Pension - charges to transfer into SIPP

MIZZ12

Hi, I am 53 and still employed - I have a DCS pension plan with my employer (one of the large banks), currently valued at c£480k.  I have been talking with a Personal Wealth advisor at the Bank who as well as looking after external clients also helps staff members.  So one of the things pointed out to me was that I was over-exposed on global equities - my pension fund is invested 80% in global equities: 20% in property.  His suggestion was that I transfer my pension pot from the Bank and into a SIPP, so that "we" can diversify the investments.  Although he said that his advice would be 'free', even his on-going advice, he mentioned that in order to transfer my pension into a SIPP, there would be an implementation fee which would cover: another team reviewing the pension, transferring the pension, setting up the funds and being able to receive ongoing advice from said Personal Wealth advisor (so not free then!!).  He mentioned that I wouldn't pay this fee directly, but that it would come out of my pension fund.  So the charge is 2.75% on the value of the transfer, capped at £10k.  As I understand it, there would also be an ongoing AMC of 0.63% vs. the fact that if my funds stay in the Bank pension fund, then the Bank covers pretty much all fees and charges.

The other point to mention is that his suggestion was that I still keep my DCS Bank pension open, ie. once the £480k pot is transferred into a SIPP, to then build it up again starting from zero, in order to benefit from the generous employer contributions..

I wanted to get your views as to whether this sounds reasonable to go ahead with the Personal Wealth Advisor's proposal please - is it me, or does this implementation fee sound pretty steep?  I have not heard of this sort of idea before, so was wondering if this is the best way forward or if there is anything else I need to consider?  Thank you!

DavidT67

So you seriously want to be charged tens of thousands of pounds for something you can do yourself for free !?

Why are you considering moving from your workplace scheme anyway ?

Wouldn't call 80% overexposed to equities. However I would call 20% property overexposed.

Most Wealth managers are only enriching themselves, not their customers, particularly the likes of St James Place and True Potential.  Best avoided.

dunstonh

.  Although he said that his advice would be 'free', even his on-going advice, he mentioned that in order to transfer my pension into a SIPP, there would be an implementation fee which would cover: another team reviewing the pension, transferring the pension, setting up the funds and being able to receive ongoing advice from said Personal Wealth advisor (so not free then!!). 

That is a really bizarre definition of free!

 So the charge is 2.75% on the value of the transfer, capped at £10k. 

That is high.  Many IFAs have a decency cap at around £2500-£5000.   Although some are as greedy as your bank sales rep.

my pension fund is invested 80% in global equities: 20% in property. 

80% equities puts you at the medium-high range.  So, not that high at all.    20% property is high.   Property is typically 0-5% ballpark.

xylophone

Mm....cui bono this transfer out? Yours or the adviser's?

If i were in your position, I'd be inclined to stick with status quo except for the property element which could be split - what other funds are available with the current provider?

Albermarle

Interesting that the Personal Wealth advisor of the bank, is recommending moving out of the banks own pension scheme !

As above I would probably stick with the bank scheme, but look within that pension what range of investments are available.
At age 53, some people would say 80% equities is a bit on the high side. It depends to some extent on when you may want to start withdrawing from the pension, and by what method. Also your own risk tolerance, as an 80% equities fund could drop quite alarmingly in a market crash. 

MEM62

MIZZ12 said:

So one of the things pointed out to me was that I was over-exposed on global equities - my pension fund is invested 80% in global equities: 20% in property.  

Not good advice in my opinion.  I am planning on retiring next year and have allocated my first five years income in cash, the remainder is almost 100% in equities. 

The thinking is that with interest rates where they are at the moment I can get a reasonable fixed return on the cash that makes my first five years income risk free.  Three years into retirement I have a DB pension of circa £4k a year starting and at the end of the five years, I will have the state pension and five years of investment growth on the remaining pot.        

dunstonh

Interesting that the Personal Wealth advisor of the bank, is recommending moving out of the banks own pension scheme !

I am wondering if there is an introducer payment shared out of the initial fee.  That is quite common on referrals to IFAs from FAs.  Usually, the employer doesn't know about it.

MIZZ12

Good evening and thanks for all your comments, I really appreciate it.
To follow up on some of the points mentioned, yes I was thinking my best option would be to stay in the Bank pension and just diversify within there a bit more - I did make this point during my conversation with the advisor, but he seemed to think I couldn't diversify if I stay in the Bank's scheme as it would be all equities.  Not sure this is correct as I know that 10 years before Target retirement age they start moving funds into more cash based investments, bonds and the like. 
In order to diversify my investments I would have to move my pension into a different investment strategy however, as currently I am in a strategy which they no longer offer to staff and am unable to move the 80:20 split I currently hold; also my current strategy only offers to take an inflation linked tracker (passive) rather than the option of flexible drawdown- but I could move into what they call a freechoice strategy whereby I can select my own investments from 18 funds, or there is a Targeted Investment strategy which I think is more automated, and then with these I think I would then have the choice of annuity or flexi access drawdown (although with the flexi access drawdown I would need to transfer my pension out to a SIPP or something).
Regarding the 20% over-exposed on property, yes thanks for the heads up on that, I think I was still in my 30's when I made that decision!  Does anyone have any tips as to a more balanced portfolio in terms of percentage splits, for someone my age, 53, with a medium attitude to risk (with regards to my pension pot!!)  Thank you.

penners324

Putting pension funds into bonds seems a particularly bad option at present. The bond market is heading downwards

wjr4

I’d definitely remain in the pension scheme and just switch your investments. It sounds like a bank sales person rather than a decent financial adviser. If you ever want financial advice, always seek an independent financial adviser. 

shortseller09

penners324 said:

Putting pension funds into bonds seems a particularly bad option at present. The bond market is heading downwards

It's much better value now than 18 months ago, possibly bottoming out.