Any reason not to transfer DC pension from L&G to ii?

Shimrod

My wife and I both have both have L&G pensions from previous employment - current values around £325K and £265K. All investments are in L&G index funds and management charges for each pension are in the £500-£550 range each year.

We don't intend to  touch these pensions for at least 3 and probably 4  years - we expect to have that spending covered in our current pension funds sometime in the next year. I understand I can do an in specie transfer and don't intend to immediately change the funds, although I will look to derisk a little in the future as the current funds are around 90% equities.

I have to move from L&G anyway as the scheme we are in lacks flexibility on drawdown, and moving to ii would save a combined £700+ per year in fees as well as flexi drawdown and UFPLS. And there's a transfer offer the moment that would get us another £1500.

I am assuming that the fund selection tool on ii is better than the one provided here https://www.ii.co.uk/funds and I would be able to filter on fund manager, asset classes etc. - it would be great if someone could confirm that.

Is there any reason why starting a transfer to ii would not be a good move? 
Thanks.

dunstonh

 I understand I can do an in specie transfer and don't intend to immediately change the funds, although I will look to derisk a little in the future as the current funds are around 90% equities.

What makes you think you can do inspecie transfers?
L&G insured funds are not available on the II platform.   So, you cannot do an inspecie transfer.

I have to move from L&G anyway as the scheme we are in lacks flexibility on drawdown, and moving to ii would save a combined £700+ per year in fees as well as flexi drawdown and UFPLS. And there's a transfer offer the moment that would get us another £1500.

Are you sure you are going to save money?  Your figures suggest it is unlikely.  £500p.a. is 0.18% of the smaller value.   As an all in charge, that is very low (but not uncommon with low cost L&G workplace schemes).   It is unlikely ii could match that low.

Is there any reason why starting a transfer to ii would not be a good move? 

• Potentially misunderstanding the charges
• Moving from 100% FSCS protection to £85,000  (people will have different views on the importance)
• not able to transfer insured funds means you will need to buy new funds which could be higher in price

Not supporting drawdown is a valid reason if you are exercising drawdown in the next 12 months.  its not really a justification if you are not though.

Pat38493

I transferred an legay Aviva pension to II recently and I also got 6 months of no charges.  I also calculated that my ongoing charges would be less as II charges a flat fee, so for larger pots it seemed like they would be cheaper.

However as DunstonH said you also have to keep in mind the fund charges for the funds you select - if you have a really good deal with the current fund you would need to check, especially since if these are L&G specific or insured funds you can't transfer them InSpecie.

Mine was a cash transfer as the Aviva fund I was in was also not available elsewhere - charges were low with Aviva but seemed even lower with II  I just did some research and invested into low cost trackers in II.

I'm not sure about the £85K protection comments.  I've seen quite a few threads saying that there is some legal ambiguity there and most people seem to think it's ok.  

Shimrod

dunstonh said:

 I understand I can do an in specie transfer and don't intend to immediately change the funds, although I will look to derisk a little in the future as the current funds are around 90% equities.

What makes you think you can do inspecie transfers?
L&G insured funds are not available on the II platform.   So, you cannot do an inspecie transfer.

My understanding was from reading other experiences - however I could not find my funds (on the link posted) - if they are not available on the ii platform that would explain why and I may need a rethink.

dunstonh said:

I have to move from L&G anyway as the scheme we are in lacks flexibility on drawdown, and moving to ii would save a combined £700+ per year in fees as well as flexi drawdown and UFPLS. And there's a transfer offer the moment that would get us another £1500.

Are you sure you are going to save money?  Your figures suggest it is unlikely.  £500p.a. is 0.18% of the smaller value.   As an all in charge, that is very low (but not uncommon with low cost L&G workplace schemes).   It is unlikely ii could match that low.

There is an element of rounding on both costs and fees - the charges are 0.2%. II offers a flat rate of £144 per year and no charge at the point I would move to drawdown. That's a definite saving in fees but that could be wiped out if I first have to move into cash and then repurchase funds

.dunstonh said:

Is there any reason why starting a transfer to ii would not be a good move? 

• Potentially misunderstanding the charges
• Moving from 100% FSCS protection to £85,000  (people will have different views on the importance)
• not able to transfer insured funds means you will need to buy new funds which could be higher in price

Not supporting drawdown is a valid reason if you are exercising drawdown in the next 12 months.  its not really a justification if you are not though.

I don't think I have misunderstood the fees as ii is a simple flat rate and I have the transaction history for the current pension. I was not aware that ii did not offer 100% FSCS protection - thank you for pointing that out.

I need to do more research - ii may be suitable for the current pensions which we will drawdown first but I am going to reconsider what I do with the L&G pension - I do need to find a platform with more flexible options for draw down than L&G are offering.

gm0

There are two possible sources of "inflexibility" with an L&G occupational

- Asset allocation

You need to think about overall asset allocation across all the providers that you intend to use for investible assets

If you intend to have more than one at the end of setting up. 

While it is unlikely that an occupational will offer a wide range of choices - it is frankly unlikely that you can't build part of your overall asset allocation in it.   Particularly if part of that asset allocation involves the use of index trackers. 

If it is low cost, the fund is market price and it tracks a major index. Then it is "the same" (to a close approximation) to a different branded fund on another platform that tracks the same index. Example:  L&G World ex UK + UK is FTSE "world developed equities". 

Cost difference across total of fund managment charge and platform charge.  And the insurance status.  Both of which may favour the existing depending upon your scheme.  But the cost difference will not be huge.

Occupational active fund choices can be quite limited.  My experience was some L&G funds and guest funds from Threadneedle and similar.  Certainly not a lot of range across each asset class.  A few choices only.

I use the drawdown feature of an L&G occupational. Via transfer from an old scheme to their Worksave Master Trust product.  It has not been problematic.  And I extend my asset allocation on my ISA platforms and other pension in a retail SIPP.   I would not wish to use it exclusively for the lot but I am happy with it as one of the platforms I use.

I tolerate the added complexity of >1.  To be insulated from platform failure, fund manager failure, IT interrruption, my own understanding of the nuances of fund wrappers and legalese.  My pot is split across more than one section.  

Hedging" for reduced risk impact is part of my investment statement.  Many others here in the DIY crowd would find the added complexity unwanted and would also consider some of the risks remote enough to ignore and just carry without making the same choice.  Neither approach is "wrong".

- Income taking options. 

It is possible to get over excited about this.  Clearly you can micro slice a pension with UFPLS - which some providers support well and some don't.  But in the end - a tax year is a tax year. And you can setup income with FAD slices or UFPLS and achieve similar cashflow results. 

If taking no TFC up front and using regular and automated UFPLS is your preference to allow growth to increase total TFC - then you will need to validate if they will do this painlessly. 

Crystallisation record keeping varies across providers but is typically a bit more than just income changes from crystallised funds.  L&G were not as slick as my SIPP provider but it was OK

You will not find all of the insured pension specials on trustnet and morningstar with correct charges and unit types.  They are not present.  They are not on retail sale outside the occupational schemes that they are used in.

- Inspecie likely won't happen.  Fund and unit types with matching insurance status and cost - don't exist on destination - although Funds with similar index tracking content will of course.

L&G digital support is a bit archaic (schemes may vary in this)

dunstonh

I don't think I have misunderstood the fees as ii is a simple flat rate and I have the transaction history for the current pension. I was not aware that ii did not offer 100% FSCS protection - thank you for pointing that out.

You have mentioned the ii charges but remember the fund charges are on top of that.    What are the fund charges of the funds you will use at ii?

LHW99

Also, I don't think II offer regular monthly UFPLS (could be wrong), because they want forms completing each time.

Regular FAD can be set up from an initial form, I think.

Pat38493

LHW99 said:

Also, I don't think II offer regular monthly UFPLS (could be wrong), because they want forms completing each time.

Regular FAD can be set up from an initial form, I think.

Yes this is correct form the research I did - each time you want to make a UFPLS withdrawal you have to fill in some forms online - takes about 15 minutes apparently.

Shimrod

@dunstonh @Pat38493 @gm0 Thank you for the replies. It's clear I need to rethink this a bit. I've started from a faulty assumption of being able to do an in specie transfer from L&G to ii and that isn't the case. Ignoring the fact that I would need to choose new funds time out of the market could easily cost more than the saving in fees over several years.

I still need to consider where these funds will go to provide a flexible draw down - L&G only allow one request for TFC and the whole pension is put into draw down - the UFPLS option must be set up over the phone and takes about 8 weeks to complete. I don't need to rush into this as the pension I am currently contributing to first (with Scottish Widows) does offer flexibility although I don't like the lack of information in the online dashboard (I cannot see any transactions and it does not show number of units for an investment - only as a percentage value of the overall pension).

as dunstonh said in the first reply, this is not something I need to get done immediately. I may just see if L&G become any more flexible over the next couple of years before reviewing again.

Albermarle

I've started from a faulty assumption of being able to do an in specie transfer from L&G to ii and that isn't the case. 

One possible point of confusion, is that it is entirely possible to buy L&G investment funds on the II platform, and many other platforms to hold in a SIPP.

The issue is that the L&G workplace pensions you have are not the same legal structure as a SIPP, although they are both DC pensions. The funds are Insured funds and although they may look very similar to L&G funds you can buy on an investment platform, they can not be transferred ( unless they are cashed in first of course) .

Pat38493

Shimrod said:

@dunstonh @Pat38493 @gm0 Thank you for the replies. It's clear I need to rethink this a bit. I've started from a faulty assumption of being able to do an in specie transfer from L&G to ii and that isn't the case. Ignoring the fact that I would need to choose new funds time out of the market could easily cost more than the saving in fees over several years.

I still need to consider where these funds will go to provide a flexible draw down - L&G only allow one request for TFC and the whole pension is put into draw down - the UFPLS option must be set up over the phone and takes about 8 weeks to complete. I don't need to rush into this as the pension I am currently contributing to first (with Scottish Widows) does offer flexibility although I don't like the lack of information in the online dashboard (I cannot see any transactions and it does not show number of units for an investment - only as a percentage value of the overall pension).

as dunstonh said in the first reply, this is not something I need to get done immediately. I may just see if L&G become any more flexible over the next couple of years before reviewing again.

No guarantees but I wouldn't personally worry too much about the time out of market part - a week or two out of the market over a long term investment is neither here nor there and you might just as likely gain as lose with short term volatility.  Especially at the moment with interest rates on the up and equity returns (at least so far this year) pretty flat.  When I transferred into II I think I received quite a large cash interest payment a few weeks later as my funds had been sitting in cash for some days.