transferring a stakeholder to a sipp

wellsie82

hi all,

just a tentative question. im considering transferring my stakeholder pension into a sipp (company to be decided)

my story so far is this, i worked for 3 years for a local government authority and when i left, i transferred this into a virgin stakeholder pension and then started to pay into this at the same time, thus meaning all my pensions were under one roof/umbrella

virgin then subcontracted their work out to ifds which i was unhappy about, and in addition they only had two funds to invest in. for these two reasons i transferred this virgin stakeholder to legal & general for great investment options. i pay into this monthly and also pay into my work one

to open further investment opportunities i am thinking of transferring my stakeholder into a sipp. this is all straightforward up until now. the problem is that the sipp providers are saying that they will not accept "contracted out" benefits and it has come to light that whilst with virgin money, i had contracted out

is there any way whatsoever of reversing this "contracted out" section through virgin money or legal & general? legal & general have said it can't be reversed and it has to remain as it is - just want a second opinion on this please

i have just been reading http://forums.moneysavingexpert.com/showthread.html?t=620287 - does this mean that from next year i will be able to transfer the whole thing into a sipp whether i have contracted out benefits or not?

EdInvestor

wellsie82 wrote: »

my story so far is this, i worked for 3 years for a local government authority and when i left, i transferred this into a virgin stakeholder pension and then started to pay into this at the same time, thus meaning all my pensions were under one roof/umbrella

Not a good idea, but if you just decided to do this by yourself, nothing can be done.

is there any way whatsoever of reversing this "contracted out" section through virgin money or legal & general?

Typically what people do is divide the pension into 2 bits, moving the non PR money to the SIPP and leaving the rest behind in the old pension (if allowed) or opening a new one for the PR money if not (could be at same company).

does this mean that from next year i will be able to transfer the whole thing into a sipp whether i have contracted out benefits or not?

That's the plan.

dunstonh

my story so far is this, i worked for 3 years for a local government authority and when i left, i transferred this into a virgin stakeholder pension and then started to pay into this at the same time, thus meaning all my pensions were under one roof/umbrella

You transferred a local Govt pension scheme (one of the best you can get) into one of the worst stakeholder pensions you can get?

If you has used an adviser, it would never have been done but lets say it was, you would now be taking them to the FOS and looking at financial redress. That was a really bad decision.

for these two reasons i transferred this virgin stakeholder to legal & general for great investment options. i pay into this monthly and also pay into my work one

Thats a better decision once you had made the initial error. L&G stakeholder is one of the best and with its low annual managment charges at 0.5-0.9% p.a. and good internal fund range it would certainly suit an inexperienced investor.

is there any way whatsoever of reversing this "contracted out" section through virgin money or legal & general? legal & general have said it can't be reversed and it has to remain as it is - just want a second opinion on this please

No. Your options are to leave it in the stakeholder or transfer your pension to a personal pension or hybrid SIPP or wait until protected rights eventually get allowed in SIPPs.

i have just been reading http://forums.moneysavingexpert.com/showthread.html?t=620287 - does this mean that from next year i will be able to transfer the whole thing into a sipp whether i have contracted out benefits or not?

Its been coming "next year" for the last few years and still hasnt arrived yet. It probably hasnt got much longer but those that waited have lost out by not using a modern personal pension instead.

wellsie82

EdInvestor wrote: »

Not a good idea, but if you just decided to do this by yourself, nothing can be done.

Typically what people do is divide the pension into 2 bits, moving the non PR money to the SIPP and leaving the rest behind in the old pension (if allowed) or opening a new one for the PR money if not (could be at same company).

That's the plan.

Hi Ed,

Thanks for your comments, what made you say it wasn't a good idea?

I guess splitting it into two places/companies wouldn't be the end of the world but at least next year they can be kept together if I liked. Do we know a date yet for this change?

wellsie82

dunstonh wrote: »

You transferred a local Govt pension scheme (one of the best you can get) into one of the worst stakeholder pensions you can get?


If you has used an adviser, it would never have been done but lets say it was, you would now be taking them to the FOS and looking at financial redress. That was a really bad decision.

Thats a better decision once you had made the initial error. L&G stakeholder is one of the best and with its low annual managment charges at 0.5-0.9% p.a. and good internal fund range it would certainly suit an inexperienced investor.



No. Your options are to leave it in the stakeholder or transfer your pension to a personal pension or hybrid SIPP or wait until protected rights eventually get allowed in SIPPs.



Its been coming "next year" for the last few years and still hasnt arrived yet. It probably hasnt got much longer but those that waited have lost out by not using a modern personal pension instead.

Hi,

Thanks for replying back, you and Ed are both in the know so I'm expecting identical replies but again why such a bad choice to transfer it into the stakerholder in the first place? What's done is done now but at the time I was 23 and was confident 3 years worth of a pension would grow quicker in a stakeholder with a wider choice of funds.

I have recently opened a sharedealing account and although I don't feel I know everything there is to know, I do feel confident enough to take a more hands-on approach to investing, hence me considering the sipp.

It sounds like transferring of contracted out benefits has been on the cards for a while then and it's just a waiting game. Does the information in http://forums.moneysavingexpert.com/showthread.html?t=620287 mean it might be more concrete for next year?

EdInvestor

wellsie82 wrote: »

Thanks for replying back, you and Ed are both in the know so I'm expecting identical replies but again why such a bad choice to transfer it into the stakerholder in the first place? What's done is done now but at the time I was 23 and was confident 3 years worth of a pension would grow quicker in a stakeholder with a wider choice of funds.

The LGPS scheme is a "final salary" pension.It guarantees to pay you a speficic pension at retirement with no investment risk to you.The value of the amount you had earned would have been index-linked for inflation up to 5% until you retired.Valuable benefits such as spouse pension and index linking are included.

Moving out of that means you have to take all the investment risk yourself ( lucky you seem to be learning fast about investment!)

The magnitude of the task is quite high. For instance to provide yourself with the basic state pension equivalent of 87 pounds a week, you would need to save up a pot of money worth 150,000 pounds.

wellsie82

EdInvestor wrote: »

The LGPS scheme is a "final salary" pension.It guarantees to pay you a speficic pension at retirement with no investment risk to you.The value of the amount you had earned would have been index-linked for inflation up to 5% until you retired.Valuable benefits such as spouse pension and index linking are included.

Moving out of that means you have to take all the investment risk yourself ( lucky you seem to be learning fast about investment!)

The magnitude of the task is quite high. For instance to provide yourself with the basic state pension equivalent of 87 pounds a week, you would need to save up a pot of money worth 150,000 pounds.

cheers for clearing that up Ed, appears I've screwed up bigtime, the only consolation i guess is that i was earning close to peanuts but it would of all added up and grew over time

dunstonh

the only consolation i guess is that i was earning close to peanuts but it would of all added up and grew over time

The amount you earned that it was calculated against would have been increased annually as well to more or less keep a real terms value.

I would say the main consolation is that you only had 3 years. What does surprise me is that Virgin accepted it. Most pension providers wont allow final salary pension transfers unless you get an IFA to sign off on it because it is estimated that in 9 out of 10 cases, a final salary pension transfer would be wrong.