Flexi drawdown & IBM DC pension with Legal & General

Orchid

Hi everyone

I am a deferred member of the IBM M Plan which is a DC pension managed by Legal & General.
Today's value is £648k. I am 55 so I can access it now. 

However, I want to do either FAD or UFPLS but apparently I will need to transfer out to do this.

The Trustees negotiated that members can transfer to Legal & General Mastertrust Pension Access Scheme but it seems there is a charge of 0.4% per annum, which seems high to me.

• Has anyone transferred out of the IBM scheme to the L&G Mastertrust scheme?  What was the experience like?
• Did anyone transfer elsewhere? where did you go? and what were the fees like?

Burnt out, work environment is toxic and need help with early retirement planning. 
Thank you

dunstonh

The Trustees negotiated that members can transfer to Legal & General Mastertrust Pension Access Scheme but it seems there is a charge of 0.4% per annum, which seems high to me.

Its not high.  Its in the ballpark.  Its basic and lacks a lot of functionality but if you don't care about functionality, then its fine. (hopefully, with £648k, you would care as it can make a big difference)

xylophone

• https://forums.moneysavingexpert.com/discussion/6296862/ibm-legal-general-pension-scheme-loss-of-enhanced-protected-tax-free-cash
  
  May be of interest to you (even if you do not have the EPTFC).
  
  You have a wide choice of schemes if you choose the transfer option. Examples
  
  https://moneytothemasses.com/saving-for-your-future/pensions/the-best-cheapest-sipps-low-cost-diy-pensions
  
  Or you might wish to seek paid for advice - you would tick "confirmed independent" and other options as required.
  
  https://adviserbook.co.uk/
  
  If you choose not to engage an IFA, it would be as well to book an appointment with Pension Wise for guidance on accessing a DC pension before starting down the transfer route.
  
  https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment
  
  
  
  
  
  
  

Linton

Transferring to another scheme is easy.  Just open a private pension with an online platform and ask them to transfer-in your old pension.  They will then take responsibility for the whole process.  The transfer is probably free.

The L&G pension chargemay not be that large.  If you went for a private pension there would be separate charges for the platform and the funds which could  total 0.4% You may find that the L&G charge covers both.  Also you may be benefitting from special rates negotiated by IBM with L&G so any general L&G data may not apply in your case.

The far bigger issue could be how you configure your pension so that it will securely generate the returns to pay out the drawdowns you need. If you have the investment knowledge to do this yourself with a £648K pot, great.  Otherwise you will have to learn how things work pretty quickly and/or pay for IFA advice. 

FIREDreamer

Linton said:

Transferring to another scheme is easy.  Just open a private pension with an online platform and ask them to transfer-in your old pension.  They will then take responsibility for the whole process.  The transfer is probably free.

The L&G pension chargemay not be that large.  If you went for a private pension there would be separate charges for the platform and the funds which could  total 0.4% You may find that the L&G charge covers both.  Also you may be benefitting from special rates negotiated by IBM with L&G so any general L&G data may not apply in your case.

The far bigger issue could be how you configure your pension so that it will securely generate the returns to pay out the drawdowns you need. If you have the investment knowledge to do this yourself with a £648K pot, great.  Otherwise you will have to learn how things work pretty quickly and/or pay for IFA advice. 

@Orchid also don’t rule out an annuity for guaranteed income (and no sleepless nights) at the current rates, even if only for some of your pot.

Albermarle

If you went for a private pension there would be separate charges for the platform and the funds which could  total 0.4%

Depending on the platform and the investment funds chosen, the total could be significantly higher than 0.4%

Orchid

@dunstonh  @xylophone @Linton @FIREDreamer @Albermarle

Thank you for the responses and the links - I will definitely check them out.

 I looked at the FAQ on L&G website and it says that there are 2 charges in the L&G Mastertrust Pension Access Scheme

• Annual Management Charge (AMC) - 0.03% (currently there are no charges so this would be new if I transfer)
• Fund Management Charge (FMC) - same as today

 I think I need to get independent financial advice as my situation is not straightforward 
 Now to find the right advisor :-(

gm0

It's fine.  Unexceptional on most dimensions. 

I use an equivalent Master Trust scheme (not IBM) but they L&G have sold this to a number of large corporate trustees.  I am a couple of years in now.

*If* the structure and choices made by the trustees are the same

There are fund management charges for the range of funds as with any other provider. 

Global passive and a few extensions easy and cheap.  Active choices are more limited.  L&G have a long list of themed multi-assets which are a) new and b) I am a bit unconvinced by.  Though I use a slice of multi-asset 3

There is a scheme or platform charge.  So check the documentation carefully and you will find your basic price. Which varies from employer to employer based on what trustees negotiated.   I would expect that to be lower and for the 0.4 to be some sort of estimate of total with a fund blend.  But it may not be.  So check.

The comparison that matters is to what would you do instead

The fund range is a lot less than a SIPP but more than the older occupational - 2-3 choices where there was one before for a given thing

The transfer process was mildly slow.  Paper forms repurposed into pdfs - all a bit old school.  But everyone was friendly and nice to deal with. 

Access and information for the "on the phones people" to what the "scheme specialist people are doing" behind the scenes is not (as is often the case) that great. 

Digital facilities are close to non-existent.  The data feed does now reach our old trust scheme web site - so you can see your investments.  Initially I had to replicate it on trustnet

Rebalancing was fine.  Secure email with desired trades.  All sorted.  The web site they gave us wants to do "specify overall investment allocations as % for changes - I wanted to just give them exact trades already calculated

Payment and tax reporting all as expected

Plus point - our version of the master trust - uses "insured funds only" like the occupational prior.  This is a minor detail but it provides 100% FSCS protection vs  85k as a SIPP would.
(Not that important due to custody arrangements for holdings, and the fact that no protection of either sort is properly tested in court at scale anyway).

I have to deal with L&G anyway for a residual pension.  So was happy with our deal and used it for a %.  And put the rest in a retail SIPP with broader range. 

Take a global developed equities passive fund blend - just as an example - invest in what you like
And do the sums

L&G World ex UK + UK blended is usually available - you can be at 0.11% fund charges.

For 648k

Alternatives:

Fidelity with a fund would be ~ 0.32%. pa (0.2 and 0.12 fund)

Fidelity with all ETFs it would be 0.13% (£90 + 0.12 etf )
Vanguard would be 0.17% (£375 and 0.12% fund)

Your L&G scheme charge is 0.03 then fund at 0.12 that's 0.15%. 

So not a relevant cost drag difference. £65pa or so

Choose on range, digital and other factors.

Albermarle

Orchid said:

@dunstonh  @xylophone @Linton @FIREDreamer @Albermarle

Thank you for the responses and the links - I will definitely check them out.

 I looked at the FAQ on L&G website and it says that there are 2 charges in the L&G Mastertrust Pension Access Scheme

• Annual Management Charge (AMC) - 0.03% (currently there are no charges so this would be new if I transfer)
• Fund Management Charge (FMC) - same as today

 I think I need to get independent financial advice as my situation is not straightforward 
 Now to find the right advisor :-(

Normally an IFA will want to :
1) Charge you an initial charge for all the background/paperwork needed. For a pension your size this could be anything from £7K to £12 K.
2) They will probably want to move your pension to a provider they are familiar with,( many providers only work via advisors), and then manage the pension for you on an ongoing basis, the charge for this will probably be 0.5% pa + the pension/investment fund charges of course.

You can skip 2) and just have 1) as a one off advice as to how to manage any new pension/investments.

As part of the service they should be able to help you with any other financial issues, like tax , family matters etc.

gm0

DIY is a lot of work - not to do.  But to learn to do confidently.

Avoiding that by buying ongoing advice is an excellent choice for some. 
But be in no doubt that it is a luxury good. 

As Abermarle says 1-2% one off.  And 0.5% pa ongoing.

On 648k

The additional cost of the advised route is initial charge - call it 1% = £6,480

Ongoing advice = 40 x (648,000 x 0.5) x 0.005 = 64,800
Assuming 40 year retirement, capital depletion, so use the halfway value (regardless of wobbles, initial to final), area under the curve, 0.5%pa)

So circa £72,000 for the advice element over the retirement.

And about 40k of product charges - assuming about 0.3% (fund and platform (what I was offered). 
Less if cost is a focus and the adviser works on that as one of your objectives. 
This 2nd element is essentially - the same - as DIY or overlaps so much as to make the argument about it somewhat fruitless.  The portfolio they or you choose - will be cheaper (passive) or more expensive (certain active investment choices).

Lowest possible cost DIY can drag that £112k total back down to close to or around  ~£20k - £25k

So let's assume retirement income is set at around 3.5% of pot in drawdown.  So ~23k. 

The cost of advice is about 4 years income out of 40. Or as Abermale says -  10% - 12% of the initial pot.

The cost insensitive will sign up happily. 
Others may wish to consider giving learning to DIY a go and then deciding.

The ongoing adviser relationship offers.  Monitoring, tax questions, admin.  Portfolio review.  Support widowed spouse with no interest in the subject.  There are reasons to value it.  Better tax planning than you would have done alone may save you a multiple of that cost.  Or indeed nothing much at all if your affairs are straightforward and largely in order.

The "cost" of the DIY work to set it up yourself (small) and the value of the time spent learning enough to feel able to do so confidently (which is undeniably larger) unless this was your prior profession.

Neither is a "better" investment return (this is unknowable).  And no guarantee is offered with the fees on the advised side.  But an advised setup should not (absent a rogue adviser) be badly structured, unsuitable for your wealth level and risk attitude.  And it won't be bad DIY (defined as taking investment risks you didn't understand via naive mistakes) People do muck it up

Each to their own - at their own risk of disappointment.