Setting up a second private pension - SIPP

solidpro

Hi
I'm 42. I have a quick question. For reasons I won't go into, I have a private pension with SJP. I'd like to leave it as-is for 5 more years until the transfer-away fees run down to nothing, before transferring it out to a SIPP.
Am I able to setup a separate SIPP to pay into with Vanguard whilst keeping the SJP pension as-is?
Asked another way, is it OK to have 2 private pensions at the same time?
I mostly pay into pension via my own private limited company contribution - is this affected in any way?
Thanks

eskbanker

Yes, you can have multiple pensions so there's nothing stopping you from opening a SIPP, as long as your aggregate contributions to all pensions are kept within the overall annual limits....

dunstonh

Am I able to setup a separate SIPP to pay into with Vanguard whilst keeping the SJP pension as-is?
Asked another way, is it OK to have 2 private pensions at the same time?

yes and yes.   Although do note that the Vanguard personal pension is not a SIPP (or a personal pension despite its name).  The name SIPP has become a bit of a marketing name in recent years rather than being a product description of the product type.

I mostly pay into pension via my own private limited company contribution - is this affected in any way?

In the majority of cases, that should be the only way you pay.  Mostly should not come into it unless you have a niche scenario.

solidpro

dunstonh said:

yes and yes.   Although do note that the Vanguard personal pension is not a SIPP (or a personal pension despite its name).  The name SIPP has become a bit of a marketing name in recent years rather than being a product description of the product type.

Ok, the Vanguard Personal Pension is advertised as a SIPP - is there a crucial difference?:
https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account
My experience with Vanguard ISAs has been positive, straightforward and I think they're pretty transparent. Is there a reason I shouldn't setup a VPP as well and put my pension contributions into that instead of resetting the 6 years fee timer everytime I pay into SJP? Thanks!

Albermarle

Normally a SIPP should offer a full range of investments from many different providers .
For example HL, Fidelity , Interactive Investor and others offer the choice of thousands of funds; ETF's ; investment trusts , individual shares etc.
A traditional personal pension with the likes of Aviva , Standard Life etc only offered their own funds. 
Vanguard only offer their own funds so its more like a personal pension .
For some reason customers like the word/concept 'SIPP' , (although  most would not really have a clue which investments to pick from the thousands available ) So for marketing reasons Vanguard likes to call itself a SIPP ( but also refers to being a personal pension at the same time) 

solidpro

I believe HL offer a variety of Vanguard's products under it's SIPP, so is it better to setup a SIPP with HL and have all the choice of all products, as well as Vanguard's? I guess there is a middleman's charge at some point?

dunstonh

Ok, the Vanguard Personal Pension is advertised as a SIPP - is there a crucial difference?:
https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account

You could say it uses both the personal pension tag and market as a SIPP despite being neither.  It is marketing.

The average consumer cant tell the difference between the different types of pension.    We have frequently seen people refer to their pensions as SIPP, even when they are not SIPPs,  because that has become a fashionable term.    The previous generation would refer to their pensions as personal pensions.  This generation sees SIPP as the term to use.

A certain large DIY platform used to market themselves as a low cost SIPP. They were a SIPP but they were not low cost.   However, people believed it.         

Vanguard use FNZ as their software provider and FNZ has a SIPP option.  Vanguard didn't want the SIPP and it asked FNZ to code a new pension type to suit its need.   However, the target market has SIPP as the pension type to have.  Hence the marketing.

SIPPs offer investments from the whole market place and that can be around 30,000 options.   You wont find another provider out there that calls their pension a SIPP unless it is a SIPP.  

My experience with Vanguard ISAs has been positive, straightforward and I think they're pretty transparent.

I find them absolutely no different from any other modern investment software provider except they only offer their own funds and are not whole of market.

Is there a reason I shouldn't setup a VPP as well and put my pension contributions into that instead of resetting the 6 years fee timer everytime I pay into SJP? 

You were happy with the restricted choice of SJP before.  You appear to be happy with the restricted choice of Vanguard now.    I wouldn't be as Vanguard dont have the best funds in every area.    I would prefer a whole of market option but that's me as I use funds from different fund houses (which include a couple of Vanguard funds where they are good and other trackers from other fund houses where Vanguard are not as strong).  If you want SIPP functionality then you wouldn't use Vanguard.  That was really the point.  If you want Vanguard only investment and that will always be the case then fair enough. It does that job well.

SJP is about the most expensive distribution channel out there.  Its not comparable to DIY platforms.   Its comparing chalk and cheese.   You should be comparing with other DIY options.

underground99

solidpro said:

dunstonh said:

yes and yes.   Although do note that the Vanguard personal pension is not a SIPP (or a personal pension despite its name).  The name SIPP has become a bit of a marketing name in recent years rather than being a product description of the product type.

Ok, the Vanguard Personal Pension is advertised as a SIPP - is there a crucial difference?:
https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account

The 'self invested' bit of SI PP generally refers to you choosing yourself what you want to hold from the full range of assets that can be held in a pension - from company shares and corporate or government bonds, open ended funds, investment trusts and ETFs, even directly held commercial property.  Some providers simplify it by not offering everything that's technically possible (such as a mortgaged commercial building) and will offer a cheaper more basic SIPP which doesn't have the stuff that's more expensive to administer. 

Vanguard have taken 'make it cheaper and simpler' to another level by only offering a limited subset of their own products and confusingly calling it both a 'Personal Pension' (though it doesn't come with insurance-backed guarantees like traditional Personal Pensions that offer only the pension company's products would do) and also a 'SIPP' (though you can't use it to hold any shares or bonds or even any investment funds from any other fund management group).

Example article:
https://www.ftadviser.com/pensions/2020/02/28/advisers-denounce-vanguard-sipp-model/?page=1

So, some people think it's disingenuous for Vanguard to be touting it as a 'SIPP' to get on the marketing bandwagon, tempting consumers who were searching for that buzzword away from the other platforms who offer a proper choice.

My experience with Vanguard ISAs has been positive, straightforward and I think they're pretty transparent. Is there a reason I shouldn't setup a VPP as well and put my pension contributions into that instead of resetting the 6 years fee timer everytime I pay into SJP? Thanks!

Putting aside the semantics of what they should call it, the bottom line is that if you're happy to build your own pension restricting yourself to Vanguard-only building blocks: no, there isn't any legal or technical reason why you shouldn't make pension contributions into their product, whether instead of - or as well as - using SJP's more expensive product which offers SJP building blocks.

Obviously you will be compromising by restricting investment choice to what you can find in a whole of market platform, but you don't need to stick with them forever anyway, and you could re-evaluate once there was a few years of contributions in it and you were leaving SJP and looking for a new home for the lot.

Albermarle

solidpro said:

I believe HL offer a variety of Vanguard's products under it's SIPP, so is it better to setup a SIPP with HL and have all the choice of all products, as well as Vanguard's? I guess there is a middleman's charge at some point?

solidpro said:

I believe HL offer a variety of Vanguard's products under it's SIPP, so is it better to setup a SIPP with HL and have all the choice of all products, as well as Vanguard's? I guess there is a middleman's charge at some point?

There is a 'middleman ' charge with Vanguard 'SIPP' as well . It has a platform charge of 0.15% .
LIfe Strategy funds have a charge of 0.22% so altogether the charge is 0.37%
HL have a platform charge of 0.45% so would work out more expensive . However HL is an expensive platform and others charge less but more than Vanguard . So to get the advantage of access to more choices than just Vanguard funds , you would have to pay a little more. . However you have to take into account that saving 0.1% on charges is small beer compared to how your actual investments will go up and down.
By the way in this business the 'middlemen' have pushed down consumer costs , as accessing funds direct is generally expensive. 

Croeso69

Albermarle said:

solidpro said:

I believe HL offer a variety of Vanguard's products under it's SIPP, so is it better to setup a SIPP with HL and have all the choice of all products, as well as Vanguard's? I guess there is a middleman's charge at some point?

solidpro said:

I believe HL offer a variety of Vanguard's products under it's SIPP, so is it better to setup a SIPP with HL and have all the choice of all products, as well as Vanguard's? I guess there is a middleman's charge at some point?

There is a 'middleman ' charge with Vanguard 'SIPP' as well . It has a platform charge of 0.15% .
LIfe Strategy funds have a charge of 0.22% so altogether the charge is 0.37%
HL have a platform charge of 0.45% so would work out more expensive . However HL is an expensive platform and others charge less but more than Vanguard . So to get the advantage of access to more choices than just Vanguard funds , you would have to pay a little more. . However you have to take into account that saving 0.1% on charges is small beer compared to how your actual investments will go up and down.
By the way in this business the 'middlemen' have pushed down consumer costs , as accessing funds direct is generally expensive. 

HL can be expensive but on some funds they have special deals that reduces their costs, sometimes significantly, e.g. a 0.18% discount on Baillie Gifford Managed, 0.20% discount on Baillie Gifford American, 0.15% on Lindsell Train Global Equity, so can be made cheaper by choice of fund. Even cheaper if you only use shares, ETF or ITs as the annual charge is capped at £200 for a SIPP.