Drawdown Pension. who would you recommend?

mot2024

As some will know I was on here a few weeks ago asking about SJP. From that advice I've realised they are expensive and not sure you're getting anymore for your investment. So I've looked around and found myself getting more confused. I currently have 2 private policies both with profits. They add up to about 120000. Aviva and Scottish widows. Who would people recommend in your opinion. Was thinking of just a drawdown  pension with Aviva as my current one appears to be performing well at the moment. All Advise welcome. Thank you

DE_612183

are you looking to merge the two together?

mot2024

DE_612183 said:

are you looking to merge the two together?

yes I am. They both have bonus's attached to them that are very good at the moment but could go at any time.

Brie

are you still working and paying into a work pension scheme?  drawdown may reduce the tax advantages of that. 

mot2024

Brie said:

are you still working and paying into a work pension scheme?  drawdown may reduce the tax advantages of that. 

yes I am. I'm not looking to take the pension yet. Was hoping to take a lump sum though!

gm0

Under current rules. Once of pension access age.  You can take 25% (or the scheme % if different) tax free cash.  And provided you don't take income alongside then that does not trigger the MPAA which restricts contributions and tax relief from ongoing employment income. 

So a pension access of a pot, or a slice of a pot - using drawdown (Flexible Access Drawdown) with zero income achieves that result. 25% of the slice to you. The 75% remains invested, crystallised in the jargon and is "marked for income".  But you don't take any income until you are ready.

The other drawdown access method UFPLS does not work like that.  Income is taken alongside tax free cash in each thin slice.  So MPAA clamp applies at the first time of using.

Taking a tax free element with the remainder committed to (ultimate) purchase of an annuity would also be one of the options supported on some older schemes which lack drawdown (annuity via open market option).  Basically when a DC pot is styled to more resemble a DB one in that there is an income (based on the annuity rate and indexation choices) and a pension commencement lump sum (the tax free bit).  Non investment risk from that point.  No heritability etc.

Moving to a modern wrapper allows you to access cash. And not clamp MPAA.  And not be committed on drawdown vs annuity until the "later" point arrives when the markets, annuity rates, interest rates and government regulation may all be different to today

Some old pensions with ultra low costs, or bonuses lost via early transfer out or other features - GAR etc.  Are exceptions to this point of view.  In terms of keeping them until as late as possible and preserving flexibility.

dunstonh

. Who would people recommend in your opinion. 

Impossible to answer without knowing details.  What is right for one person will be different for another.

. Was thinking of just a drawdown  pension with Aviva as my current one appears to be performing well at the moment.

Pensions don't perform.  The investments you hold in the pension perform.   Many modern pensions are whole of market. i.e. they offer the same investment range.   The pension provider is just an administrator.  So, it will come down to the functionality you are after, method of drawdown (not all providers support all methods - what if the method of drawdown you are using is not supported on your existing plan?)

yes I am. They both have bonus's attached to them that are very good at the moment but could go at any time.

The reference to bonuses indicates they are invested in with profits.  That is an old fashioned way of investing that is no longer available.  Plans from that era tend to only support UFPLS although some may offer access to the tax free cash.   

artyboy

One thing to consider is that with any move, including to to one of the more 'modern' SIPP providers like II, AJ Bell, Charles Stanley Direct, HL (etc...), you will have to accept a period where you are 'out of the market' - ie you are disinvested from your old product, the cash is then moved to the new provider, and you can then reinvest in the fund/s of your choice.

If all goes smoothly, it might only be a week or two, but however long it is, you are running the risk that you miss out on any upward market swings. Of course you could also benefit from not getting impacted by any market drops. 

Either way though it's a risk to consider, and one way to (at least partly) mitigate this is to hold out till there is a decent cashback offer with one of the providers. No guarantees, but they have tended to occur during the back end of the year and start of the next one - there's nothing much going on right now. But for the sums you're transferring, historically you could have got at least a £1500 cashback bonus.

I should stress that cashback shouldn't be the principal consideration in choosing your provider, but it is useful nonetheless...

mot2024

dunstonh said:

. Who would people recommend in your opinion. 

Impossible to answer without knowing details.  What is right for one person will be different for another.

. Was thinking of just a drawdown  pension with Aviva as my current one appears to be performing well at the moment.

Pensions don't perform.  The investments you hold in the pension perform.   Many modern pensions are whole of market. i.e. they offer the same investment range.   The pension provider is just an administrator.  So, it will come down to the functionality you are after, method of drawdown (not all providers support all methods - what if the method of drawdown you are using is not supported on your existing plan?)

yes I am. They both have bonus's attached to them that are very good at the moment but could go at any time.

The reference to bonuses indicates they are invested in with profits.  That is an old fashioned way of investing that is no longer available.  Plans from that era tend to only support UFPLS although some may offer access to the tax free cash.   

my thought was to move both policies into a new one with aviva which would be a drawdown pension. The thing is i dont want to draw it yet as im still working but could do with the lumpsum or some of it!

dunstonh

my thought was to move both policies into a new one with aviva which would be a drawdown pension. 

I don't particularly like Aviva's software.   They are also not the best value (there are other providers that use the same software as Aviva but have better configuration and better front ends and have lower charges).     But software and configuration may not matter to you in the same way it does me.

I have a personal view that if you are going to DIY you are better off using a provider focused on the DIY market.  Not one that predominantly deals with intermediaries.

mot2024

dunstonh said:

my thought was to move both policies into a new one with aviva which would be a drawdown pension. 

I don't particularly like Aviva's software.   They are also not the best value (there are other providers that use the same software as Aviva but have better configuration and better front ends and have lower charges).     But software and configuration may not matter to you in the same way it does me.

I have a personal view that if you are going to DIY you are better off using a provider focused on the DIY market.  Not one that predominantly deals with intermediaries.

which ones are focused on DIY?