess that with Aviva your 0.42% figure is the average fund cost once you've worked out how much is invested in what fund at what ongoing charge etc.

If you can still easily access and manage your Aviva pension and there are no additional costs it may be worth staying with them, same goes if there is any protections or additional benefits attached to the pension e.g. annuity rates and such like.

Linton

One thing you may have missed - With Aviva and SW I believe the platform charge is bundled into the fund charge whereas for HL it is an extra. So you will have to pay fund charges on top of the average 0.36% which I guess is purely the platform charge.

Are you sure that the SW charges are correct? An average 1% sounds high. You may find that your employer has special rates.

leahcim17

Linton wrote: »

One thing you may have missed - With Aviva and SW I believe the platform charge is bundled into the fund charge whereas for HL it is an extra. So you will have to pay fund charges on top of the average 0.36% which I guess is purely the platform charge.

Are you sure that the SW charges are correct? An average 1% sounds high. You may find that your employer has special rates.

Sorry if this is a daft question but is the fund charge that HL and other SIPP providers collect not done by adjusting the unit price? You don't actually see it charged to your account. If so I'm more than happy how my S&S ISA performs which is similar if not slightly better than my pension even with an adjusted unit price.

As for SW charges this is straight from the portal that allows me to switch funds.

SW Default fund = 0.23%
SW JPM Europe Dynamic = 1.10%
SW Liontrust UK Smaller Companies = 1.61% !!!

Linton

leahcim17 wrote: »

Sorry if this is a daft question but is the fund charge that HL and other SIPP providers collect not done by adjusting the unit price? You don't actually see it charged to your account. If so I'm more than happy how my S&S ISA performs which is similar if not slightly better than my pension even with an adjusted unit price.

As for SW charges this is straight from the portal that allows me to switch funds.

SW Default fund = 0.23%
SW JPM Europe Dynamic = 1.10%
SW Liontrust UK Smaller Companies = 1.61% !!!

Surely the Pension charges are also included in the unit price. Or do they actually deduct cash from your account? The SW JPM figure looks like the OCF which is included in the unit price.

Linton

leahcim17 wrote: »

..... If so I'm more than happy how my S&S ISA performs which is similar if not slightly better than my pension even with an adjusted unit price.

As for SW charges this is straight from the portal that allows me to switch funds.

SW Default fund = 0.23%
SW JPM Europe Dynamic = 1.10%
SW Liontrust UK Smaller Companies = 1.61% !!!

The S&S ISA version will probably perform better because of lower charges. The lower charges are due to the platform charge being undebundled. However you will also get a deduction in £s from yor ISA account, this being the platform charge. The comparison is the ISA fund annual charge+ISA platform charge with the pension fund charge.

Prism

leahcim17 wrote: »

Sorry if this is a daft question but is the fund charge that HL and other SIPP providers collect not done by adjusting the unit price? You don't actually see it charged to your account. If so I'm more than happy how my S&S ISA performs which is similar if not slightly better than my pension even with an adjusted unit price.

As for SW charges this is straight from the portal that allows me to switch funds.

SW Default fund = 0.23%
SW JPM Europe Dynamic = 1.10%
SW Liontrust UK Smaller Companies = 1.61% !!!

From those numbers it looks like your platform charge is 0.23% and then the fund charges go on top. Liontrust UK Smaller Companies is always pretty expensive. My wife's company is also using Scottish Widows and the SW platform charge is 1% so you are actually getting s good deal. Its the fund choices that are poor. I can only find 6 funds that I like and even the passives by SSgA seem to underperform others like iShares and Vanguard (which they don't provide access to)

As for the Aviva pension, I find it pretty good and the platform charges are ok too for larger amounts. 40% down to 0% over 500K. The fund range isn't bad except that it doesnt include Investment Trusts or ETFs.

leahcim17

Linton wrote: »

Surely the Pension charges are also included in the unit price. Or do they actually deduct cash from your account? The SW JPM figure looks like the OCF which is included in the unit price.

Aviva deduct the charge monthly by selling units in all the funds I hold.
HL deduct their platform charge from any cash held in the account. If there isn't enough cash they sell units from the largest holding. I think this is the same whether it's a SIPP or S&S ISA.

I think I will phone SW tomorrow to clarify. I'm pretty certain it's the AMC but will find out.

leahcim17

Prism wrote: »

From those numbers it looks like your platform charge is 0.23% and then the fund charges go on top. Liontrust UK Smaller Companies is always pretty expensive. My wife's company is also using Scottish Widows and the SW platform charge is 1% so you are actually getting s good deal. Its the fund choices that are poor. I can only find 6 funds that I like and even the passives by SSgA seem to underperform others like iShares and Vanguard (which they don't provide access to).

Yes I had the same problem with SW. 160 funds to choose from and struggled to find the equivalent to the ones I currently hold with Aviva.

Temporarily I've moved from the default to SW Baillie Gifford Managed which weirdly only has a charge of 0.54%.