Choosing a Sipp Platform?

michaels

So my pension is invested through my company DC scheme into a default fund which is an equity heavy, slightly UK biased general investment fund which I think probably charges about 70 basis points all in.

I reckon I could leave my money going into this fund but regularly move the majority of funds into a sipp with a similar investment profile and much lower charges saving several thousand quid a year.  for example there seem to be platforms that charge a £240 fixed fee and then I could choose vs80 at 22 basis points charge making a total of 25 basis points and saving of order 2k+ pa.

Any suggestions or pitfalls I need to think about in choosing a platform?  Any thing preventing me from pursuing a strategy of moving funds from my current pension to a sipp every 6 or 12 months?  Is there likely to be a charge for moving the funds?  Is it of a magnitude worth worrying about?  Do I need to think about how the platform handles drawdown or the availability of different funds (I might want to go lighter equities or put some funds in a money market or bonds fund closer to or early in retirement).

Anything else I have overlooked?

Paul_Herring

So my pension is invested through my company DC scheme into a default fund which is an equity heavy, slightly UK biased general investment fund which I think probably charges about 70 basis points all in.

Have you investigated what other funds your company's chosen provider offers, and what they charge for the other funds?  Can you instead get a better deal by swapping within that scheme, rather than looking outside it?
Who is it?

Any suggestions or pitfalls I need to think about in choosing a platform? Any thing preventing me from pursuing a strategy of moving funds from my current pension to a sipp every 6 or 12 months?  Is there likely to be a charge for moving the funds? 

Are you actually able to do partial withdrawals from the current company?
Or do you have to pause your (and your employer's) contributions while doing so, risking missing a month or so's contributions going in?

Is it of a magnitude worth worrying about? 

Are we talking thousands, tens of thousands or hundreds of thousands?
What percentage of your pension portfolio is currently with your current employer's pension?
How much are you contributing per year?

Anything else I have overlooked?

Volatility? Presuming there'd be no equivalence between investments within the two schemes, or the destination (hello Vanguard!) won't take anything but cash transfers from others, you have a delay between employer's scheme liquidating the funds, and your other scheme purchasing.

Anyway, some numbers:

0.5% difference in charges on, say, a portfolio of £40,000 over a year would be £200. On contributions of £4,000 over a year, that'd be £10 on those contributions.

On a portfolio of £400,000, that's closer to £2,000.

Magnitude matters - the smaller numbers could be made up by contributing more. The larger ones could benefit by moving them.

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Anyway, that was this evening's wine-assisted ramblings from me

michaels

Thank you, I can choose other funds with Scottish Widows but I don't think any of them are cheaper, either the same or more.  The company seems to do it through a separate pensions company via an arrangement set up years ago, the rep of which drives a very nice car....

Don't think I am worried about the risk of being out of the market for a short period, it is just as likely to fall as rise.

Magnitude mean we are looking at the order of 2-4k a year in fees saved and on each year's contributions 200 quid.

No idea if this is allowed, I think someone else suggested they did similar with Scottish Widows so I hope so.

Obviously using cfiresim or the earlyretirementnow spreadsheet the difference between fees of 0.7% and 0.2% makes a big difference to the cash value of the safe withdrawal rate.

Paul_Herring

Scottish Widows

Ugh. You have my sympathy. After years without their providing internet access to my particular type of account (Clerical Medical) with them (it was a previous employer's scheme to which current employer was contributing) I'm finally closing/transferring out.
At a cost of £138/m (employer's NI forgone) which I'm hoping to subsequently save with Vanguard.

Magnitude mean we are looking at the order of 2-4k a year in fees saved and on each year's contributions 200 quid.

I'm guessing not very small monthly contributions. Via salary sacrifice? Just being nosey.

No idea if this is allowed, I think someone else suggested they did similar with Scottish Widows so I hope so.

I think you need a friendly chat, in the first instance, with someone in either finance, payroll or HR who knows something about the scheme.
Also contact SW, sooner rather than later, to see if your particular scheme will allow partial transfers.

But if it's anything like my (very) longstanding CM one, they may not allow partial transfers (hence my loss of £138/m - needed to stop contributions there and move to current employer's scheme, and transfer the lot out - otherwise I would have pulled 99.9% out and kept the contributions going in.)

bowlhead99

If you are looking at saving £2-4k a year by moving your all-in costs from 0.7% to 0.25% (saving 0.45% a year), that implies the total amount involved is £450k-900k and the £200 on each year's contributions means you are perhaps adding the max £40k each year to move it from the £450k range to the £900k range over the next decade.

So yes there will be scope for saving fees or getting greater options by moving a large portion of that money elsewhere.  My workplace pension is with SW so maybe it was me you saw mention in a previous post that I periodically move a chunk of SW money off into my SIPP, having realised that the costs my employer negotiated (0.5% for SW in-house funds but quite a lot more for external ones) were not what I wanted.

In your shoes I would simply call SW saying you would like to transfer a portion of your existing pension balance out to your personal pension scheme elsewhere, and asking whether that is possible. They will likely tell you that you must leave at least £2 in the pension to keep it open accepting your ongoing contributions from the employer (that's what they told me). Then you can just go ahead and open a pension elsewhere and fill out the relevant transfer paperwork to move most of your value over to that other scheme, in cash.

There is no real point asking your HR or finance department, as they are unlikely to know the answer to the question on how to keep the existing group personal pension account 'alive' as you'll want to do here -  because when they were researching workplace pension options, they would not have  at the top of their wishlist for scheme features: "how easy is it for our employees to periodically transfer out their workplace pension balances to their other personal schemes without exiting the scheme". It's fine to just get your information straight from the horse's mouth (Scottish Widows themselves) instead.

In suggesting to just go ahead and check with SW the rule on partial transfers out and then do it... I'm assuming your pension does not have any special nice features such as guaranteed annuity rates, larger than normal lump-sum allowed to be taken on retirement, etc, which would obviously be considerations for people considering moving a large balance from their main scheme to another. If it's a standard plain vanilla SW series 2 group personal pension like mine, it's easy to do if you want to save some cost or get more advanced investment options.

michaels

Thanks all. It is as described but standard fees are 0.75 (discounted from 1) not 0.5. It is supposed to be discounted to 0.55 for sal sac contributions but I notice the admin person changed a year ago and since then all contributions have been paid in together so I suspect I have missed out on the reduced fees for those ones.

Time to move.

Any suggestions on best platform to move to? Any tips on how best to move? Should I transfer the money into a fund I would like to move to in the new platform so it could be moved whilst staying in the same fund or is this impossible so it will have to be cashed out and reinvested anyway?

Joey_Soap

For platforms it's a simple choice of % based or flat fee based. For the sums invloved here, I'd suggest the latter option. That basically points you to Interactive Investor. I use them, they are just fine. Family uses AJ Bell, theycharge 0.25%, they are fine until the pot reaches the stage where II are cheaper.

cloud_dog

There are other options available, michaels, if you are comfortable not holding OIECs, i.e. ITs or ETFs.  For example Fidelity limit the platform charge to £45pa, and AJ Bell limit it to £100pa (£25pq).

Albermarle

Should I transfer the money into a fund I would like to move to in the new platform so it could be moved whilst staying in the same fund or is this impossible so it will have to be cashed out and reinvested anyway?

As you are currently invested in a SW insured fund, this will not be available with a SIPP provider, so you will have to transfer in cash . From time to time II ( and others ) offer cashback for transferred pensions . Could be worth checking if one will be on offer soon.

I have made partial transfers from a SW pension . Takes about two weeks . Although the transfer was initiated via the receiving SIPP , I still got a call from SW just to check it was OK and what funds I wanted to cash in for the transfer. 

michaels

cloud_dog said:

There are other options available, michaels, if you are comfortable not holding OIECs, i.e. ITs or ETFs.  For example Fidelity limit the platform charge to £45pa, and AJ Bell limit it to £100pa (£25pq).

Hmm - is it worth saving a couple of hundred quid at most to put up with that restriction?  No one has mentioned iweb/Halifax  are there drawbacks to them?

bowlhead99

michaels said:

cloud_dog said:

There are other options available, michaels, if you are comfortable not holding OIECs, i.e. ITs or ETFs.  For example Fidelity limit the platform charge to £45pa, and AJ Bell limit it to £100pa (£25pq).

Hmm - is it worth saving a couple of hundred quid at most to put up with that restriction?  

Personally If I were investing £400k-900k I wouldn't want the restriction of only being able to use exchange-traded stuff. I can see why you might want to give up using SW funds to shave a couple of thousand in fees by moving, but the odd couple of hundred a year, on half a million invested, is only a few minutes movement on the stock market. Ultimately what you are invested in is a bigger determinant of outcome than a few basis points of fees here and there.

No one has mentioned iweb/Halifax  are there drawbacks to them?

IWeb's SIPP is £180 a year while Interactive Investor's is £240 a year (£10pm for the account and the same again for SIPP administration), but II gives you a portion of the account fee back as trading credit while IWeb make you pay for each and every trade and don't have any kind of reduced fee for ongoing monthly 'regular investing'. As you will be adding new money on an ongoing basis and will presumably need to rebalance every year, you will probably use up most of the credit, but overall II fees will be the same order of magnitude as IWeb rather than significantly more costly - a few tenners of difference here and there is not worth worrying about in the grand scheme of things. 

From time to time people have posted that a particular non-obscure fund they wanted was not available on IWeb, while II seem anecdotally to have most things people might want. II have a broader range of international markets if you are buying individual stocks, though if you're just looking at using funds and ETFs etc and not wanting to take advantage of the other options available in SIPPs, you might not value that.