Personal Pension compared to SIPP

Albermarle

Taken the plunge for my first post !
I have four DC personal pensions , with one still active. As I start seeing retirement getting a bit closer I had a good look around as to options about combining them /what to plan to do with them.
All the trend seems to be you must go for a low cost SIPP, even if you are not a hyper active investor . However I am struggling to see the benefit in changing from personal pensions to a SIPP, especially as with the personal pensions ( with SW; SL , Aviva etc ) you can easily change between quite a lot of funds at different risk levels. Also the websites are easy to navigate and all offer drawdown options etc
I know the headline charges for SIPP's appear lower but I have quite low charges for the personal pensions as originally they were all GPP's and the employers at the time seem to have negotiated good rates.

So I am wondering why SIPPs are so popular with even moderately active investors when you can do the same sort of thing within a personal pension ? Just wondering if I am missing something ?

Marcon

A SIPP is a personal pension. SIPPs are flavour of the month because they generally support the ability to take retirement benefits flexibly (e.g. drawdown), whereas bog standard personal/stakeholder pensions generally don't.

dunstonh

All the trend seems to be you must go for a low cost SIPP, even if you are not a hyper active investor .

And it is somewhat ironic that some of these so-called low cost sipps are actually more expensive and are relying on advertising techniques to make people think they are low cost.

The reason they are popular in the DIY market is that until recently, SIPP providers had lower costs. Lower solvency requirements and limited FSCS protection with no real fear of the FOS. That is now changing and you are starting to see SIPP costs on the cheapest provider rise.

However I am struggling to see the benefit in changing from personal pensions to a SIPP, especially as with the personal pensions ( with SW; SL , Aviva etc ) you can easily change between quite a lot of funds at different risk levels. Also the websites are easy to navigate and all offer drawdown options etc

You mention SW, SL and Aviva.

Aviva's current main pension products is a SIPP. They maintain a stakeholder pension (unlike most) but its small business. And technically, they still have a personal pension but goodness knows why as it is hardly used.

SL are selling their old life and pensions book to focus on their two platforms, which only offers SIPPs.

SW is starved of money and hasnt developed a decent product in well over a decade.

They key is software. Most legacy products were built on old software methods. SIPPs don't come with many legacy issues and were built on modern software that is easier to change. Also, worth noting that both SL and Aviva use the same software.

I know the headline charges for SIPP's appear lower but I have quite low charges for the personal pensions as originally they were all GPP's and the employers at the time seem to have negotiated good rates.

The insurance company SIPPs tend to be the cheapest at the moment. 0.34% all in for £1+ is available. However, they retail via intermediaries and that incurs a cost.

PPPs wont exist for much longer. Stakeholders are already niche and SIPP will be the primary product.

Thrugelmir

Albermarle wrote: »

All the trend seems to be you must go for a low cost SIPP, even if you are not a hyper active investor .

Who can possibly fail to make money when stockmarkets are booming.......

Trouble is, at some point in time. Who knows when. The tide will turn. A lot of people are going to get their fingers badly burnt. Then the fad will change to something new.

Albermarle

Marcon wrote: »

A SIPP is a personal pension. SIPPs are flavour of the month because they generally support the ability to take retirement benefits flexibly (e.g. drawdown), whereas bog standard personal/stakeholder pensions generally don't.

In the case of my personal pensions ( SW; SL and Aviva) they all seem to have updated software and all offer flexi drawdown (and UFPLS facility in two cases) , with no/very low extra charges . So in my case it seems like the current personal pensions I have, and the low cost Sipps I could transfer to ,are actually very similar products in reality. The only obvious difference is that with the SIPP is that I could buy individual shares and access more funds than the hundreds I already have access to, but that is not really a selling point for me . The charging structures are also a bit different, but the overall cost seems to be comparable as I get discounts on the PP's .
So I am minded not to change but as originally mentioned, I wondered if I was missing some critical point as SIPPS seem to be the flavour of the month !

dunstonh

In the case of my personal pensions ( SW; SL and Aviva) they all seem to have updated software and all offer flexi drawdown (and UFPLS facility in two cases) , with no/very low extra charges .

SW don't do drawdown on the majority of the personal pensions. Just the retirement account. SL dont do drawdown on the majority of its personal pensions. Aviva, despite saying their plans do drawdown, they don't. They only allow UFPLS or 25% TFC. Not income. They need it to be transferred to their SIPP to offer full drawdown options.

Be wary of providers saying they do drawdown but then only allowing the 25% TFC or ad hoc UFPLS. Or the very common one of saying they offer drawdown but when you get there you find out that you have to transfer to their current new business contract... which is usually a SIPP.

Their front end may be visually better than it used to be but functionality and down periods are dreadful on legacy contracts compared to modern ones.

Albermarle

Dunston,
Thanks for the advice about potentially misleading claims about provision for drawdown.
I must admit I did not look into the Aviva one very closely as they have the highest charge, so will probably transfer that one anyway.
The SW one is actually an ex Zurich workplace pension that had been previously revamped to include Drawdown, and currently SW are administering this separately from their main offerings, so maybe a special case.
For SL it seem clear from their website that they do offer drawdown with a personal pension.
Although their recent sale f this part of the business to Phoenix is a potential worry