SIPP transfer compensation limit

zolou

Just wondered if anyone has any thoughts on this - getting set to transfer pension funds into a SIPP with interactive investor, and reading all the docs - they helpfully point out that FSCS compensation is limited to £85K, and that on first opening an account the money is held in the ii bank account, and then in your SIPP investment account before you allocate it. So for anything above £85K, there is a brief period of vulnerability. We want to transfer most of one pension, approaching retirement - about £260K. Wondering whether that's a serious concern and if we can/should do the transfer in dribs and drabs. ii are currently offering an incentive of £500K for investing over £250K before 2nd August.

El_Torro

It's unlikely that ii will catastrophically fail during the short time that the holding is in cash. Then again, maybe it will... Doing the transfer in 2 or 3 pieces is a prudent move.

Also it's worth having more than one platform for your SIPPs. If nothing else it means you can take money out of one platform while the other is undergoing maintenance (or whatever).

I wouldn't worry too much about the £500 incentive. It's 0.2% of your £260k holding. You could gain or lose that in a day.

zolou

Thanks, I'll look into breaking it up. I found some reassuring info here:

https://www.ii.co.uk/about-ii/your-protection

Really appreciate your feedback.

Albermarle

ii are currently offering an incentive of £500K for investing over £250K before 2nd August.

Looks like a very good deal ! Assuming you mean £500 , in fact other SIPP providers are offering something similar - seems very competitive market for pension transfers at the moment.

Regarding the FSCS cover , there are two elements . The SIPP provider has £85K cover ( was £50K ) in case of fraud, unexpected collapse of the platform etc . Normally your money is invested in funds within the platform and not with ii, so not really an issue .
Cash ( I think ) is held with the bank that ii use , which like all banks have their own £85K cover.
The posters on this forum seem generally unconcerned about having amounts well over £85K with any main stream SIPP provider They are not banks lending money, that may never get paid back , they are basically intermediaries taking a small cut for administering the funds rather than holding them .
However if you had a very big pot , you might feel more comfortable splitting between two providers in case of IT crashes rather than anything else.
If you are still concerned then you should put your pension with a more traditional pension company , like Aviva or Standard Life where you have unlimited 100% cover.

SonOf

they helpfully point out that FSCS compensation is limited to £85K,

Only if they fail and it impacts on the value of your assets. However, if you are using investments that have no FSCS protection, such as shares, ITs or ETFs, then you dont suddenly get FSCS protection on those just because it is in a SIPP.

zolou

Thanks, I was really thinking about the brief period when the money had gone to ii but before it was re-invested. Just visions of the Years and Years scenario! Just being a bit paranoid And yes, £500K would be worryingly generous!

Alexland

I run two SIPPs to spread the risk across two unrelated platforms and fund managers. The bigger one is in an HSBC fund at fixed price Halifax Share Dealing and the smaller one is in a Blackrock ETF on capped price Fidelity. New contributions go into my workplace pension as salary sacrifice and then I occasionally transfer lump sums across to Fidelity which is the only time I incur trade fees. Of course I don't get any FSCS protection with the ETF.

The II transfer offers are tempting (it's not clear why they offer bigger cashback for larger accounts when their fees are fixed anyway) but for my needs they work out more expensive so I would only give it back to them in higher fees over time.

Alex