Obscure Scottish Widows workplace pension - can I regularly transfer out to a SIPP?

Westminster

I recently started a new job where my employer has set up a Scottish Widows pension with a 60% match up to £7150 per year.

However the Scottish Widows website is shockingly obscure and obfuscated - particularly compared to the low-cost platforms.

I eventually found that I am in set up with SW SSgA 50:50 Global Equity Index Pension (series 2) and after much digging I see that the total annual fund charge is 1.003%

I find this to be extremely high as all my previous pension pots are in a couple of low cost Vanguard ETFs (FTSE 250 and S&P 500).

I want to maximise the company match but it is irritating to be tied to crappy actively managed funds with excessive charges.

Others must have also been in similar positions so is it technically possible to regularly transfer out from Scottish Widows into my SIPP while remaining with this employer?

El_Torro

It might be worth asking Scottish Widows this direct question, though in my experience it should be fine to do as you suggest. Just make sure you do a partial transfer, rather than a complete transfer, otherwise you might end up cancelling your workplace pension.

I do the same with my workplace pension, for similar reasons to you. My employer doesn't use Scottish Widows though.

As an aside, I don't think having all your pensions focused solely on the FTSE 250 and S&P 500 is a good idea. This lacks diversification.

bowlhead99

A few points you might find useful:

Scottish Widows pension series 2 is unlikely to actually have charges of 1% for you personally, as workplace default pensions are set up cheaper than that -e g. 0.75%, 0.65%, 0.55% or whatever, depending on what your employer was able to negotiate. For simplicity their factsheets show 1% as standard for their basic in house SW solutions and index funds, and a higher amount for a variety of externally managed funds, *but* your employer will have a lower rate with them which will be less than that, and you will get the difference back via a rebate (free fund units credited monthly) which you'll see in your unit history.

You can find your actual basic rate on one of the home pages on their (antiquated) site when logged in to your pension - from memory I think it's a link called something along the lines of pension benefits, which is where it shows you your chosen retirement age, standard fee rate etc. So, if that rate is 0.65%, then the simple index or in-house funds that have a headline charge of 1% will really be 0 65%.

So the one you mention is a 50:50 index tracker but you're not going to be paying a full percent for it. An example rate of 0.65% all in might equate to going to a SIPP provider with a platform fee of 0 3% and paying 0.35% for the fund. Not super cheap but not the end of the world. And obviously if your employer has a better deal than that, is not as expensive as it first sounds, when you see 1% for a tracker based solution. And the free money isn't something you should give up to save a smidge on fees

The good news is yes you can transfer out of the SW series 2 workplace pensions without needing to leave the scheme entirely and re-enrolling(which would likely cost you missed employer contributions). You just have to make sure you leave at least £2 in the account to keep it alive. It's not worth the hassle of doing this every month or two, but perhaps periodically when you get to £10k or so, just fill out your receiving scheme's paperwork to transfer as cash and it will go through in a reasonable timeframe.

You may need to fill out a SW form as part of the process (can't remember as it's a while since I last did one, but will be doing another one soon). Just phone up the SW phone support number and give them your plan number and they will be able to confirm what management charge rate you are on as well as anything specific you need to do to effect a partial transfer out.

Prism

My wife just did a partial transfer from Scottish Widows to AJ Bell Youinvest. It took about two days (cash transfer) and was very easy. Just filled out a form at Youinvest, sent it in and thats it.

Btw, like Bowlhead99 says, her Scottish Widows charge for that fund is only 0.39% which is pretty good for a total fee for a passive multi-asset fund.

Westminster

Thanks for the input guys.

I’m currently with AJ Bell with my SIPP, ISA and Junior SIPPs but intend to transfer my ISA to Vanguard who charge a platform fee of 0.15% and no dealing fee. (Once Vanguard launch their SIPP I will be transferring those too).

Given that I currently only have Vanguard ETFs then the limitation on only being able to buy Vanguard funds is not of concern to me.

I’ve only taken control of my old pensions (c95k) and started a meaningful stocks & shares ISA in the last 9 month or so.

I take onboard the comment from El Torro regarding my portfolio spread just across USA and UK and I’ve been researching heavily over the past few weeks with sites like Moneyvator, podcasts like Meaningful Money and books like Investing Demystifying before adding a few other areas and rebalancing etc.

I certainly intend to maximise the company match available so if I can partially transfer out every 6-12 months while leaving that scheme open then that is what I will do.

I'll speak to SW later to find out what the discount is on the current fund.

cloud_dog

Westminster wrote: »

Thanks for the input guys.

I’m currently with AJ Bell with my SIPP, ISA and Junior SIPPs but intend to transfer my ISA to Vanguard who charge a platform fee of 0.15% and no dealing fee. (Once Vanguard launch their SIPP I will be transferring those too).

Given that I currently only have Vanguard ETFs then the limitation on only being able to buy Vanguard funds is not of concern to me.

I’ve only taken control of my old pensions (c95k) and started a meaningful stocks & shares ISA in the last 9 month or so.

I take onboard the comment from El Torro regarding my portfolio spread just across USA and UK and I’ve been researching heavily over the past few weeks with sites like Moneyvator, podcasts like Meaningful Money and books like Investing Demystifying before adding a few other areas and rebalancing etc.

I certainly intend to maximise the company match available so if I can partially transfer out every 6-12 months while leaving that scheme open then that is what I will do.

I'll speak to SW later to find out what the discount is on the current fund.

With approx £100k in the SIPP, and with the possibility via the partial tranfers of this increasing by thousands of ££££ per year, why would you move from a fixed price solution to a percentage based solution (Vanguard)?

I appreciate you currently incur trading costs (£9.95 or £1.50) but you may very well be better off by staying with AJ Bell based on your holdings / strategy.

Re ISAs, have you considered another fixed price offering like iWeb? Obviously a lot of this depends on amounts, strategy, and investment frequency etc.

Westminster

AJ is a 0.25% annual charge (vs 0.15% and free trades) as far as I'm aware.

cloud_dog

Westminster wrote: »

AJ is a 0.25% annual charge (vs 0.15% and free trades) as far as I'm aware.

No.

You said that you hold ETFs. Assuming this is correct, the charge for holding stocks (shares, ITs, ETFs) in a SIPP with YouInvest is capped at £100pa, or £25 per quarter. Obviously, you would need to factor in dealing charges, and I am unsure what dealing charges Vanguard apply for ETFs.