Move stakeholder to SIPP?

Annie1612

Hello

I am wondering if someone could answer a few questions for me about SIPPs? I have a (very) small stakeholder pension (about 12k) which I intend to keep on adding to by putting in the maximum I can each year (not currently working so this is limited). I am in my fifties and hope to build this to about £40k. 

I have been thinking about transferring this to a SIPP. Specifically the Vanguard Target Retirement 2035, which wasn’t available when I originally started the pension. I have a Vanguard S&S ISA so this appeals to me. I am trying to work out if there is any advantage to me in doing this (or disadvantage). From what I can gather, a SIPP is easier to put in/take out funds and will grow a bit quicker? Not sure how the fees compare. I am currently paying 0.55%. Vanguard says it charges 0.15% but I was listening to the radio where it stated that pension fees aren’t always transparent. Would I still have the option to buy an annuity with the SIPP?

Would it be worth my while transferring or should I just leave well alone?

Thanks for any one who can clarify things a bit for me.

MaxiRobriguez

The main two reasons for transferring out of a stakeholder and into a SIPP are to access a broader range of investment options and/or to reduce fees. There are two things to consider with fees: the platform itself (like Vanguard) and then the funds you're invested in. You need to combine both to get the overall picture... however, on £12k it's not going to be a massive amount you can scrimp by cost saving.

NB: A SIPP won't grow any faster than a stakeholder pension, they're just vehicles - it's what you're invested in that actually counts. Would the Vanguard 2035 fund grow faster than whatever it is you're invested in now? Even if we knew what that was, no one could say with any certainty that it would or wouldn't.

Annie1612

Thank you. I am invested in Aviva Mixed Funds. When I opened the pension there was a choice of funds but I had no idea if any were better than the others so I just went for the mixed bag option. Though I can change what I am invested in on the Aviva website I think. 

dunstonh

Stakeholder pensions have due diligence carried out on the funds and that makes them very simple and reliable.  Its one of the reasons they get 100% FSCS protection with no upper limit.  They won't be the best. They won't be the worst.

but I was listening to the radio where it stated that pension fees aren’t always transparent.

Charges are pretty transparent.  However, older plans (not stakeholder pensions) can have a wide menu of charges that can be tricky to work out the annualised cost. A lot of SIPP providers have pages of charges.  

Vanguard says it charges 0.15% 

That is just the platform charge.   On top of that you will have the OCF, TC (transaction charges) and IC (incidental/other charges).  I think all of Vanguard's funds have nil as the IC.  However, they all have some TC.   So, you need to add up all those things and then compare it to the stakeholder pension which is a mono charge plan (a single annual charge).

jamesd

Annie1612 said:

 Would I still have the option to buy an annuity with the SIPP?

Yes, but at present doing that is likely to be a very bad mistake, roughly equivalent to throwing away half of the money.

The leading competitor for annuities for guaranteed income is deferring claiming the state pension. That increases it by 5.8% per year deferred and this increase is inflation linked. That's close to twice what an annuity with no inflation increases pays.

It's entirely possible that annuities will be better value by the time you become interested in guaranteed income.

Albermarle

Annie1612 said:

Hello

I am wondering if someone could answer a few questions for me about SIPPs? I have a (very) small stakeholder pension (about 12k) which I intend to keep on adding to by putting in the maximum I can each year (not currently working so this is limited). I am in my fifties and hope to build this to about £40k. 

I have been thinking about transferring this to a SIPP. Specifically the Vanguard Target Retirement 2035, which wasn’t available when I originally started the pension. I have a Vanguard S&S ISA so this appeals to me. I am trying to work out if there is any advantage to me in doing this (or disadvantage). From what I can gather, a SIPP is easier to put in/take out funds and will grow a bit quicker? Not sure how the fees compare. I am currently paying 0.55%. Vanguard says it charges 0.15% but I was listening to the radio where it stated that pension fees aren’t always transparent. Would I still have the option to buy an annuity with the SIPP?

Would it be worth my while transferring or should I just leave well alone?

Thanks for any one who can clarify things a bit for me.

By moving you would save about £12 pa , so hardly worth it for that reason.

Annie1612

Thank you for the responses. 

I will leave the pension as it is and not meddle with things I don’t know enough about. It’s good that I could ask the question here and get helpful replies.