Splitting SIPPs (and ISAs) between platforms

randompenitent

How many eggs is it safe to hold in one basket?

I currently use Interactive Investor (II) for SIPP and ISA. I'm happy with the service and the low charges.  I've also a company "group personal pension" with Scottish Widows which I plan to transfer to a low cost SIPP platform when I retire in a couple of months time.

I'm tempted to add the SW funds to my II SIPP. This won't cost me anything and will make management simple for the future but it does mean I'll end up pretty dependent on II with pretty much everything except my cash and near-cash savings held with them.

Is this worth worrying about? What do other people do?

dunstonh

How many eggs is it safe to hold in one basket?

Depends on the eggs and the basket.

Is this worth worrying about?

You haven't told us what you are investing in with your SIPP or how much.   For all we know, it could be South American rain forests.

The SW pensions prevent you from investing in silly things as they carry out a level of due diligence that avoids issues.  That is in part why you get 100% FSCS protection with them.    The SIPP, on the other hand, lets you invest in unregulated assets or assets with lower protections.      

randompenitent

Good question, @dunstonh

I'm invested in a range of mainstream funds, ITs and ETFs. Nothing too wild (unless you consider Scottish Mortgage to be extreme - clearly some do). The eventual SIPP total would be around the LTA and will probably breach it at some point during retirement if you include my small DB pension.

My question is really about the risks associated with platforms rather than with the investments. What could go wrong? A platform could go bust but I imagine that investors investments would not be lost. Worst case is, I imagine, some kind of long-term fraud where the investments the platform claims to have made on your behalf have actually been siphoned off elsewhere. I consider this unlikely. Maybe I'm too optimistic.

Something you could clear up - for me at least - is what the FSCS protection actually protects against. Clearly it isn't protection against poorly performing funds, or even (I assume) abject fund failures like Woodford. 

[Deleted User]

randompenitent said:

Good question, @dunstonh

I'm invested in a range of mainstream funds, ITs and ETFs. Nothing too wild (unless you consider Scottish Mortgage to be extreme - clearly some do). The eventual SIPP total would be around the LTA and will probably breach it at some point during retirement if you include my small DB pension.

My question is really about the risks associated with platforms rather than with the investments. What could go wrong? A platform could go bust but I imagine that investors investments would not be lost. Worst case is, I imagine, some kind of long-term fraud where the investments the platform claims to have made on your behalf have actually been siphoned off elsewhere. I consider this unlikely. Maybe I'm too optimistic.

Something you could clear up - for me at least - is what the FSCS protection actually protects against. Clearly it isn't protection against poorly performing funds, or even (I assume) abject fund failures like Woodford. 

There is no FSCS protection for ITs or ETFs

dunstonh

I'm invested in a range of mainstream funds, ITs and ETFs. Nothing too wild (unless you consider Scottish Mortgage to be extreme - clearly some do).

As mentioned above, IT's and ETFs get no FSCS protection.   So, whether you hold them on one platform or across several platforms, a failure in the ETF/IT would impact in exactly the same way.

My question is really about the risks associated with platforms rather than with the investments. What could go wrong? A platform could go bust but I imagine that investors investments would not be lost. Worst case is, I imagine, some kind of long-term fraud where the investments the platform claims to have made on your behalf have actually been siphoned off elsewhere. I consider this unlikely. Maybe I'm too optimistic.

The assets are yours in that case.   The administrator would look to find a pre-pack buyer of the platform/provider.   It would likely continue to trade during that period if its a mainstream platform until the administrator believes no pre-pack or buyer is likely.  At the point it closes for trading, you will not be able to access your money for trades.   It will still be there but the ability to transact will be gone until a wind-down or late buyer is found.  That could be many months or even into 1-2 years.

If the platform/SIPP is one that is well known for having a high ratio of unregulated/illiquid assets, its unlikely there would be a buyer.  If it a mainstream platform with mostly regulated investments or mainstream investments then a buyer will be found easily.   

Generally, you should avoid niche platforms that are unprofitable.   For many years, there has been an expectation that a number of the smaller unprofitable platforms will fail.  Some have and that is expected to continue.  If you are on a profitable mainstream platform then the scope for them to fail is very small.

Something you could clear up - for me at least - is what the FSCS protection actually protects against. Clearly it isn't protection against poorly performing funds, or even (I assume) abject fund failures like Woodford. 

As mentioned, your ETFs, ITs and shares would have no FSCS protection.   The UT/OEICs get £85k per fund house.

At platform level, it is really only against a fraud that brings down the company.   The big players can afford fraud that goes into a billion.  A smaller player may not be able to afford a fraud that costs millions.     A fraud against the platform is unlikely though as there are checks and balances in place to reduce the chances.  Anything is possible but if you have the risk level and knowledge to invest in ETFs/ITs etc then you have the risk level and knowledge to be able to work out if your platform is viable or not.

Albermarle

I'm tempted to add the SW funds to my II SIPP

You can not transfer SW pension/insured funds into a SIPP. It will have to be a cash transfer.

Some SW Group personal pension have very low charges , so worth checking this properly first .

Notepad_Phil

In my view there are four reasons why you may want to hold your portfolio across multiple platforms:

1) it makes financial sense - e.g. I hold my ISA on a different platform from my SIPP because that provides the cheapest total platform cost across my portfolio.

2) it makes investing sense - e.g. a platform might offer specific funds that an investor might wish to take advantage of.

3) your portfolio is well into 6 figure sums or higher, in which case holding the portfolio across two platforms might become more justifiable even if does cost a bit more.

4) in case of technical issues - e.g. as you say that you will be retiring in the near future then depending on what access you have to other sources of income/cash then a second platform might be advisable in case of technical problems affecting a platform and stopping you from drawing out money.

Albermarle

Another reason might be the need to stick with current workplace pension but to have an alternative SIPP(s) for the reasons outlined above.