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

Albermarle

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.

From my knowledge of these funds , the Consensus ones seem to be rather poor performers and really superseded by the MyMap funds , which are cheaper and seem to perform better .

Dead_keen

dawsonna said:

What would you do?

There is no one right answer and you can spend a lot of time thinking about it. 

For some people, thinking about it is the fun bit. But I find the thinking about it much less fun than others.  So while some people will come up with lots of cunning plans, I'd quite like a steady DB pension.  As I don't have one I've had to spend time thinking about it. 

For what it is worth, my plan is to:

1. Keep three years of essential expenditure in cash (or very near cash, like premium bonds).  Essential expenditure is less than what I expect to spend and I also reduce this by any income that I or my partner will get that is 100% guaranteed. This makes me feel relaxed.

2. Self-invest the rest in a very low cost, very well diversified, index tracking fund. I know it will never beat the market by doing this.  But the very low fees means that I am likely to end up with an above average return compared with other people who invest.  It also means I don't have to worry about whether there is something better to invest in.  My choice of a tracker might change when I get a lot older.  

3. Draw out from my SIPP each year so I always use up my basic rate tax band. 

4. Ignore the LTA until I'm 55.  I'm 52 and expect that the higher rates of income tax rates will go up in April 2022.  So worrying about it now is (for me) pointless.  

5. Ignore IHT as it is not important to me at the moment.  I don't see the favourable IHT treatment of pensions continuing and there are plenty of IHT exemptions available (gifts out of income being one of my favourite).  

6. Use a spreadsheet to guess the future and tweak it once a year (based on the feedback of the previous year and my future wants).  My spreadsheet goes up to age 100 at the moment.  I use it to give me a flavour of the future and what cash I need.  

7. Find something meaningful to do in retirement.  Over the last few years, I've learned to fly, glide and play in powerboats with a view to finding some hobby that will allow me to potter away as I get older.  No luck so far.  For me, this is the biggest issue about when I plan to retire.  I would not enjoy a passive retirement at 52.

8. Not underspend in retirement. I've saved hard over a long time and while I've been trying to change that recently, for me its not a natural thing to do.

Thrugelmir

In the absence of decent returns from fixed interest stocks. My DB pensions provide this element of my portfolio. Allowing my SIPP to remain primarily focussed on equities.  Nor will I have any concerns as to managing my portfolio as I age or over shorter term market performance. Once everybody copies the same investment concept then the law of diminishing returns kicks in. 

Brynsam

MK62 said:

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.

You don't need an adviser to sign off on the transfer; you just need to find an adviser who is authorised to give advice and willing to do so. The requirement is to prove to the DB scheme that you have 'received advice' - they don't need to know what that advice is or whether you're following it.

As already discussed many times here, a stakeholder scheme is required to accept any transfer from any UK registered pension scheme and can be used as a 'stepping stone' to any SIPP, otherwise the only SIPP which will accept transfers from a DB scheme without a positive recommendation is currently AJ Bell.

Not clear if OP has actually gone through the advice process and is still within the guarantee period for acceptance of the CETV. If not, needs to get their skates on to get through the process by 31 March 2021 if that's the deadline for actually taking the DB pension should that prove to be their final decision.

OldMusicGuy

Albermarle said:

From my knowledge of these funds , the Consensus ones seem to be rather poor performers and really superseded by the MyMap funds , which are cheaper and seem to perform better .

I think it's too early to say as far as MyMap is concerned. They are clearly targeting the VLS style funds though. Consensus is cheaper on my platform.

[Deleted User]

What about the obvious remedy? Split the fortune into two SIPPs, let the one you manage compete with your adviser's for two or three years, then transfer the smaller half to the better performing fund. (you could even do this as a paper exercise if you defer the DB transfer until you are 55).
Some would not use a FA at any price - even if the timing of the transfer resulted in a 50% crash - but the best insurance against such a crash is to realise gains in the good years. 
Since he is eyeing  a million pound income stream over the course of your lifetime, and your expectations would be easily met, your FA is understandably keen for you to sign up for ongoing advice. (funny how hurdles about transferring a DB pension tend to clear in these circumstances).

ukdw

I wouldn't have too much of a problem paying an IFA up to £5k for ongoing or occasional advice  - it's the 'professional fund manager' with charges up to £40k (>£1m over 30 years) I would have more concerns about.

mark13

I would take the cash and manage it in a SIPP.  I originally transferred out of DB pension, £800K ( mainly to ensure any  money would be handed down) and then the funds were managed by an IFA. Didn't perform as well as expected so moved from IFA managed pension to a SIPP. Now much happier, once you've invested the funds , pretty much the SIPP will look after itself and shouldn't need to much tinkering, Depends whether you have the time and some financial knowledge. Of course you can also pay for one off advice as well. 

coyrls

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.

I am in a comparable situation to OldMusicGuy, living off a DC pension that should be large enough for my requirements.  I also agree with him that in your position I would not transfer from your DB scheme.  I have been retired now for over five years (I retired at 59) and I am surprised at how much time and effort I have had to put in to managing my money.  As gm0 has said, there is a lot of technical stuff to get to grips with and understand even if you do end up taking advice.  Again, like OldMusicGuy, once I had gone through the research and learning process, I didn’t feel the cost of advice was justified for me.  Once you’ve decided on your portfolio construction the actual management of the investments is not so much the problem, it’s more the understanding that you have to have both to devise your strategy and construct your portfolio.

JonathanBFS

Crazy ongoing quoted, we cap out at 4750 pa

is 0.25% of the pot to be professionally managed and other services included too much?

Perhaps shop around abit further?