DC pension - options

Cobbler_tone

I like to think I am pretty savvy but clearly not as savvy as some posters on here. 
I took a call with Pensionwise recently and fully understand the 6 options to use a DC pension pot. I have also fired off the various questions to L&G before potentially considering any transfer. Penalties, special features etc.

In people's experience is there real value to be found in transferring pots to alternative providers? I would imagine the majority leave their pensions in the providers they were built in. It is clearly a minefield. Going onto sites like money.co.uk will lead you to Standard Life, Aviva, Hargreaves London etc etc. Outside of fees and flexibility what are the best sources to look at performance, investment profiles etc? Or if you have a low attitude to risk and not chasing a few hundred quid here and there, the best approach is to execute your options from the current provider. For context I have a DB core pension and the DC will be a pot of around £150k. 

Dazed_and_C0nfused

Cobbler_tone said:

I like to think I am pretty savvy but clearly not as savvy as some posters on here. 
I took a call with Pensionwise recently and fully understand the 6 options to use a DC pension pot. I have also fired off the various questions to L&G before potentially considering any transfer. Penalties, special features etc.

In people's experience is there real value to be found in transferring pots to alternative providers? I would imagine the majority leave their pensions in the providers they were built in. It is clearly a minefield. Going onto sites like money.co.uk will lead you to Standard Life, Aviva, Hargreaves London etc etc. Outside of fees and flexibility what are the best sources to look at performance, investment profiles etc? Or if you have a low attitude to risk and not chasing a few hundred quid here and there, the best approach is to execute your options from the current provider. For context I have a DB core pension and the DC will be a pot of around £150k. 

A recurring issue queried on here is older pensions which don't support pension flexibilities.  And as a result thoroughly confuse (some) people.

So transferring in that situation is not uncommon, simply to then have access to the full range of options that are available on modern plans.

tacpot12

Customer service/ease of accessing your pension should be an important factor. Some providers expect you to cope with their antiquated ways of doing things. There are providers that make it easy. I'm with AJ Bell and recommend them. 

Charges are an important point as well. If you are paying 2% in charges, you are actually giving away about 30% of your potential return! Pay 0.5% in charges and that drops to about 7%.

Moonwolf

I think there are at least three good reasons for changing providers and one bad reason.

1) As Dazed_and_confused said, because you want to use a particular drawdown strategy and your provider doesn't support it.

2) To reduce costs.  Some platforms are significantly cheaper than others. I have to admit that I found it difficult to understand costs because fees on older pensions can be structured slightly differently. Some platforms have capped platform fees or offer lower charges for larger pots so aggregation will help here.  I've found people and old threads here very helpful if you want help comparing costs.

3) If you have to deal with a lot of different providers in order to sort out your drawdown and that is going to be too messy it might be simpler to rationalise, although there might be benefits to having a couple of small pots.

The bad reason is that your pension hasn't performed well.  For the most part, with most providers you can choose the same or very similar funds or mixes of investments.  Changing providers without addressing your investment choices won't improve your pension performance.

bjorn_toby_wilde

I can only speak for my own experience. I had two DC workplace pensions from the same employer one with Aviva and one with Scottish Widows (employer chose to change provider from SW to Aviva).  Both had low fees, presumably negotiated by the employer.

The Aviva platform was simple and although the choices of fund were limited the performance of the funds I was invested in was good. I didn’t want the “lifestyling” option but it was easy to switch off.  The web platform is basic but as I’m not doing any dealing (just leaving it alone) that wasn’t an issue.  Their customer service was fine whenever I needed to contact them also.

The SW platform was very basic, clunky and didn’t give me any of the info I needed. The fund choices were again limited but the performance wasn’t great and I couldn’t find any way to stop the lifestyling option.

Ultimately I transferred the SW funds to AJ Bell (used the Monevator table to compare providers) and made my own investment choices. I’m happy with the choice. I’m considering moving to II now as the pot has grown to the point where a fixed fee would be better and I want to open a GIA alongside. There’s a bit of inertia though because I like the AJ Bell app!

The other thing which will probably mean I move again is the costs of Drawdown. A recent thread on here demonstrated how much difference there is between the providers in terms of fees. I may well be better with II at that point.

Linton

Cobbler_tone said:

I like to think I am pretty savvy but clearly not as savvy as some posters on here. 
I took a call with Pensionwise recently and fully understand the 6 options to use a DC pension pot. I have also fired off the various questions to L&G before potentially considering any transfer. Penalties, special features etc.

In people's experience is there real value to be found in transferring pots to alternative providers? I would imagine the majority leave their pensions in the providers they were built in. It is clearly a minefield. Going onto sites like money.co.uk will lead you to Standard Life, Aviva, Hargreaves London etc etc. Outside of fees and flexibility what are the best sources to look at performance, investment profiles etc? Or if you have a low attitude to risk and not chasing a few hundred quid here and there, the best approach is to execute your options from the current provider. For context I have a DB core pension and the DC will be a pot of around £150k. 

You included performance in your list of relevent factors.  Performance is all to do with the funds you use and very little to do with the platform beyond a small fraction of a % in charges.

All providers will have moderate risk/moderate performance funds on their list.  All the mainstream fund managers will have a wide range of funds ranging from near zero risk with the performance of a savings account possibly up to ones which could make or lose serious amounts of money.

Some platforms will provide helpful data  on their websites.  The main souces of detailed info on specific funds are www.trustnet.com and www.morningstar.co uk but these may be over the top for your needs at this stage.

Where platform choice comes in is whether they support the funds you want.  The general mainstream platforms are all likely to support all the funds you could reasonably want.  The one that doesnt is Vanguard who only sell Vanguard funds.

Cobbler_tone

Thanks all.
My approach will probably be quite straight forward. Take lump sums from DB and DC (which I have a plan for) and then take the DB and phased drawdown on the DC to take me to state pension age. I won't have any worries of 40% tax but will be impossible to avoid 20% tax.  I like the L&G platform, it seems user friendly and some good tools on there, so probably no great advantage in taking it out. It gives me a gross income of around £33k from 58 (allowing ISA contributions) to when I pop my clogs and a spousal provision of around £10k, which works for her (she has her own pensions) if I go first.

bjorn_toby_wilde

Sounds reasonable. I’m sure L&G will have as many options as other providers when it comes to funds. When you come to drawdown time it might be worth another look.

Which have an interesting comparison table here for drawdown costs https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/pension-income-drawdown/compare-pension-drawdown-plans-and-charges-aMxXo0o2dHBV#pension-drawdown-plans-compared

Cobbler_tone

bjorn_toby_wilde said:

Sounds reasonable. I’m sure L&G will have as many options as other providers when it comes to funds. When you come to drawdown time it might be worth another look.

Which have an interesting comparison table here for drawdown costs https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/pension-income-drawdown/compare-pension-drawdown-plans-and-charges-aMxXo0o2dHBV#pension-drawdown-plans-compared

Thank you, that is interesting info. I make that £150 a year difference (on £150k) between someone like L&G (0.25% current) and Vanguard (0.15% lowest), so two trains of thought. The hassle factor of moving and working with a new platform vs covering one of your bills. I guess the more relevant performance is how much the pots grow...or not.

dunstonh

I took a call with Pensionwise recently and fully understand the 6 options to use a DC pension pot. 

Remember that pensionwise is very basic guidance.   They don't cover all options and don't consider multi-wrapper/combination options.

In people's experience is there real value to be found in transferring pots to alternative providers?

In my experience, in around 4 out of 5 cases, yes.

Outside of fees and flexibility what are the best sources to look at performance, investment profiles etc?

Most of the best modern pensions are whole of market.  So, performance doesn't come into it.  
First thing is being able to do what is best for you.   Many pension plans only support some of the options. Some support none of the modern options (just the old ones).   So, you may have to transfer to a plan that supports your chosen method.

I find the most common method used is phased monthly UFPLS.   However, you generally only find that supported on the platform pensions.   I don't know of a legacy pension plan that supports that method.

The SW platform was very basic, clunky and didn’t give me any of the info I needed. The fund choices were again limited but the performance wasn’t great and I couldn’t find any way to stop the lifestyling option.

The SW platform is whole of market and couldn't be considered basic or clunky.   Are you sure you are referring to the platform?  (and not perhaps their auto-enrolment scheme - which isn't a platform but certainly is limited and clunky)

 I like the L&G platform, it seems user friendly and some good tools on there, so probably no great advantage in taking it out.

L&G do not operate a platform.   Indeed, they are one of the few larger players that do not.  They abandoned the platform business some years back.    What they do operate is basic product which is awkward and limited in data and can usually be beaten in price unless your employer has obtained very good terms.

Cobbler_tone

But TBF the vast majority will make (hopefully) informed decisions and make their pension work perfectly well for them. Although I never underestimate the amount of people who have no idea about their pension, what's in it, how it works etc. I work with enough of them! 
Then you have those who may obsess (or maybe become a financial whizz), spend money on an IFA they don't need to, maybe win/lose a few quid over their lifetime but enjoy their retirement in ignorant bliss. UFPLS wouldn't be for me (Pensionwise covered this) as I have clear plans to use my TFLS's...and live my life out....hopefully in ignorant bliss. 

There is no doubt though that this forum is absolutely brilliant for increasing knowledge and in some instances free advice.