Transferring whole or part of Workplace Pension

Wonky_Dan

Hello,

I'm still in the process of trying to sort my Scottish Widows workplace pension out. I know the asset allocation I would like but due to the fund availability I can't create what I want. My equity is just setup as per global trackers which is good. I don't have access to any passive global bond funds, only UK Gilt funds of varying duration and type. I'm using an all stocks gilt index along with an inflation linked gilt index and have added a corporate bond fund to get the rough weightings of a global aggregate bond fund but I'm not happy with the lack of diversification in the government bonds, especially with the state of the UK at the moment.

Would it make sense for me to transfer the bond portion of my workplace pension out to my SIPP once a year so I can invest in a hedged global bond fund? Although daft, this is causing me to constantly second guess what I'm doing and is giving me the urge to tinker which I dont want. Am I being stupid or would this be sensible?

MX5huggy

Maybe you don’t need to transfer the money? Just have 100% equity in the work place pension (SW) and whatever bond percentage you need in the SIPP to get the balance you want. 

If the SW is £200k and the SIPP £50k and you want 20% bonds then just have the SIPP 100% bonds. 

Marcon

Before you go any further, have you checked that the rules of your scheme allow you to transfer out just part of it, in particular whether your employer would class such an action as 'opting out' of membership? If they do, although you can apply to rejoin, they don't have to re-enrol you for a year if they don't wish to.

Wonky_Dan

MX5huggy said:

Maybe you don’t need to transfer the money? Just have 100% equity in the work place pension (SW) and whatever bond percentage you need in the SIPP to get the balance you want. 

If the SW is £200k and the SIPP £50k and you want 20% bonds then just have the SIPP 100% bonds. 

I have considered this, however I wouldn't  have enough savings left after other commitments to make the 20% each month in my SIPP. Unless I reduce the amount I put into my workplace pension every month to compensate but I'm not really sure of the amount I'd need to reduce by.

Wonky_Dan

Marcon said:

Before you go any further, have you checked that the rules of your scheme allow you to transfer out just part of it, in particular whether your employer would class such an action as 'opting out' of membership? If they do, although you can apply to rejoin, they don't have to re-enrol you for a year if they don't wish to.

I have checked this through and I am allowed to make 2 transfers per year as long as I keep at least £5000 in my pension.

MX5huggy

What is the fee difference between the 2? 

Wonky_Dan

MX5huggy said:

What is the fee difference between the 2? 

I can't remember off the top of my head but I remember the difference not being huge. My SIPP is with Vanguard at the moment so 0.15% plus fund fee. Scottish Widows was in the region of 0.3% plus fund fees. I was also considering transferring everything out up to the £5000 limit and then just reinvesting into the Vanguard SIPP in the funds I want at the right allocation. I'm assuming that this wouldn't undo the benefits of DCA'ing over a year.

MX5huggy

The fee is half! So a big difference. 

No the DCA is still in effect you just have the psychological barrier  to overcome if it goes in the wrong direction. Because your VG account will show the large deposit as going in on 1 day then next day if it’s down 2% it will show £100k is now worth £98k in red where as your SW account (I don’t have one so don’t really know how it presents the figures) would still be green because the deposit was far in the past. 

Wonky_Dan

I know the fee for Vanguard is half that of SW but it is still only 0.15% difference! I just don't know if it is worth it to do a full transfer or just the bond portion. If SW would only offer a global bond fund. It is annoying because there is in fact an overseas bond fund held within some of their ready made portfolios, they just don't offer it separately!

Edit:::: I've just gone upstairs and tracked down all the charges and I was incorrect. If I've worked this out right, the total yearly fee, inclusive of all charges I could find relating to my SW scheme works out at 0.3% ayear whereas Vanguard would work out at 0.36% sois actually more expensive.