Moving workplace pension into Vanguard for lower costs - anything I and not thought about?

mark_cycling00

Hi,

I contribute a fair about each month into a salary sacrifice pension "Standard Life Passive Plus IV" with a 0.31% annual charge.
It appears that the pension fund mostly invests in Vanguard funds.

I have a personal pension and ISAs with Vanguard too. If I transferred the Standard Life pension into Vanguard then I would soon hit the £375 maximum charge, and effectively remove the 0.31% fee applied by Standard Life. I know it's not much but an extra £200 saved each year could pay a month of electricity. 

I could try to replicate the Standard Life investments in Vanguard or add into one of their standard pension plan funds (2050 etc)

Is there anything else I haven't considered? 
Many thanks

Albermarle

You should be aware that it is highly unlikely that your employer will be prepared to make contributions to anything other than the SL pension. So the best you could do, would be to make regular partial transfers out to Vanguard, IF the SL plan allows partial transfers.
0.31% is pretty competitive so not sure would be worth the potential hassle . Transfers sometimes get delayed/need chasing up/get lost in the system etc 

Personally I would be more concerned about the Passive Plus 4 . These Passive plus funds are underperformers, partly due to the large UK % , which has dragged down the performance, until recently.  21% growth in the past 5 years for a fund with approx 70% equities, is pretty poor. Basically it has largely missed out on some big growth in the US markets.
However the good news is that the fund has weathered the recent market drops quite well, as the UK stock market has held up better than the US.
There are different views on the best weighting for the UK in portfolios going forward, including many thinking a higher UK % might be a good thing, but probably not quite as high a % as in this fund. 

dunstonh

I contribute a fair about each month into a salary sacrifice pension "Standard Life Passive Plus IV" with a 0.31% annual charge.

It is worth remembering that when comparing bundled pension funds with OEICs/UTs, you need to include TC & IC on the OEIC/UT and not just the OCF to get a like-for-like figure.

Is there anything else I haven't considered? 

Sounds a bit desperate.  How much are you actually going to save for all that hassle?  (assuming your employer and SL will allow partial transfers)
Growth periods outnumber negative periods. You will be out of the market for about a week each time you transfer it.  It could take years, decades or even never to recover that.

mark_cycling00

thanks for both comments.

So the reason to transfer (very occasionally) would be to have the funds in a better pension fund than the passive plus. 

dunstonh

So the reason to transfer (very occasionally) would be to have the funds in a better pension fund than the passive plus. 

Maybe consider a different fund from the passive plus?  i.e. use the actual trackers available and not a multi-asset fund?

Albermarle

mark_cycling00 said:

thanks for both comments.

So the reason to transfer (very occasionally) would be to have the funds in a better pension fund than the passive plus. 

The word 'better' can mean many things when it comes to an pension/investment fund.
For some 'better' means maximum potential growth long term, regardless of inevitable volatility. ( aggressive approach)
For others it would mean minimum drops in the face of a dropping market ( defensive/cautious approach)
Or something inbetween.

Having said that , in my personal opinion only, ( others may differ) I was not impressed by the SL passive portfolios, when I was invested in them. Also they are often used as the default fund, and  SL were rated as having the worst performing default funds of the big providers . To be fair to them their website and customer service seem good.

As Dunstonh suggests a trawl through what else is available with SL makes sense, plus of course you need to check if they would allow partial transfers anyway.
A compromise could be to just do one transfer out, and then review how it all looks again in a year or two.

gm0

+1 for fully explore other fund options available via existing scheme first - limited though it may well prove to be.

The other issues to be aware of with an employer sponsored trustee run pension is that many of these older trusts setup decades ago with life companies often carry two features which while less important than costs and fund selection are still worth being aware of in coming to transfer decisions

1) use of insured funds.  Many old occupational pension schemes use these exclusively. 100% protection. Not 85k (for a SIPP using uninsured). Custody arrangements for fund holdings mean that this matters a lot less than the raw figures might suggest but it is nonetheless a difference between the two and the value of either form of protection in a new failure scenario where everyone involved then sues each other to shed liability is unclear.  One can only predict that lawyers will win and that access to assets would be delayed even if total loss is ultimately averted.

2) lack of drawdown without transfer.  Many older schemes lack drawdown and a product transfer is offered to "support" it.

It is sometimes added so it's absence 20 years ahead of need is not a reason of itself to exit.  It may turn up at a pensions admin contract renewal and the deal that is added may be good or bad value vs retail SIPPs.

Bimbly

If transferring out, you'll want the money to be in cash. Otherwise, it will take some time and you are transferring out to avail yourself of other investments anyway.

So how often do you transfer out? Once a year seems sensible, but in that case you'll have cash sitting there for up to a year not invested. Monthly would be a right faff, assuming the two pension companies didn't complain.

If you want to invest, then having time out of the market in this way makes transfers like this problematic in my view.

Albermarle

If transferring out, you'll want the money to be in cash. Otherwise, it will take some time and you are transferring out to avail yourself of other investments anyway

The funds available in Standard Life are their own insured pension funds, so would not be available on any other platform. Therefore would have to be cash transfer.