Transferring Stakeholder to SIPP

pulck74

Sorry it's that time of the year for annoying pension questions....

I've had a Scottish Widows stakeholder for about 15 years. I think at the time stakeholder pensions were highly considered because of lower management fees.

But more and more recently I am reading that a SIPP pension invested in a passive tracker fund (e.g. Vanguard Life Strategy) will yield better results over the long-term and will generally have lower management fees than a stakeholder.

So my questions are:

- Is this true?!
- How costly is it to transfer a stakeholder pension into a SIPP?
- Should I be looking for a different provider to invest in a tracker fund?

Marcon

pulck74 wrote: »

But more and more recently I am reading that a SIPP pension invested in a passive tracker fund (e.g. Vanguard Life Strategy) will yield better results over the long-term and will generally have lower management fees than a stakeholder.

So my questions are:

- Is this true?!Not necessarily. Check the fees you are paying now and do a comparison with the fees for the SIPP you have in mind. Make sure you are comparing like with like (i.e. any passive funds offered in your current stakeholder v any passive funds in the SIPP)
- How costly is it to transfer a stakeholder pension into a SIPP?No exit fees on a stakeholder
- Should I be looking for a different provider to invest in a tracker fund?If you can find one which offers lower fees and a similar fund, consider it

You need to do a bit of legwork - see above - and you'll have most of your answers, barring the bits which require a crystal ball!

Hope this helps.

pulck74

Marcon wrote: »

You need to do a bit of legwork - see above - and you'll have most of your answers, barring the bits which require a crystal ball!

Hope this helps.

Yes, very helpful, thanks!

As far as I can work out, my current management charge with Scot Wids is 0.35% and the investment charge (it is 100% invested in 1 fund) is 0.20%.

However, the bigger concern is that my current fund is called "SW Environmental" (I was young and thought this was a good idea) which, I believe, is an active fund and has over 96% invested in UK equities. My worry is that I have almost all my eggs in one basket and it is very volatile, especially in the next couple of months!

Brynsam

Move a few (or lots) of eggs to other baskets within the same stakeholder pension scheme. Have you checked the choices available: https://www.scottishwidows.co.uk/assets/pdfs/stakeholder-funds-guide.pdf

If in doubt, give the provider's helpline a ring - there'll be details on the website or on the paperwork you receive from them.

pulck74

Thanks. I suppose I was thinking in the long term transferring to a SIPP would be a good move. But, yes, in the short term moving out of an almost 100% UK equities fund might be sensible!

dunstonh

But more and more recently I am reading that a SIPP pension invested in a passive tracker fund (e.g. Vanguard Life Strategy) will yield better results over the long-term and will generally have lower management fees than a stakeholder.

That is too simplistic.

1 - VLS is a not a passive tracker. It is a fettered fund of funds using a collection of passive funds with a management investment strategy.
2 - there is no guarnatee it will give better returns. The fund(s) you have in your stakeholder (or other pensions available) may result in better returns and could be cheaper.
3 - You can get Stakeholder pensions at 0.55% p.a. all in. Vanguard Lifestrategy is 0.33% including transaction charges (some 0.32%, some 0.34%). Then you have to add on the platform charge. If you went with the UK's largest DIY provider then thats 0.45% to add onto that 0.33%. A total of 0.78% p.a. So, more expensive than a stakeholder pension on 0.55%.

pulck74

dunstonh wrote: »

That is too simplistic.

1 - VLS is a not a passive tracker. It is a fettered fund of funds using a collection of passive funds with a management investment strategy.
2 - there is no guarnatee it will give better returns. The fund(s) you have in your stakeholder (or other pensions available) may result in better returns and could be cheaper.
3 - You can get Stakeholder pensions at 0.55% p.a. all in. Vanguard Lifestrategy is 0.33% including transaction charges (some 0.32%, some 0.34%). Then you have to add on the platform charge. If you went with the UK's largest DIY provider then thats 0.45% to add onto that 0.33%. A total of 0.78% p.a. So, more expensive than a stakeholder pension on 0.55%.

Thank you. Sounds like my management fees are already pretty low.

I suppose all I have to worry about now is that 96% of my fund is invested in British equities, which I'm guessing is not a great position to be in as we veer towards a potential No Deal Brexit.

dunstonh

I suppose all I have to worry about now is that 96% of my fund is invested in British equities, which I'm guessing is not a great position to be in as we veer towards a potential No Deal Brexit.

UK equities has a history of being a top third performer one year and a bottom third performer the next. There is no logic in that. Its just the way it has fallen.

2018 bottom
2017 top
2016 bottom
2015 top
2014 bottom
2013 top

For 2019 it is possible UK equity could be a top third performer. UK markets have had a drag on their performance due to Brexit. A softer Brexit would see mid caps and smaller caps rise in value (excluding all other influences - many of which are far bigger than Brexit). A harder Brexit would see large caps rise in value due to the fall in Sterling. Small/mid caps likely to be go the other way (again, ignoring all other influences).

You should certainly not be invested in a fund that is heavy in a single sector. However, if it makes you feel better, UK equity outperformed European Equity over a 10 year period (2009-2018 by calendar years).

Going forward, it makes sense changing to a multi-asset fund (a fund type that spread the money around the various sectors). SW have suitable multi-asset funds for cautious and medium risk. A bit lacking in other areas. Investment selection is a primary concern. Charges are secondary. So, if you cant get the investment you want, you should move it even if it costs you 0.x% more.

BLB53

You can get Stakeholder pensions at 0.55% p.a. all in. Vanguard Lifestrategy is 0.33% including transaction charges (some 0.32%, some 0.34%)

If you include transaction charges for one, you should include for the other...

dunstonh

BLB53 wrote: »

If you include transaction charges for one, you should include for the other...

I did include them. Although I only gave the stakeholder as an example of 0.55%. One of the cheaper options is 0.28% plus 0.05% for a fund charge and 0.01% TC. making 0.34% all in.

pulck74

dunstonh wrote: »

Going forward, it makes sense changing to a multi-asset fund (a fund type that spread the money around the various sectors). SW have suitable multi-asset funds for cautious and medium risk. A bit lacking in other areas. Investment selection is a primary concern. Charges are secondary. So, if you cant get the investment you want, you should move it even if it costs you 0.x% more.

Thank you. That is very helpful.

I suppose I am medium risk and I have probably got 23 years till retirement, so I hope I'm being sensible in wanting to split my pension investment something like 50% UK bonds and 50% world equity index tracker. I want as passive a portfolio as possible.

The passive tracker options within my Scottish Widows Stakeholder are not clear to me - another reason why I am inclined to move to a SIPP quite soon. But there is, for example, a fund called "Scottish Widows Global Equity Pension" (it's listed on Trustnet). Its growth appears to have been much better than my Environmental fund over the last 5 years. Of course, I fully understand the usual disclaimer about past performance not being a guarantee of future performance.

What do you think?