Why use a SIPP and workplace pension together?

Thrugelmir

Costs have reduced. Technology and scale of operations primarily driving them downwards. 

Alexland

granta said:

Just curious, in 2022, what is considered (really) cheap, and what is average for employer provided pensions? What is the lowest anyone has?

Our employer moved to a master trust pension which offers a developed world tracker fund at 0.20%, only slightly more than we have been paying to hold VEVE and HMWO in our capped Fidelity SIPPs so we have stopped partially transferring lump sums across.
I don't contribute into my SIPP but my wife is contributing into both by sal sac into the master trust down to just above the personal allowance (above min wage as she is part time) then most of the personal allowance into her Fidelity SIPP such that she is contributing nearly 100% of earnings across her 2 schemes.

masonic

granta said:

Albermarle said:

 Employer provided pensions normally have minimal charges. It varies , some are a lot cheaper than others .

Just curious, in 2022, what is considered (really) cheap, and what is average for employer provided pensions? What is the lowest anyone has?

My older ones were in the 1-1.25% region but later ones more like 0.5% so wondering if costs have come down and also whether larger employers tend to negotiate better deals for their employees?

Mine is 0.63% if in the default fund, or 1% + fund charges for any other fund held. Hence I contribute to the employer pension for matched contributions and salary sacrifice, then periodically transfer to a SIPP. Not a very large employer (<500 employees).

Prism

0.39% in Scottish Widows. SW funds are free but some others add a little on top.

dunstonh

I have a workplace pension already setup but I haven't thought about using a SIPP, why are both recommended so strongly? Isn't it like having multiple ISA providers? but if you're happy with one ISA provider and they have the investments you want then why would you want to use others?

Unless the individual is a regulated financial adviser, then it is not a recommendation.   In this case, it is just a blog post and an opinion.

Workplace pensions can be cheaper than SIPPs or vice versa.  The UK's largest DIY SIPP provider frequently has 2 of its own brand funds in its top-selling funds which makes their solution more expensive than most full advice options (which largely defeats the purpose of going DIY if it is costing you more).     It is all about how you invest and what options you have available.

Frequent movers who are on top of their money often will have an individual pension and a workplace pension. Each time they move employer, they transfer the old workplace one to their individual plan and join the new employer scheme.

If you don't have investment knowledge and understanding and your workplace pension is good value, then there is usually no need for a SIPP.  If your workplace pension is a low quality one and you find its not to your needs, then many will run an individual plan alongside it.

ISAs are different as you don't have an ISA provider being selected by a third party restricted to a limited investment range.     

IvanOpinion

In my case the workplace pension is the only one that our company will contribute to so I contribute only what the company will match.  Platform fees are 0.6%. Choice of a few dozen funds that I can invest in.

My SIPP is where I have consolidated old pensions and make additional personal contributions to.  Platform fees are the equivalent of 0.025%.  Choice of hundreds of funds, ITs, ETFs that I can invest in.

Albermarle

granta said:

Albermarle said:

 Employer provided pensions normally have minimal charges. It varies , some are a lot cheaper than others .

Just curious, in 2022, what is considered (really) cheap, and what is average for employer provided pensions? What is the lowest anyone has?

My older ones were in the 1-1.25% region but later ones more like 0.5% so wondering if costs have come down and also whether larger employers tend to negotiate better deals for their employees?

I have a SIPP with an overall charge of around 0.5% ( includes some managed funds )
An old SERPS related pension also around 0.5% ( includes original employer discount )
Last employer ( very large) 0.35% ( could be even less if I was 100% with the cheapest funds )

sevenhills

I have a SIPP and a local authority pension. I believe that I could have opted for an AVC but they seem complicated. I don't know if my employer would have allowed me to contribute more to my local authority pension, as I am an hourly paid worker.

I have always liked investing in shares, so I transferred from an ISA to a SIPP and share trading is like a hobby, which means I want to save more. It has greatly increased my knowledge of pension tax and shares.

redpete

Albermarle said:

For more experienced investors the better choice of investments in a SIPP is a plus . However for the majority the choice of funds in a workplace pension is enough, and probably less scope for blunders. In any case >90% never move out of the default fund ( or are even aware of what they are invested in )

That's true. I was surprised when chatting with one of the employee trustees of our company scheme how many of the employees take just the default investments, and that for a company with a high proportion of numerate scientists / engineers.

Thrugelmir

redpete said:

Albermarle said:

For more experienced investors the better choice of investments in a SIPP is a plus . However for the majority the choice of funds in a workplace pension is enough, and probably less scope for blunders. In any case >90% never move out of the default fund ( or are even aware of what they are invested in )

That's true. I was surprised when chatting with one of the employee trustees of our company scheme how many of the employees take just the default investments, and that for a company with a high proportion of numerate scientists / engineers.

Default funds are such for a reason. No evidence that a high risk equity strategy works for everyone. Being numerate doesn't make somebody a better investor either. Common sense is a basic skill that requires no IQ.