Pension consolidation / transfer

noclaf

I am debating whether to consolidate two DC pensions but not sure, I will set out the details of both and my thought process, would be helpful to have others views and suggestions.

Old/former employer DC pension scheme:
- value circa £35k
-  Baillie Gifford Global Growth Equities with fees @ 0.64%. This actively managed fund has around 30% invested into EM including a number of Chinese firms.
I switched to the BG fund earlier this year, the performance has been a significant improvement over the previous 'diversified growth' fund...this can be seen below in the increase in investment value from Jul-20 to Nov-21, this is all growth as there were no additional contributions:
Jul-18 - £25,479.58
Jul-19 - £26, 793.43
Jul-20 - £25,733.19
Nov-21 - £34, 941.76
 
Current employer DC pension Scheme - - value circa £86k, 95% invested into two passive Vanguard global funds with fees @ 0.177% and 5% invested into a Active UK Equities fund (BG) with fees @ 0.5%
I am reasonably content with the current scheme funds and given the low cost of the Vanguard funds, happy to leave as it is...the BG fund is a bit pricey but is a relatively small part of the overall portfolio.
Both old and current schemes indicate I can take the pensions at 65 (I am 40).

I am stuck in terms of what to do with the older pension. It's a fairly high cost active fund and whilst the last 5 years performance has been v good, not sure if the next few years will be worth the additional cost? That aside it has a relatively high exposure to EM and the political situation in China is a slight concern and how this could impact the parts of the fund exposed to Chinese firms. The other funds available in the old pension scheme are not great, a few passive options but they aren't v competitive on pricing or great performers. The other active funds are more expensive (+0.8%) and there is no benefit based on the past/current returns for those funds.

I could simply transfer the proceeds from the old pension to my current scheme as the Vanguard funds are cheap or I could open a SIPP but is it really worthwhile from a fees perspective opening a SIPP for the £35k or would merging it with the current scheme be more cost efficient?
I may change roles/employer in Jan/Feb next year so if considering a transfer I may need to start the ball rolling as once I leave the firm, they will not accept transfers in.
Keen to hear other thoughts and considerations here, have you been through a similar process and am I missing any other key aspects to consider?

Thanks

Thrugelmir

The only values that matter are the price you buy at and the price you sell at.  Assets can fall in value as well as grow over any given timeframe. Until it's cash in the bank.  Growth can be an illusion not a financial reality. 

noclaf

Thrugelmir said:

The only values that matter are the price you buy at and the price you sell at.  Assets can fall in value as well as grow over any given timeframe. Until it's cash in the bank.  Growth can be an illusion not a financial reality. 

I am hoping that in about 25 years the overall growth is positive relative to the unit purchase prices....assuming I make it that far

Marcon

noclaf said:

I could simply transfer the proceeds from the old pension to my current scheme as the Vanguard funds are cheap or I could open a SIPP but is it really worthwhile from a fees perspective opening a SIPP for the £35k or would merging it with the current scheme be more cost efficient?

The only way to know is to have a look online at various SIPP providers which offer the same (or very similar) funds and compare the charges - a suggestion made when you asked a similar question in July: https://forums.moneysavingexpert.com/discussion/6285019/old-pension/p1

Sadly, doing the legwork (or paying someone else to do it) is the only way to find out!

noclaf

Marcon said:

noclaf said:

I could simply transfer the proceeds from the old pension to my current scheme as the Vanguard funds are cheap or I could open a SIPP but is it really worthwhile from a fees perspective opening a SIPP for the £35k or would merging it with the current scheme be more cost efficient?

The only way to know is to have a look online at various SIPP providers which offer the same (or very similar) funds and compare the charges - a suggestion made when you asked a similar question in July: https://forums.moneysavingexpert.com/discussion/6285019/old-pension/p1

Sadly, doing the legwork (or paying someone else to do it) is the only way to find out!

Noted, will take a look at the available options and fees. The Vanguard funds in my current pension scheme were added earlier this year and given the rebate on fees, it appears to be quite competitive pricing though a SIPP might open up my access even further, to cheap options with other providers such as HSBC, L&G etc 

NannaH

There are plenty of Sipp comparison charts online. 

noclaf

Just as an update, I looked at the online comparisons for SIPP's, Vanguard would be the cheapest I believe e.g: I could use VEVE @ 0.12 + the 0.15 platform fee. This would be quite competitive for the next few years to simply grow the investment and then review in a few years once it is hopefully bigger. 

The other option I am considering is AJ Bell, I have a LISA with them, the platform is good enough and whilst the platform fee is higher than Vanguard, there is a much larger pool of fund/etf options and ETF fees are capped I believe.

Before I pull the trigger, am checking with the plan provider whether they have any protection in the scheme against the government's minimum age change for pensions (55 to 57 in 2028). This isn't a deal breaker for me (currently 40) but thought it worth checking. It appears they do not support drawdown either so eventually I will need to transfer out of the plan anyway.

Alexland

At your combined valuation if you are wanting to invest in developed world passive equity ETFs such as VEVE, HMWO, etc then Fidelity are attractive at £45 pa plus £1.50 for the quarterly divi reinvestments. AJ Bell would charge you £120 pa plus trades. Fidelity are currently offering transfer cashback.

https://www.fidelity.co.uk/pension-transfer/?intcmp=hero1_sipp_cashback-offer_nov_2021#cashback-offer

noclaf

Thanks Alexland, is that based on the smaller £35k pension only or combined pensions value of around £120k (£86k + £35k)?
My employer has a scheme with Fidelity* so I also receive a  0.5% discount on the SIPP platform fee (0.3% rather than 0.35%)

*Just to clarify, my employer uses Standard Life as the main pension platform but Fidelity is a trusted/approved provider so I am permitted to use them for SIPP's and S&SISA's etc

Alexland

noclaf said:

Thanks Alexland, is that based on the smaller £35k pension only or combined pensions value of around £120k (£86k + £35k)?

My employer has a scheme with Fidelity* so I also receive a  0.5% discount on the SIPP platform fee (0.3% rather than 0.35%)

Example platform charges for holding £35k of VEVE:

• Vanguard Investor (0.15%) would be £52.50 pa

• Fidelity (0.35% discounted to 0.30%) would be £105 pa however it would cap at £45 unless you also get a discount on the cap plus 4x £1.50 divi reinvestment charges. You would also get £50 cashback but spend £10 on the first trade.

• AJ Bell (0.25%) would be £87.50 pa plus 4x £1.50 divi reinvestment charges and £9.95 on the first trade.

But on the combined valuation with the £86k pension then Fidelity is clearly the winner as the platform charges do not go up.

Vanguard Investor would go up with the valuation (as their cap is really high at £375 pa) and AJ Bell would increase until it caps at £120 pa.

As such although there is not much difference between Vanguard Investor and Fidelity on the £35k the Fidelity is more future proof for further growth and transfers that might happen.

noclaf

Thanks Alexland, really helpful as always.

The 'Future proof' aspect leans me towards Fidelity, I can simply add more pensions as and when I need to e.g if I leave my current employer.
It's likely that if I do go ahead would transfer the initial £35k and invest the whole lot (aside from a small balance to cover fees) using a single transaction into a cheap global or Dev world ETF, most likely VEVE unless there is an Acc version or similarly priced accumulating global ETF available.