My SJPP Pension - what to do?

martindias

When i retired i had three pensions pots merged into one by St James Place whom i knew through a family friend. The final pot came to about £350K I have now had 10 years of draw down equalling £9600 pa. The pot is now about £249k and the charges £4.9k per annum. I am 71 yrears old and have a working partner.

Too late I started a SIPP so missed out maxing out payments into the SIPP when i sold my house and downsized; that fund now sits at £129k and hence my question:

Should i now take my 25% tax free from the SIPP (pay it into my ISA - now at £300K), amalgamate the two pensions and go for an inflation link drawdown?

The SJPP high charges are eating into my pension pot and my draw down pension is not inflation linked. I see problems on the horizon.

I largely manage to live off my current state and drawdown pension plus an Airbnb income of approx £17k per annum. I estimate my monthly living costs at £2,500, and use my ISA (invested) to cover major purchases, like cars, new white goods etc  

I have asked similar questions before but not taken a decision - I think now it is decision time.

AlanP_2

I'm not sure what you mean by an "inflation linked draw down" or why your "current draw down pension is not inflation linked".

DC pension pots do not have inflation linking, the investments within the pension may or may not return more than inflation.

As a general comment most people on here would say that SJP is probably the most expensive option out there for a simple DC pension.

Given that you have around £380k in your pension pots, £300k in ISAs and both SP and AirBnB income why not use an Independent Financial Adviser to structure the investments for the future against what you set out as your objectives and risk tolerance?

wjr4

I’d be moving away from SJP as long as there are no exit charges. Have they been completing annual reviews for you?

dunstonh

Too late I started a SIPP so missed out maxing out payments into the SIPP when i sold my house and downsized; that fund now sits at £129k and hence my question:

Its not too late.   You can still make the £3600 annual allowance and if you transfer that would involve starting a SIPP (assuming you wouldn't use a stakeholder pension or personal pension)

Should i now take my 25% tax free from the SIPP (pay it into my ISA - now at £300K), amalgamate the two pensions and go for an inflation link drawdown?

You don't need to move it to the ISA yet.  You have until 75 to do that.  So no hurry at this time.

You probably need to define what you mean by inflation linked drawdown as that doesn't exist as a product option.  You could certainly do that manually each year.   Or did you mean inflation linked annuity? (and which inflation rate)

The SJPP high charges are eating into my pension pot and my draw down pension is not inflation linked. I see problems on the horizon.

It could be inflation linked if you manually adjusted it each year.  

First thing to do is find out the difference between the current value of the SJP pension and the transfer value.  If no difference, then you have full choices open to you via an IFA or DIY to use whatever methods best match your objectives.

RogerPensionGuy

My initial pick up is for every £2 you take out of your SIPP your provider gets £1.

So 20K for you and 10K for the provider.

I am always looking for friends to help me with money, after reading this thread, I will keep a close eye on my friends. 

gm0

A lot of web literature talks about setting a fixed income for drawdown at the start of a plan. 

And indexing (inflation linking) the amount of income each year for 30 / 40+ years.

This has no connection - with whether particular investments do or do not keep up with inflation and the planned depletion of capital across the whole plan for income.  Other than the obvious - if they don't keep up - the pot will be depleted too fast and the "plan" will be stressed. 

The idea being that income is set so the plan can work in "known" market conditions with a level of confidence. 

This approach while not terrible has the disadvantage that in benign conditions viewed in hindsight over the full plan you take less income than you could have.  Most journeys are not the worst journey.  A possibly large pot is unspent at a normal actuarial death date / end of plan.

Generally your plan suits your age at retirement and a sensible guess of how long you will live.

More web literature debates the subject of "how much" income can be at the start - how hard a pot can work - to permit a planned 30 or 40 years "inflation linked drawdown" based on particular investing scenarios. And a mix of returns (after fees) and capital being spent down.

Getting the most income possible without risking running out prematurely but depleting most of the assets over the life of the plan

This all assumes investments don't spring a worse than 1929 and major war surprise that lasts and lasts.   All this focus on "backtesting" past markets.  And simulating with ranges of returns or inflation (montecarlo) is NOT predictive.  The future is the future.  It may live in the "envelope" of the crises seen before.  Or some arbitrary model you create. Or it may not.  Whatever edge you create - I can always +1 it. 

All this frenzied activity and debate does not "prove" a plan today will work. But this type of work CAN detect a "stupid plan" that would NOT have worked previously and regularly in already experienced conditions.  This is still a useful risk management input to avoid doing silly things.  A lot of conventional "advice" flows from this sort of thinking.

Example - for my "inflation linked drawdown" - at the start I want and decide to take £3000 from a 100,000 pot.  Or 3.0%.  That is my withdrawal rate.  A pretty safe one.  

After discussion with adviser I am placed in a middle of the road risk position.  I am in Polaris 2 (60% equities).

In year two.  I add 3% to the income. £90.  So I reset income to £3090. And so on next year I add. £92.70 if I am indexing by 3%. To £3182.70.  And so on.  Inflation linked drawdown.  Of a sort.

For many of us this is exactly what we mean by "inflation linked drawdown". 

You can use 2% or 3% or CPI to index. Or a higher figure.  Nobody is stopping you.  If you have advice they will say "Careful now" at some point.  Depending on investment returns to date and what happens next. This will work more or less well in terms of risks of running out over the long term.  Entirely your issue (with advice help) to plan.

You can do what you like with drawdown. 

Fixed amount. 
Indexed amount (as example here). 
Stop for a while (if markets are terrible to avoid selling cheap). 
Variable income amounts every year (to suit variation in returns).  GuytonKlinger etc.

It all depends on whether this is essential income to buy food - or top up on guaranteed incomes - DB, state pension etc.  And whether you can tolerate variable income.   Variable income is good for managing the risk of a plan and avoiding too much left over. And allows pushing income vs pot a tiny bit harder - all else equal.

There are a wide selection of methods for "how" to decide "how much" and what to sell first etc.  For DIY this is a study area in and of itself.

As an advised drawdown user - your adviser should be dealing with all this for you and you should not have to care about the details.    SJP will do this like any IFA - but as others have said.  Are among the most expensive options out there for doing so. 

If your SJP pension has moved from their traditional pension product - which was hysterically obfuscated and complex as well as expensive.  It was almost as though they deliberately made it multi-layered and shuffled everything all the time to avoid it being easy to track performance below the final number.  Then it will be to POLARIS multi-asset funds. 

If so you are now in normal multi-asset risk tiered funds.  That you can find anywhere. 

Via an adviser (IFA) or direct.  This is slightly cheaper than it was before.  But in no way cheap.   Nor a fair price for what you get in terms of product. 

The whole point of an advice relationship IFA or FA as here - is broader tax planning and help with your financial planning goals.  Recent pension tax changes would be a popular topic this year. 

Value isn't really to be found in the product whether you are paying a highstreet IFA 0.5% assets pa or the luxury rates at SJP.  You trust and like the advice you get.  Or you don't.  You may be motivated to go and find it elsewhere cheaper.  Or not.

martindias

AlanP_2 said:

I'm not sure what you mean by an "inflation linked draw down" or why your "current draw down pension is not inflation linked".

DC pension pots do not have inflation linking, the investments within the pension may or may not return more than inflation.

As a general comment most people on here would say that SJP is probably the most expensive option out there for a simple DC pension.

Given that you have around £380k in your pension pots, £300k in ISAs and both SP and AirBnB income why not use an Independent Financial Adviser to structure the investments for the future against what you set out as your objectives and risk tolerance?

Sorry - I could have been clearer. I remember my SJPP advisor giving me the option to increase the draw down each year to keep pace with the RPI but when you calculate that into the longer term life budget it does show my capital evaporating earlier than my expect life. I now have no withdrawal charges having been with SJPP for more than 10 years. I did get an introductory consultation with an independent IFA last year but the fees were going to be £7k for first advice then an annuall charge if they undertook fund management on my behalf! Should I bite the bullet and pay? It means digging into my ISA!

martindias

wjr4 said:

I’d be moving away from SJP as long as there are no exit charges. Have they been completing annual reviews for you?

Yes - reviews have been largely annual - i say largely as being a friend of the family other than more often than not became a discussion about family events! When i look at the growth of the capital pot, after income, it is quite a bit less than the 3 ISA funds i have so not sure their 'extra' management of the capital has added value (however i do take into account that my ISAs are in more risky investment funds (Fundsmith).

martindias

RogerPensionGuy said:

My initial pick up is for every £2 you take out of your SIPP your provider gets £1.

So 20K for you and 10K for the provider.

I am always looking for friends to help me with money, after reading this thread, I will keep a close eye on my friends. 

That's a neat way of seeing it! A steal :-)

martindias

gm0 said:

A lot of web literature talks about setting a fixed income for drawdown at the start of a plan. 

And indexing (inflation linking) the amount of income each year for 30 / 40+ years.

This has no connection - with whether particular investments do or do not keep up with inflation and the planned depletion of capital across the whole plan for income.  Other than the obvious - if they don't keep up - the pot will be depleted too fast and the "plan" will be stressed. 

The idea being that income is set so the plan can work in "known" market conditions with a level of confidence. 

This approach while not terrible has the disadvantage that in benign conditions viewed in hindsight over the full plan you take less income than you could have.  Most journeys are not the worst journey.  A possibly large pot is unspent at a normal actuarial death date / end of plan.

Generally your plan suits your age at retirement and a sensible guess of how long you will live.

More web literature debates the subject of "how much" income can be at the start - how hard a pot can work - to permit a planned 30 or 40 years "inflation linked drawdown" based on particular investing scenarios. And a mix of returns (after fees) and capital being spent down.

Getting the most income possible without risking running out prematurely but depleting most of the assets over the life of the plan

This all assumes investments don't spring a worse than 1929 and major war surprise that lasts and lasts.   All this focus on "backtesting" past markets.  And simulating with ranges of returns or inflation (montecarlo) is NOT predictive.  The future is the future.  It may live in the "envelope" of the crises seen before.  Or some arbitrary model you create. Or it may not.  Whatever edge you create - I can always +1 it. 

All this frenzied activity and debate does not "prove" a plan today will work. But this type of work CAN detect a "stupid plan" that would NOT have worked previously and regularly in already experienced conditions.  This is still a useful risk management input to avoid doing silly things.  A lot of conventional "advice" flows from this sort of thinking.

Example - for my "inflation linked drawdown" - at the start I want and decide to take £3000 from a 100,000 pot.  Or 3.0%.  That is my withdrawal rate.  A pretty safe one.  

After discussion with adviser I am placed in a middle of the road risk position.  I am in Polaris 2 (60% equities).

In year two.  I add 3% to the income. £90.  So I reset income to £3090. And so on next year I add. £92.70 if I am indexing by 3%. To £3182.70.  And so on.  Inflation linked drawdown.  Of a sort.

For many of us this is exactly what we mean by "inflation linked drawdown". 

You can use 2% or 3% or CPI to index. Or a higher figure.  Nobody is stopping you.  If you have advice they will say "Careful now" at some point.  Depending on investment returns to date and what happens next. This will work more or less well in terms of risks of running out over the long term.  Entirely your issue (with advice help) to plan.

You can do what you like with drawdown. 

Fixed amount. 
Indexed amount (as example here). 
Stop for a while (if markets are terrible to avoid selling cheap). 
Variable income amounts every year (to suit variation in returns).  GuytonKlinger etc.

It all depends on whether this is essential income to buy food - or top up on guaranteed incomes - DB, state pension etc.  And whether you can tolerate variable income.   Variable income is good for managing the risk of a plan and avoiding too much left over. And allows pushing income vs pot a tiny bit harder - all else equal.

There are a wide selection of methods for "how" to decide "how much" and what to sell first etc.  For DIY this is a study area in and of itself.

As an advised drawdown user - your adviser should be dealing with all this for you and you should not have to care about the details.    SJP will do this like any IFA - but as others have said.  Are among the most expensive options out there for doing so. 

If your SJP pension has moved from their traditional pension product - which was hysterically obfuscated and complex as well as expensive.  It was almost as though they deliberately made it multi-layered and shuffled everything all the time to avoid it being easy to track performance below the final number.  Then it will be to POLARIS multi-asset funds. 

If so you are now in normal multi-asset risk tiered funds.  That you can find anywhere. 

Via an adviser (IFA) or direct.  This is slightly cheaper than it was before.  But in no way cheap.   Nor a fair price for what you get in terms of product. 

The whole point of an advice relationship IFA or FA as here - is broader tax planning and help with your financial planning goals.  Recent pension tax changes would be a popular topic this year. 

Value isn't really to be found in the product whether you are paying a highstreet IFA 0.5% assets pa or the luxury rates at SJP.  You trust and like the advice you get.  Or you don't.  You may be motivated to go and find it elsewhere cheaper.  Or not.

Gosh a long and thoughtful answer. Thanks. My partner is much younger than I so not sure it is necessary to leave them a pension and with uncertain times ahead (Warren B and others spreading fear of a crash) i was thinking 'ham where i am' is a prudent option for a pension so an index RPI linked annuity income would do that. I am assuming the charges for these are lower than drawdowns, but guess that is inevitable thing to check.

As I said in an earlier reply when i first retired i did take IFAs advice but on reading the 120 page 'report' they produced with colourful graphs i felt much of it was the same as i read in the Sunday Papers finance supplements. One key bit of advice is that i could do it myself. I guess now i am beginning to feel that I can't. Should i go back to get another IFAs advice and bite the bullet?

gm0

You can at any point if you don't have an inheritance objective consider an annuity with indexation on it.  And for a given family - all the options - guarantee periods, joint life, impaired health, indexation, fixed periods - are out there. Ironically forum wisdom seems to be that many annuities are best approached via an IFA to get best offers.  Now interest rates are returning to the rate of centuries - 5%.  They are not quite as hated as they have been in the period of artificially low interest rates.

Or the solution for someone who doesn't buy into a death pool game and hands over their pot.

Is to "self annuitise".  Essentially you buy a "ladder" of 1,2,3,4, 10 year. Index linked bonds. 
Google Bond ladder. aka TIPS ladder in American.

The use cases for this include bridging early retirement to SP and DB later.  Or for an extra slice of "known good" indexed income to top up essential income needs beyond the level of SP.

Equities investing drawdown above that on top with whatever is left. And variable "desirable" income and you can be more risk embracing - if that's your thing.

To your main post - this is a general problem with retail financial services advice.  It can be mediocre handle turning.  Or attentive and high quality.  That can happen good or bad - with a high street IFA.  Or an SJP "partner" / agent. 

On leaving SJP. 

Older existing customer plans have pensions with an exit fee.  This is a calculated deferred management charge levied for "new money" added which ramps down over 5 years and disappears as I recall).  
Value to exit is less than portfolio unit value by that amount.  Recent customers don't have this feature in the contract.  But SJP now place a bigger charge on putting money in.  This is a pivot to get ahead of the FCA deciding "exit deterrent fees" should be prohibited entirely in the market.  They were already unusual in doing it.

A new provider keen to take you on.  Will quote based on the number of providers/amount of work. And pot size.
SJP refugees are fairly common.  The business case to leave will stand up relatively quickly.  Even if you have some exit charges latent.

I do not really believe that adviser introduced portfolios are magic.  They are obviously better than mucking a portfolio up - doing it very badly.  But at similar risk levels and thus major asset class mixes - they perform similarly - how could they not. A tilted portfolio can win or lose of course.  Otherwise for a given mix, diversfied. The cheaper one with much the same stuff in gradually creeps ahead.  Less money sticks to other people's fingers.

If you disentangle the total SJP fees (product, advice, fund charges or equivalents, exit - they break it down differently - naturally. Total is what matters.   You can work out breakeven.  

The REAL cost is your effort and time to comparison shop, meet and quote several - and then get a fact find / suitable advice done again. 

Or time spent to wrap your head round DIY to a point that you are confident to set up.

Operating is simpler.  But you and any partner need to be happy with it in practice.

Advice is a luxury - 10-12% of initial pot lifetime cost of advice for a pension is a lot.
But so is the value of the time (to you) to do the work to do it once vs hiring a professional. 
You do you.  I treat it as a keep brain active and learn a new thing hobby of sorts.