Workplace Pension approaching retirement - should I take control?

RichardS

I’m 58 and perhaps a year or so from early retirement.  I have a SIPP with around £300k in it (70/30 shares/bonds) which I do not currently pay into as I am utilising salary sacrifice to pay as much as I can (55% of my salary) into my workplace pension. The workplace pension is with Scottish Widows in one of their default funds set to lifestyling (pension age estimated at 60). I can select my own funds in the SW pension but I’ve always left it set at the default - there are a selection of funds that appear of I select the Choose My Own option but I’ve never gone down that route. Over the next year I will be paying around £32k into this pension and the current value of it is £65k - my aim was to get this pension to £100k+ before I retire.

I’ve just read todays article in the Money section of the Telegraph about the bond market and how “default fund” pensions such as this (de-risking as retirement approaches) may not be the best idea currently because of the bond markets. 

I’m wondering if I should act now and take more control over this pension myself for the final 12-18 months i.e move the pension into some funds I select myself rather than the default?  Or even pay some money into my SIPP instead and lose some salary sacrifice benefit.  Any advice / thoughts on what should do?

El_Torro

I wouldn't put money into the SIPP rather than your workplace pension. Since you are on salary sacrifice you are better off paying in through your workplace pension. 

Taking control of one's pension is a good thing, regardless of your age and when you plan to retire. Whether you choose a better fund than the default Scottish Widows fund is less certain though. I wouldn't base my decision on one article that The Telegraph publised either. 

Remember to look at your pensions as a whole, not in isolation. For example you might decide to draw down from your SIPP first and leave Scottish Widows for later. An alternative option would be to transfer your Scottish Widows pension to a SIPP once you have retired, giving you more freedom to do what you want with the investments.

Marcon

RichardS said:

I’m 58 and perhaps a year or so from early retirement.  I have a SIPP with around £300k in it (70/30 shares/bonds) which I do not currently pay into as I am utilising salary sacrifice to pay as much as I can (55% of my salary) into my workplace pension. The workplace pension is with Scottish Widows in one of their default funds set to lifestyling (pension age estimated at 60). I can select my own funds in the SW pension but I’ve always left it set at the default - there are a selection of funds that appear of I select the Choose My Own option but I’ve never gone down that route. Over the next year I will be paying around £32k into this pension and the current value of it is £65k - my aim was to get this pension to £100k+ before I retire.

I’ve just read todays article in the Money section of the Telegraph about the bond market and how “default fund” pensions such as this (de-risking as retirement approaches) may not be the best idea currently because of the bond markets. 

I’m wondering if I should act now and take more control over this pension myself for the final 12-18 months i.e move the pension into some funds I select myself rather than the default?  Or even pay some money into my SIPP instead and lose some salary sacrifice benefit.  Any advice / thoughts on what should do?

You haven't said what your objectives are. Lifestyling funds typically target those looking for annuities rather than drawdown - is that the case here?

A knee jerk reaction to one article in one newspaper isn't usually a good trigger for action, especially if that action isn't well-informed. Have you thought about a free appointment with Pensionwise to increase your general knowledge of pensions: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

LHW99

12-18 months may be rather short to change funds. What do you plan to do with the pensions? If you plan an annuity, then bonds should be reasonable if you will drawdown, than potentially you will have money invested for longer than just the time to retirement, so changing is probably not a problem.

What do you have in the SIPP? Are you used to choosing / managing the funds?

RichardS

LHW99 said:

12-18 months may be rather short to change funds. What do you plan to do with the pensions? If you plan an annuity, then bonds should be reasonable if you will drawdown, than potentially you will have money invested for longer than just the time to retirement, so changing is probably not a problem.

What do you have in the SIPP? Are you used to choosing / managing the funds?

Thanks. I have my SIPP in HSBC Global Strategy funds - mostly in Adventurous but some in Dynamic. I should probably move a chunk into a 100% equities but for the moment they are left in the multi-asset HSBC funds.  I’m not planning on an annuity - I’m expecting to move the SW pension into my SIPP on retirement and then withdraw from that what I need. 

RichardS

Thanks for the comments - very useful 👏

Albermarle

You need to check what kind of lifestyle fund it is.
Some are geared towards an annuity, especially older ones, but there are also ones geared towards drawdown, and this is becoming the default for new clients at many providers.

RichardS

Albermarle said:

You need to check what kind of lifestyle fund it is.
Some are geared towards an annuity, especially older ones, but there are also ones geared towards drawdown, and this is becoming the default for new clients at many providers.

It’s targeting Flexible Drawdown rather than annuity purchase so maybe I don’t need to be quite so worried about it. Thanks. 

poseidon1

RichardS said:

I’m 58 and perhaps a year or so from early retirement.  I have a SIPP with around £300k in it (70/30 shares/bonds) which I do not currently pay into as I am utilising salary sacrifice to pay as much as I can (55% of my salary) into my workplace pension. The workplace pension is with Scottish Widows in one of their default funds set to lifestyling (pension age estimated at 60). I can select my own funds in the SW pension but I’ve always left it set at the default - there are a selection of funds that appear of I select the Choose My Own option but I’ve never gone down that route. Over the next year I will be paying around £32k into this pension and the current value of it is £65k - my aim was to get this pension to £100k+ before I retire.

I’ve just read todays article in the Money section of the Telegraph about the bond market and how “default fund” pensions such as this (de-risking as retirement approaches) may not be the best idea currently because of the bond markets. 

I’m wondering if I should act now and take more control over this pension myself for the final 12-18 months i.e move the pension into some funds I select myself rather than the default?  Or even pay some money into my SIPP instead and lose some salary sacrifice benefit.  Any advice / thoughts on what should do?

Depending on the size of your firm and your seniority there, would your firm consent for theirs and your contributions to be redirected to your own sipp?

My firm had a workplace scheme with SWIDS as well which I did not like the look of but in any event I wanted total control via my own sipp.

 My firm kindly agreed to redirect all their (3%) employer's contributions plus their NI savings from my salary sacrifice into my sipp, a situation that persisted until I eventually ceased being a employee and moved up the partnership ladder. I believe I was the only employee that had requested this facility, so it seemed to be very much a case of 'if you don't ask you don't get'.

If you are happy with how you have been managing your own Sipp, then redirecting all your work place  contributions ( inclusive of employer's contributions and  NI savings if credited to you) may better serve your objectives going forward, unless it is your preference to allow SWIDS to continue 'management' of your works pension pot.

Albermarle

RichardS said:

Albermarle said:

You need to check what kind of lifestyle fund it is.
Some are geared towards an annuity, especially older ones, but there are also ones geared towards drawdown, and this is becoming the default for new clients at many providers.

It’s targeting Flexible Drawdown rather than annuity purchase so maybe I don’t need to be quite so worried about it. Thanks. 

Still worth looking into as even the drawdown options have a tendency to derisk more than you would expect.
Maybe going down to 30% equities, when the norm would be higher than that, especially if you are looking at a hopefully long drawdown.