Pension Diversification

Crystal_Pixie

Linton wrote: »

Various factors arising from your employers pension may be important:

1) Can you use your AVC pot to pay the Tax Free Lump Sum from the DB pension? If so putting sufficient money in the AVC to pay out the full TFLS could be very worthwhile.
2) Does you employer offer Salary Sacrifice? Again this could be a good reason for using the AVC.
3) May you want to retire earlier than the DB scheme retirement age? If so putting the money into a SIPP could be more sensible as you could access it earlier with no reduction in benefits.
I dont see how merging pots in HL saved fees. HL is one of the more expensive platforms. Most platforms charge on a % basis so generally it would not matter whether you split the pots or not.

1 - Not sure need to check.
2. yes all pensions are salary sacrifice.
3. I would like to retire earlier - but I wondered if I need to put this on hold until I know what happens with the DB scheme.


The other pot I merged was a very expensive Standard life scheme that had been going since the 90's. It just wasn't growing at the rate I wanted and the fees were much higher than HL.

I know a lot of you guys don't like HL and I understand that, but for a novice investor that is trying to learn more I find their website very good. Not planning on switching any time soon until I am more comfortable with investing concepts and understanding my attitude to risk. However, I do like having the freedom to invest at least some of my pension how I want to.

Crystal_Pixie

Just a thought but why would I want to transfer a tax free lump sum from my DB scheme?


I understand that once the scheme is wound up I can take all the money out of the scheme (subject to IFA advice). However, if I had other pots I don't understand why I would want to take money out of my DB pot.


Like I say I am a novice and I want to learn more.

Linton

Crystal_Pixie wrote: »

Just a thought but why would I want to transfer a tax free lump sum from my DB scheme?

When you come to retire your DB pension scheme may let you take a tax free lump sum from your pension. This is often a bad idea for a DB pension as the cost in reduction of future payments can be rather high. But if you are allowed to take the cash from the AVC you can get that money tax free without reducing your DB pension.

I know a lot of you guys don't like HL and I understand that, but for a novice investor that is trying to learn more I find their website very good. Not planning on switching any time soon until I am more comfortable with investing concepts and understanding my attitude to risk. However, I do like having the freedom to invest at least some of my pension how I want to.

The point being made was in response to your stressing of the importance of reducing costs which seemed inconsistent with your choice of HL. Yes HL are good and may well meet your needs but they are expensive. That is a trade off you have to make. Similarly with your choice of investments - minimising costs should not be an over-riding consideration, you need to look at whether they are appropriate for your objectives.

kidmugsy

Crystal_Pixie wrote: »

I know a lot of you guys don't like HL.

I like them very well for our purpose: a smallish SIPP each. Their service seems excellent to me. We're even considering opening an ordinary tax-exposed dealing account. Also small, alas.

Crystal_Pixie

Linton wrote: »

When you come to retire your DB pension scheme may let you take a tax free lump sum from your pension. This is often a bad idea for a DB pension as the cost in reduction of future payments can be rather high. But if you are allowed to take the cash from the AVC you can get that money tax free without reducing your DB pension.



The point being made was in response to your stressing of the importance of reducing costs which seemed inconsistent with your choice of HL. Yes HL are good and may well meet your needs but they are expensive. That is a trade off you have to make. Similarly with your choice of investments - minimising costs should not be an over-riding consideration, you need to look at whether they are appropriate for your objectives.

As I mentioned in a previous post I transferred a expensive old and underperforming pension into my SIPP to keep costs down.


However, I understand that it might be useful to split my HL SIPP based on what has recently happened with Beaufort.

Crystal_Pixie

Ok I understand why it might be a good idea to start looking at the AVCs. Based on the advice coming from here (and if I can do the transfer) it might be worth thinking about transferring some of my SIPP into AVCs instead?

dunstonh

However, I understand that it might be useful to split my HL SIPP based on what has recently happened with Beaufort.

If someone drives a motorbike at 200mph without any safety equipment and does wheelies and stunts and then crashes, would you stop driving your car because of fears that a similar crash could happen to you?

Lungboy

Does the AVC lump sum benefit still work if taken early, as the OP wants to do?

MK62

I know a lot of you guys don't like HL and I understand that, but for a novice investor that is trying to learn more I find their website very good.

That's because their website IS very good - much better than some, as is the overall service.
However, as said by others, it can come at a price, depending on the size of your pot, what you are invested in, and whether you are drawing from the SIPP (which you aren't).

There are a couple of ways to mitigate the fees though, depending your preferences, but even if you don't, you still need to put the costs into perspective.....

At your SIPP size, your platform fees should be around £630pa if you are invested in standard OEIC funds - you can recoup some of that using their Wealth150(+) funds if you find them suitable for you (that's a personal judgement call of course) - a quick look up at a comparison site suggests the cheapest SIPP alternative is going to come in at around £360pa, so while certainly cheaper, you have to weigh up what you get for your money - if being with HL makes you feel comfortable, then what price do you put on that?
The gap may get bigger though as the SIPP grows, so an annual re-evaluation might be prudent.....

Investing in ITs/ETFs/shares etc has a £200 fee cap on that part of the portfolio, so you might be able to get the fees down using that route, but the free dealing is then gone, so you have to then be careful about racking up too many trades in the year....and if you are still building your SIPP (and at 46yo you most likely are), then at least some trading is unavoidable.
You can of course combine the two approaches as well, so you have options....

AnotherJoe

HL don't have to be expensive at all. I hold mostly shares and ETFs and that really keeps the costs down, comparable to most SIPP providers. Plus as said their service is excellent and that's worth something. .

Add to that, unless you end up completely emptying your account, the end result is that your descendants end up getting less money, not you. And you have had, in the meantime, a easy experience managing your money.