Weighing up transferring workplace pension to SIPP

BoracicLint

Hi All,

Recently I have decided to move my S&S ISA, SIPP and Trading Account to Interactive Investor (ii) as the pots have reached a reasonable size that it has become a cheaper option than keeping them with HL.

This then got me thinking about my workplace pension.  I have opted to take a DIY approach to my workplace pension, choosing my own allocations and fund investments, yet the annual management fees are still reasonably high relative to my SIPP.  I am therefore considering transferring my workplace pension to my SIPP with ii, to further benefit from the reduced platform fees and give me greater flexibility over what I invest in.  My questions/considerations are as follows:

1. If I transfer my workplace pension to my SIPP, can I keep the workplace pension open so I can continue to benefit from NI savings from future employer contributions?

2. If an in-specie transfer cannot be done, I will need to transfer as cash, during which time I may suffer a loss from being out of the market.

3. There are no fees for transferring out, and no other benefits I'm aware of in my workplace pension. Are there any other factors I haven't thought about that should be considered before I go ahead?

4. I would stand to save 0.25% per year in doing this.  Is it worth considering, or does the risk of losing out due to being out of the market for a short time out-weigh the cost savings?

5. Has anyone got first hand experience doing this and was it a straightforward process?

Thanks in advance!

OldBeanz

1. You will have to ask your employer if possible. There is no default position.
2. You might also gain.
3. I would make sure there are no other benefits rather than "that I am aware of".
4. Depends how long you are out of the market, how long to recover and whether the markets go up or down at this time.
5. Might ask in your own workplace.

Albermarle

Point 2) The typical workplace pension is using funds that are not available in the open market , so most likely would have to be a cash transfer.
4) Have you double checked the workplace pension charges ? Some providers fees are clear ( Nest ; Peoples Pension etc ) but the traditional providers like Standard Life, Scottish Widows have highish standard charges, but the employer will often have agreed a significant discount that is not always obvious,

BoracicLint

Thanks OldBeanz and Albermarle for your responses.

Agreed on Albermarles point regarding the fees.  Scottish Widows are the provider of my workplace pension and the fees are not clearly stated.  My employer has agreed a substantial discount but even with that taken into account, the charges are still 0.4% per year so there would be a significant saving in moving it to my SIPP.  I think it's just the gamble of being out of the market that is putting me off, but that could too be to my advantage.

Albermarle

the charges are still 0.4% per year so there would be a significant saving in moving it to my SIPP.

Are you sure ?

Hargreaves Landsdown is the largest provider of SIPPs for the public. Their platform fee alone is 0.45% and then + any fund costs .The funds they promote cost >1 % although there are cheaper ways to invest as well.

A popular low cost SIPP provider is Vanguard . Their platform  fee is 0.15% and their standard multi asset and retirement funds are 0.22% and 0,24% .

If you get a SIPP and have a mixture of low cost and active funds , I would say a typical cost would be 0,6to 0,8%

You can get cheaper than 0.4% all in but it is a pretty competitive rate and probably there are no extra charges for anything , which is not usually the case for a SIPP .

BoracicLint

Albermarle said:

the charges are still 0.4% per year so there would be a significant saving in moving it to my SIPP.

Are you sure ?

Hargreaves Landsdown is the largest provider of SIPPs for the public. Their platform fee alone is 0.45% and then + any fund costs .The funds they promote cost >1 % although there are cheaper ways to invest as well.

A popular low cost SIPP provider is Vanguard . Their platform  fee is 0.15% and their standard multi asset and retirement funds are 0.22% and 0,24% .

If you get a SIPP and have a mixture of low cost and active funds , I would say a typical cost would be 0,6to 0,8%

You can get cheaper than 0.4% all in but it is a pretty competitive rate and probably there are no extra charges for anything , which is not usually the case for a SIPP .

Yes, my SIPP at ii is costing £120 per year and does not increase with the size of my investment, so it would make sense to move more into the SIPP and reduce the fees I'm paying to Scottish Widows.  If I transfer, I only have to consider the cost of the funds, which based on my portfolio of trackers are around 0.2%.  So I could still reduce the costs by half, although your point regarding 0.4% being competitive is valid - I will also need to consider extra charges that might be incurred when it comes to accessing the pension or transferring elsewhere in future.

Prism

If it helps we have done a partial transfer from a Scottish Widows workplace pension into a SIPP. It was done in cash though as the pension funds do not match with the SIPP funds.

BoracicLint

Prism said:

If it helps we have done a partial transfer from a Scottish Widows workplace pension into a SIPP. It was done in cash though as the pension funds do not match with the SIPP funds.

Thanks, that's what I'm finding too - the Scottish Widows funds are very specific and don't seem to be available elsewhere, so will have to be transferred as cash.  Do you continue to pay into your Scottish Widows pension as well as your SIPP?

ratechaser

Most of my pension is now with Nutmeg - platform fee is 0.3% for fully managed (well, robo managed...) and fund fees are comparable to Vanguard. So a slight premium, although they've also lobbed 300,000 Avios to me as a sweetener, so it comes out roughly even over 5 years. I considered it worth doing, and will reduce the urge for me to tinker with it...

(I do have Vanguard too, plus another workplace pension, so interesting watching relative performance of 3 seperate pots of what should be pretty well diversified assets...)

Albermarle

the Scottish Widows funds are very specific and don't seem to be available elsewhere

It is the same with all 'insured funds ' with a traditional pension provider . They can not be transferred as they are specific to the pension provider and are insured for 100% , unlike funds in SIPPs.

Alexland

ratechaser said:

Most of my pension is now with Nutmeg - platform fee is 0.3% for fully managed

How did you get that rate when their normal service charge is 0.75% on the first £100k then 0.35% for the portion above that?