Options for transferring pension to enable access

wannaretireearly

My husband turns 55 in June and wants to access his d c pension pot of £450k which can not be accessed unless it is moved to another provider. We want access to the 25% tax free lump sum and are considering buying a 10 year annuity with £100k, leaving the remainder invested to allow for rainy days etc. We have been thinking about moving it to a SIPP provider and leaving the £237k in cash whilst we decide where to invest but are worried about the risk of initially having £450k in cash until drawdown/annuity purchase takes place and then £237k until investments are purchased. How safe would this be? His current provider will only transfer the whole pot to one other provider. Looking for thoughts, advice, different options available x

captain_jep

Well no one knows the future but we do currently have a benign investment environment. You can get 4-5 pc on instant access money. Additionally index funds are currently in a boom phase and I (personally) can’t see that changing until the end of the year. So this is a good time to be reviewing and reordering your finances

dunstonh

 but are worried about the risk of initially having £450k in cash until drawdown/annuity purchase takes place and then £237k until investments are purchased. How safe would this be? 

You are only going to be to of the market for about a week.  So, only the annuity purchase money and TFC that would be in cash.  The TFC is usually paid within 24 hours with most SIPP providers.

wannaretireearly

Thank you for your reply dunstonh. Our concern is that the money held as cash is fully protected as it may be weeks or longer before we decide upon where to invest as it's new to us.

We've also been considering the other option of taking out a fixed term income plan for the next five years as it feels like a safer option whilst we find our feet with self investing. We've done an online quote with Legal and General which we thought was quite good. Do you know of any other providers that offer these products?

Alongside that we thought we'd utilise the £2880/£3600 in a SIPP in my name from next April (finishing work in summer) and 'practise' investing with it so after five years we'll feel comfortable with managing his pot ourselves.

We are in a good position, maybe more by luck than planning - husband has a good final salary from 65 which cost him very little in contributions and a decent dc pot due to salary sacrificing a high amount to keep him in 20% tax band/keep my child benefit in the past. We have a rental property and I have a small amount held in cash in a SIPP as I've put in 80% of my part time wage to gain the tax benefit for the last few years. This was done to utilise my unused personal allowance for the next five years until my small civil service pension starts to pay out at 60. I then have a small LGPS pension to come at 67. We both have full SP entitlement, own our home and have savings. We're definitely more savvy now but we have made a couple of huge mistakes in the past so are cautious and we're too old to come back from making one now

Marcon

wannaretireearly said:

Thank you for your reply dunstonh. Our concern is that the money held as cash is fully protected as it may be weeks or longer before we decide upon where to invest as it's new to us.

We've also been considering the other option of taking out a fixed term income plan for the next five years as it feels like a safer option whilst we find our feet with self investing. We've done an online quote with Legal and General which we thought was quite good. Do you know of any other providers that offer these products?

Alongside that we thought we'd utilise the £2880/£3600 in a SIPP in my name from next April (finishing work in summer) and 'practise' investing with it so after five years we'll feel comfortable with managing his pot ourselves.

We are in a good position, maybe more by luck than planning - husband has a good final salary from 65 which cost him very little in contributions and a decent dc pot due to salary sacrificing a high amount to keep him in 20% tax band/keep my child benefit in the past. We have a rental property and I have a small amount held in cash in a SIPP as I've put in 80% of my part time wage to gain the tax benefit for the last few years. This was done to utilise my unused personal allowance for the next five years until my small civil service pension starts to pay out at 60. I then have a small LGPS pension to come at 67. We both have full SP entitlement, own our home and have savings. We're definitely more savvy now but we have made a couple of huge mistakes in the past so are cautious and we're too old to come back from making one now

Maybe take some proper financial advice if you're so concerned? It could be a very good investment - and give you peace of mind which no amount of helpful answers here could, given the very limited knowledge of your circumstances.

When you refer to 'fully protected' or 'safe', do you mean in terms of market risk, or the level of protection you have if the pension provider goes bust?

Albermarle

A SIPP provider will keep your cash with more than one bank.
They all seem to do it a little bit differently. The info will be on their website somewhere.

If one of those banks goes bust you are covered in the normal way by £85K FSCS compensation. However if you happen to have money in the same bank outside the SIPP, it is £85K across all accounts.

Normally I think they use mainstream clearing banks, like Barclays, HSBC etc so the chance of an issue is pretty minimal.

If the SIPP provider went bust, the cash would be in the banks as above, although might be difficult to access for a while. Again if you use a mainstream SIPP/pension provider then any risk is minimal

wannaretireearly

Thanks for your replies. Our concern was about the safety of holding a large amount of cash in a SIPP. We understand that any form of investment carries risk. We did get an advisor round but they were quoted £9k plus an annual fee which tbh we felt was ridiculous. My husband didn't feel comfortable with him and we don't know anyone who uses an advisor they can recommend as most people we know have db pensions. I'll talk to him again about having another go - maybe having a conversation on the phone with some and see if there's anyone he feels he wants to go further with. We have no issue paying for a service, nothing is free and certainly shouldn't be but we just couldn't see the justification in being charged £9k!

dunstonh

We did get an advisor round but they were quoted £9k plus an annual fee which tbh we felt was ridiculous

No-one should be paying £9k but there are some greedy types out there.    A quarter of that is closer to typical.

 We have no issue paying for a service, nothing is free and certainly shouldn't be but we just couldn't see the justification in being charged £9k!

There is no justification for £9k (unless it was a DB pension transfer).    Make sure anyone you contact is an IFA and not an FA.  FAs are typically very expensive.  You can get greedy IFAs too but after speaking to several local IFAs, you should find suitable pricing.