Transferring pension pots to SIPP

WackieO

I was looking into this a few months ago but unable to find my previous discussion. 

I've had a proposal from my Financial Advisor to consolidate 3 of my DC pensions into a SIPP with Novia.  

The total is over £100K - should I be concerned about transferring over £85,000 into the SIPP ?

Thanks in advance. 

molerat

https://forums.moneysavingexpert.com/discussion/6371744/combining-pensions-into-a-low-to-moderate-risk-pension#latest

Albermarle

The total is over £100K - should I be concerned about transferring over £85,000 into the SIPP ?

No, it is not the same as the £85k compensation limit for cash accounts. Banks are much more vulnerable to going bust than mainstream investments and platforms.

Many people have hundreds of thousands/Millions on one platform.

WackieO

molerat said:

https://forums.moneysavingexpert.com/discussion/6371744/combining-pensions-into-a-low-to-moderate-risk-pension#latest

Thanks for pointing me in the right direction of my previous post

molerat

WackieO said:

molerat said:

https://forums.moneysavingexpert.com/discussion/6371744/combining-pensions-into-a-low-to-moderate-risk-pension#latest

Thanks for pointing me in the right direction of my previous post

If you click on your name it will go to your profile and previous activity page.

gm0

Pension protection is a more complex topic than cash deposit protection limits.

- Pension Protection Fund (for DB schemes failing)

- 85k SIPP platform failure protection but actual investment custody arrangement mean this matters less than it seems)

- Reduced or zero limits for fund protection arrangements on ETFs (Ireland, Luxembourg, Other)
- Fully offshore stuff (unprotected)
- 100% protection for occupational DC trusts (some types)

A lot of these legal and trust arrangements are in practice law or regulation as deterrent and untested by major failure and subesquent payout.  Political resolution on such matters is longwinded (lawyers malign influence again). Equitable Life as multi-decade example.

Most people don't worry about SIPP protection.  A minority use or retain more than one platform (at extra cost) as a hedge

dunstonh

as mentioned, pensions do not use the deposit protection scheme for investments. 

Some pensions do not fall under the  investment protection scheme either.  They can fall under the insurance protection scheme.  Those ones get 100% FSCS protection with no upper limit.

So, if you are really paranoid, you could use an insured pension instead (stakeholder pensions, most personal pensions and some SIPPs that have access to insured funds).   However, most people do not worry about it as its a tiny risk as long as you are sticking to the mainstream.

[Deleted User]

The only time this “insurance” might play out would be if the SIPP provider were to go bankrupt and administration consultant’s costs were to be distributed among the clients of your provider.  

The best way to protect yourself is to pick a broker with lots of clients.  Such a broker a) would be less likely to go bankrupt b) will likely have enough own assets to cover administration costs c) in the extremely unlikely event that an attempt would be made to charge SIPP owners, there would be a massive public outcry, court cases and the costs would be distributed among a very large cost base. 

Make sure you understand that this insurance gives zero protection against investment losses so the value of your investment isn’t really relevant. 

Steve_666_

Can someone make this simpler, I have a SIPP (<85K) and employer personal pension, my intention was to transfer all of that PP to the SIPP(III/Aberdeen) when I retire to reduce charges. This will be significantly over the 85K limit, my understanding is that my money/investment would be ring fenced from the providers finances. Will accept that short term access might be difficult, but thought the SIPP could/would be transferred to another provider.
Not sure what to make of this stmt

"- 85k SIPP platform failure protection but actual investment custody arrangement mean this matters less than it seems)"

If I had a car in a garage being serviced and the garage goes bust, the car is still mine, not the property of the administrators or creditors.

dunstonh

This will be significantly over the 85K limit, my understanding is that my money/investment would be ring fenced from the providers finances. 

The pension provider doesn't have your money.  It is held in the investment funds.  The investment funds are ringfenced and do not belong to the pension provider.

Will accept that short term access might be difficult, but thought the SIPP could/would be transferred to another provider.

If you use a  non-mainstream platform that has a high proportion of illiquid assets, then its unlikely that a buyer would be found and the platform would be wound down and people told to move elsewhere.  (this has been seen with a couple of platform failures)
If you use a mainstream platform with a low proportion of illiquid assets then it is an asset of value for an administrator to sell and obtain money to repay the creditors.   So, it would be bought by another party and would likely continue without disruption.  Indeed, it would likely happen long before administration is even considered.

If I had a car in a garage being serviced and the garage goes bust, the car is still mine, not the property of the administrators or creditors.

The difference is that legally, the funds in the pension are held by the platform and then the platform allocates to them to you themselves.   Hence, why ringfencing exists.  (simplified terminology)