Transferring a SIPP into a company scheme 9 March at 4:45PM in Pensions, annuities & retirement planning 19 replies 336 views

cmonwigan

I have just started a new permanent position after several years freelancing. I have a managed SIPP with a  valuation of £200k.
The company pension allows for a new member to select either a managed lifestyle investment - managed funds -  or to select individual funds and self-manage.
My current SIPP management charges are 1%.
I am allowed to transfer my SIPP into my new employer's defined contribution scheme.   
Would it be wise to transfer my SIPP into the scheme?  I was thinking it's a no-brainer as I will be starting off with a larger amount for compunding purposes.
I am not a proactive investor and would be looking at a managed lifestyle investment with a 70/30 equities to bonds split.  I am 55 years old and will be retiring at 67.
Any sage advice would be gratefully received.

Scrudgy

Assuming that the funds are the same/similar across the SIPP and your employer scheme choices , then it’s all about the fees. If your employer has very low fees or zero fees like I enjoy, then yes transfer the SIPP into your employer money purchase scheme. If the fees are the same, it doesn’t matter much what you do.

Albermarle

Would it be wise to transfer my SIPP into the scheme?  I was thinking it's a no-brainer as I will be starting off with a larger amount for compunding purposes.

It will still compound the same wherever it is, even if it is in two separate pensions.

There is no harm in having two pensions, it is one way to compare how they work in terms of website ease of use, customer service, charges etc. Then again there is no harm really in having just one. Its can be a bit 50:50 really.

Linton

Whether your investments are held together or spread over multiple platforms makes no difference to compounding.

There are probably no strong arguments to merge and some possible reasons not to.   It will be very dependent on the features of the schemes.  In any case if you want to go into drawdown you may have to transfer out of your employer scheme anyway. 

Possible reasons not to merge your SIPP with your company scheme:
1) Flexibility.  You may want to drawdown the tax free lump sum from your SIPP whilst continuing to pay into your Company pension.  This may not be possible if they were merged.  Or you may want to do different things with the pots when you retire.
2) Range of investments: Sometimes employer DC schemes only have a limited range of funds.

On the other hand it may be more convenient or cheaper to merge.

cmonwigan

As a follow up, assuming I stayed with two pensions, would it be an idea to pay into my SIPP from my salary, or better to invest in a stocks and shares ISA?

Linton

cmonwigan said:

As a follow up, assuming I stayed with two pensions, would it be an idea to pay into my SIPP from my salary, or better to invest in a stocks and shares ISA?

It depends on your circumstances.  Generally a pension is a better deal than an ISA for tax reasons.  However there are circumstances where an S&S ISA could be better.  For example:
1) Your pension size was approaching the Lifetime Allowance, currently £1,073,100
2) You are stopping work before you can access your pension (57 from 2028)  so need some money in the meantime.

Albermarle

cmonwigan said:

As a follow up, assuming I stayed with two pensions, would it be an idea to pay into my SIPP from my salary, or better to invest in a stocks and shares ISA?

If you are a basic rate taxpayer now, and will probably be a basic rate taxpayer when you take money from the pension, there is a 6.25% tax advantage with a pension.
If you are a 40% taxpayer now and a 20% taxpayer later, then the benefit is significantly multiplied.
If you are a 40% or 20% taxpayer now and you are able to withdraw some of the taxable income from the pension, inside your personal allowance ( and therefore pay no tax ) the benefit is also greater. This could be in any years between retiring and taking your state pension ( which is taxable income).

gm0

If you are employed then your matching contributions from employer will likely be going into their scheme not your existing SIPP.  In most cases.  It would be mad to drop your employer scheme employee contribution below the level required for you to obtain matching employer contributions depending upon scheme rules.  Above that level if it exists - you can put it where you like subject to the Annual Allowance cap and from Pensionable Income rules.  And ease of doing taxes.

Employers sometimes offer salary sacrifice terms - which may or may not appeal

Employer sponsored schemes sometimes support partial transfers out (without leaving) and sometimes do not. 
Some people sweep their employment pension to their SIPP from time to time to gather their investments in the funds they want not the limited occupational scheme range. This is a minority sport.  Not all schemes will do it.  And there is no legal right to insist on partial transfer being available.  Only full exit must exist (which typically stops contributions which makes it silly if still employed).

On costs and considering transfer in - it is possible to compare once you have the real (as discounted) fund charges and any platform or scheme fees to do an actual comparison with SIPP equivalent.  Pension fund fact sheets on the web are something of a misleading mess unfortunately.  And a "retail" version of a fact sheet can often be a different share class and charge than an occupational scheme special - with the scheme special not being on trustnet / morningstar for the unit share classes actually used.  You need to drill into scheme paperwork not public fora about "similar" things.  With trackers and some unit prices it is also possible to check that unit prices follow the total return index bar the expected fund management fee.

Finally and least important.  Many (not all) occupational schemes used the insured versions of funds. Which offer the 100% FSCS protection version of the legislation rather than the 85k SIPP one.  Given custody arrangements this is more of a legal quirk than a major difference.  Neither protection is really tested legally in a major failure or scandal.

cmonwigan

Albermarle said:

If you are a basic rate taxpayer now, and will probably be a basic rate taxpayer when you take money from the pension, there is a 6.25% tax advantage with a pension.

I am a 40% taxpayer, I may make it to the £40k p.a. pension depending on good performance. I currently use salary sacrifice to pay into the company pension.  Nothing going into the SIPP currently. I have approximately £300 left each month to further invest into either the company pension/SIPP or the ISA. The ISA currently has £12k.   Would you go for the pension rather than ISA, and would that investment be in the company pension or  the SIPP? 

LHW99

Is the ISA your only funds outside the pensions? If so, increasing the amount of emergency cash may be sensible.

cmonwigan

LHW99 said:

Is the ISA your only funds outside the pensions? If so, increasing the amount of emergency cash may be sensible.

Apologies for the delay replying.  I have an emergency cash fund of @£25k