DB (final salary) transfer into a SIPP is £1.9M - manage this myself or have a professional manage?

dawsonna

Yes - you are probably right.  I just keep going back on forth on the decision.  I have until March 30th 2021 to activate my DB final salary pension., if I want to take it on leaving otherwise I need to wait until 55. 
On the one hand just holding £1.9M as liquid cash in a SIPP (whilst it would devalue inflation wise), would give me 20-30 years of guaranteed good living, and after age 75 my wife's pension, state pensions, ISA investments, and future inheritances will be more than ample - this is just a tempting prospect, although a missed opportunity on using cash to grow.

gm0

dawsonna - I really would not say I am incredibly well informed.  I think most of what I said is broadly OK as a place to start your own research if you can follow my tortured prose.  And apply it to your own situation.  I am a consumer and a relative stockmarket investment novice learning about this rather complex occasionally deliberately obfuscated subject because I have to - I have a DC pension threatened with LTA issues to manage. So how to take it, and how to outsource or DIY the investment portfolio and drawdown process is the biggest financial decision I have left.  I am in the middle of choosing, platform, funds, phasing right now.

So I created a personal research project around it a couple of years ago to get savvy enough to consume advice intelligently or to do a basic DIY for my situation. I am incapable of consuming the advice if I haven't understood it sufficiently so i was doomed to learn about it.

Marcon

dawsonna said:

Yes - you are probably right.  I just keep going back on forth on the decision.  I have until March 30th 2021 to activate my DB final salary pension., if I want to take it on leaving otherwise I need to wait until 55. 

Sounds as if you are out of the guarantee period to accept your CETV, so will have to start the advice process again, always assuming your scheme will issue another one within 12 months of the previous one?

ukdw

SIPPs (be they self managed or professionally managed) are not the only option if you do decide to transfer out.  There are personal pension based options that give a level of professional management and diversification at a much lower cost than the professional SIPP option you mention. Many of them also have the advantage of giving a theoretical greater level of government backing than SIPPs.

If you do decide to go the SIPP route, self managed does not have to be complicated if you were to just follow the very simple low cost 2 fund occasional balancing approach suggested by people like Lars Kroijer's 'Investing Demystified' book.  You could always back that up with adhoc or ongoing independent financial advice at a much lower cost than the professional rates you mentioned - which would add up to a massive amount if you multiply the high charges out by 30+ years.

Difficult decision to make though about transferring out, sticking with the DB pension would certainly be the easier option - as with the DB approach your pension will be just something you rarely if ever have to think again about once you take it.

OldMusicGuy

dawsonna said:

 At this level of investment the annual management fees can approach £25-30k, even £40k per year - its almost as if your pension fund provides an annual salary for a professional finance person.   

Which is exactly why I don't use an IFA. I have a large DC pot (not as big as yours though). It is the main retirement provision for me and my wife and I just need this to stay ahead of inflation to provide us with a comfortable retirement. I use a simple low-cost strategy that involves three multi-asset funds. 

My goal in setting up my portfolio was limit volatility at the expense of growth, mainly to avoid sequence of returns risk. Goal was to match or be slightly ahead of inflation. It's been well tested through 2020 (I retired nearly three years ago) and it performed exactly as I hoped and is well ahead of inflation at the moment. 

Mind you, I think you are mad to be considering transferring out from such a fantastic DB pension. I would much rather have that than a DC pot because I am risk averse. If you fear market crashes it sounds like you have a way to go before you have the right mentality for self-managing such a large pot, or even paying a massive annual fee to have an "expert" manage it.

garmeg

OldMusicGuy said:

dawsonna said:

 At this level of investment the annual management fees can approach £25-30k, even £40k per year - its almost as if your pension fund provides an annual salary for a professional finance person.   

Which is exactly why I don't use an IFA. I have a large DC pot (not as big as yours though). It is the main retirement provision for me and my wife and I just need this to stay ahead of inflation to provide us with a comfortable retirement. I use a simple low-cost strategy that involves three multi-asset funds. 

My goal in setting up my portfolio was limit volatility at the expense of growth, mainly to avoid sequence of returns risk. Goal was to match or be slightly ahead of inflation. It's been well tested through 2020 (I retired nearly three years ago) and it performed exactly as I hoped and is well ahead of inflation at the moment. 

Mind you, I think you are mad to be considering transferring out from such a fantastic DB pension. I would much rather have that than a DC pot because I am risk averse. If you fear market crashes it sounds like you have a way to go before you have the right mentality for self-managing such a large pot, or even paying a massive annual fee to have an "expert" manage it.

Could you tell me what the three funds are please? Just looking for ideas. Thanks.

MK62

It's tough choice for sure......but one most of us would like to have.

If it was me, I think that CETV would prove too tempting.....assuming you can get an adviser to sign off on the transfer.

daveyjp

 Self management is ok while you have the capacity and ability to do it. 

With such a large amount you need to have everything in place to ensure trusted third parties can takeover.  It can't be one person as it could be a job for 20-30 years as my family did for my grandparents who were in failing health for about 20 years. 

OldMusicGuy

garmeg said:

Could you tell me what the three funds are please? Just looking for ideas. Thanks.

I chose the funds from the popular multi-asset ranges that are often mentioned on here: BlackRock Consensus, HSBC Global Strategy, L&G Multi-Index and Vanguard Lifestrategy. I used a combination of three of the funds within those providers (and the subchoices in each range) to match my chosen equity/bond ratio and global exposure. I use the Morningstar X-Ray tool to help with that.

Albermarle

dawsonna said:

I have seen all the FAs that I need - numerous, some tied and some Independant.  I just wanted to glean people's experiences with self managing a large £M SIPP fund or having it professionally managed with the annual costs that go with it.

Are you clear that there are two choices here with respect to IFA's.
You can have one that advises on general tax, personal finance, IHT issues etc AND constructs an investment portfolio for you .
Or you can have one that delegates the investment side to a DFM ( discretionary fund manager) .
The second option will be more expensive.