Stakeholder vs SIPP

Aylesbury_Duck

I have a deferred DC stakeholder pension with Scottish Widows, Currently valued at £152k in a default fund with an annual management fee of 0.75%

I have a small Vanguard SIPP, with £9k in their Target Retirement 2040 fund, management charge of 0.39%

I'm nearly 52 and plan to retire at 57-60 but am unlikely to access either of these pots until a few years later.  It seems an obvious move to transfer the Scottish Widows plan into the SIPP, saving over £500 a year in charges and knowing that the target retirement fund is a good fit for my risk appetite.  Am I missing anything?

Edited to add:

The Scottish Widows plan does have a lifestyle aspect to it, where it's gradually de-risked from 15 years out to retirement age, which it has set to 65.  There is also an accidental death benefit which runs until July 2027.  120% of the plan value would be paid out rather than just the plan value.  I suppose it could be viewed as a 'free' bit of life insurance worth £30k for the next 2.5 years.

El_Torro

Do you plan to buy an annuity? If so the lifestyling makes sense, otherwise it doesn't. 

Vanguard probably offers lower total fees than anything Scottish Widows could offer you, so from that perspective it makes sense to ditch Scottish Widows and move to Vanguard. Just depends on how much the accidental death benefit is worth to you.

If your concern is paying the lowest fees then there are cheaper platforms out there than Vanguard.

QrizB

Aylesbury_Duck said:

Am I missing anything?

Do you have a current occupational pension? What are the charges and investment options, and could you transfer your Stakeholder pension into it?

(My current occupational DC pension has lower fees than Vanguard do, and offers a much wider range of investment options. The only reason I have a small Vanguard pension is the flexibility it gives me for making prompt end-of-tax-year payments to avoid 40% income tax and HICBC.)

Aylesbury_Duck

El_Torro said:

Do you plan to buy an annuity? If so the lifestyling makes sense, otherwise it doesn't. 

Vanguard probably offers lower total fees than anything Scottish Widows could offer you, so from that perspective it makes sense to ditch Scottish Widows and move to Vanguard. Just depends on how much the accidental death benefit is worth to you.

If your concern is paying the lowest fees then there are cheaper platforms out there than Vanguard.

Thank you.  Is that because lifestyling is designed to provide the most secure pot by a target retirement age with which to buy an annuity, whereas if I were to invest fully in equity funds, for example, I might use flexible drawdown and therefore would ideally have continual growth of the plan as I draw from it?  If I lifestyled and went for drawdown, I suppose the remainder wouldn't be expected to grow much because it would be in safe, lower-risk assets like bonds and cash?

As you can tell, I'm gradually learning more about all of this, so points like yours are helpful to check my understanding!

El_Torro

Aylesbury_Duck said:

El_Torro said:

Do you plan to buy an annuity? If so the lifestyling makes sense, otherwise it doesn't. 

Vanguard probably offers lower total fees than anything Scottish Widows could offer you, so from that perspective it makes sense to ditch Scottish Widows and move to Vanguard. Just depends on how much the accidental death benefit is worth to you.

If your concern is paying the lowest fees then there are cheaper platforms out there than Vanguard.

Thank you.  Is that because lifestyling is designed to provide the most secure pot by a target retirement age with which to buy an annuity, whereas if I were to invest fully in equity funds, for example, I might use flexible drawdown and therefore would ideally have continual growth of the plan as I draw from it?  If I lifestyled and went for drawdown, I suppose the remainder wouldn't be expected to grow much because it would be in safe, lower-risk assets like bonds and cash?

As you can tell, I'm gradually learning more about all of this, so points like yours are helpful to check my understanding!

Basically yes. Lifestyling assumes you will spend all your pot (or at least the 75% left after you take out 25% tax free) on an annuity. 

Drawdown can be a bit more complicated. I am not close to retirement myself but my plan when I get there is to have some of the pension in cash to draw from in the early years, then some in medium risk funds for drawing down in 5 years time or so, then the rest can stay in funds with a lot of equities for spending in 10 years time, or more.

Having all your money in a lifestyled fund and not buying an annuity means that you will probably miss out on good growth on the part of the pot that won't be spent for some years to come. 

Aylesbury_Duck

QrizB said:

Aylesbury_Duck said:

Am I missing anything?

Do you have a current occupational pension? What are the charges and investment options, and could you transfer your Stakeholder pension into it?

(My current occupational DC pension has lower fees than Vanguard do, and offers a much wider range of investment options. The only reason I have a small Vanguard pension is the flexibility it gives me for making prompt end-of-tax-year payments to avoid 40% income tax and HICBC.)

Thank you.  Yes, I have other pensions (feel free to view my other recent post for details if you're interested) but basically I am currently in the LGPS, maximising contributions to a linked AVC scheme and I have the Scottish Widows and Vanguard plans mentioned on this thread.  I have another deferred DC scheme worth about £166k. 

Like you, I have the Vanguard pension for the same flexibility reasons.

Aylesbury_Duck

El_Torro said:

Aylesbury_Duck said:

El_Torro said:

Do you plan to buy an annuity? If so the lifestyling makes sense, otherwise it doesn't. 

Vanguard probably offers lower total fees than anything Scottish Widows could offer you, so from that perspective it makes sense to ditch Scottish Widows and move to Vanguard. Just depends on how much the accidental death benefit is worth to you.

If your concern is paying the lowest fees then there are cheaper platforms out there than Vanguard.

Thank you.  Is that because lifestyling is designed to provide the most secure pot by a target retirement age with which to buy an annuity, whereas if I were to invest fully in equity funds, for example, I might use flexible drawdown and therefore would ideally have continual growth of the plan as I draw from it?  If I lifestyled and went for drawdown, I suppose the remainder wouldn't be expected to grow much because it would be in safe, lower-risk assets like bonds and cash?

As you can tell, I'm gradually learning more about all of this, so points like yours are helpful to check my understanding!

Basically yes. Lifestyling assumes you will spend all your pot (or at least the 75% left after you take out 25% tax free) on an annuity. 

Drawdown can be a bit more complicated. I am not close to retirement myself but my plan when I get there is to have some of the pension in cash to draw from in the early years, then some in medium risk funds for drawing down in 5 years time or so, then the rest can stay in funds with a lot of equities for spending in 10 years time, or more.

Having all your money in a lifestyled fund and not buying an annuity means that you will probably miss out on good growth on the part of the pot that won't be spent for some years to come. 

Thank you.  I will assess my entire provision because I have an LGPS currently worth £11.5k p.a. and still rising, plus a linked AVC from which I intend to take as much TFLS as I can, using any remainder to buy more LGPS.  That means that an annuity isn't in my thinking for these plans at the moment, so I will consider alternatives to lifestyling for both of them.

Albermarle

El_Torro said:

Aylesbury_Duck said:

El_Torro said:

Do you plan to buy an annuity? If so the lifestyling makes sense, otherwise it doesn't. 

Vanguard probably offers lower total fees than anything Scottish Widows could offer you, so from that perspective it makes sense to ditch Scottish Widows and move to Vanguard. Just depends on how much the accidental death benefit is worth to you.

If your concern is paying the lowest fees then there are cheaper platforms out there than Vanguard.

Thank you.  Is that because lifestyling is designed to provide the most secure pot by a target retirement age with which to buy an annuity, whereas if I were to invest fully in equity funds, for example, I might use flexible drawdown and therefore would ideally have continual growth of the plan as I draw from it?  If I lifestyled and went for drawdown, I suppose the remainder wouldn't be expected to grow much because it would be in safe, lower-risk assets like bonds and cash?

As you can tell, I'm gradually learning more about all of this, so points like yours are helpful to check my understanding!

Basically yes. Lifestyling assumes you will spend all your pot (or at least the 75% left after you take out 25% tax free) on an annuity. 

Drawdown can be a bit more complicated. I am not close to retirement myself but my plan when I get there is to have some of the pension in cash to draw from in the early years, then some in medium risk funds for drawing down in 5 years time or so, then the rest can stay in funds with a lot of equities for spending in 10 years time, or more.

Having all your money in a lifestyled fund and not buying an annuity means that you will probably miss out on good growth on the part of the pot that won't be spent for some years to come. 

Traditionally lifestyling was geared towards buying an annuity.
However this has been changing in recent years.
Most plans will now have a choice of lifestyling options; for annuity: for drawdown; for a short drawdown etc
Some providers at least now use lifestyling for drawdown as their default option for new customers.
Probably there will be lots of people still in historical annuity lifestyling plans that are innappropiate, but you can not just assume all lifestyling plans are geared towards annuities.
OP you need to check what kind of lifestyle fund it is.

Albermarle

Aylesbury_Duck said:

El_Torro said:

Do you plan to buy an annuity? If so the lifestyling makes sense, otherwise it doesn't. 

Vanguard probably offers lower total fees than anything Scottish Widows could offer you, so from that perspective it makes sense to ditch Scottish Widows and move to Vanguard. Just depends on how much the accidental death benefit is worth to you.

If your concern is paying the lowest fees then there are cheaper platforms out there than Vanguard.

Thank you.  Is that because lifestyling is designed to provide the most secure pot by a target retirement age with which to buy an annuity, whereas if I were to invest fully in equity funds, for example, I might use flexible drawdown and therefore would ideally have continual growth of the plan as I draw from it?  If I lifestyled and went for drawdown, I suppose the remainder wouldn't be expected to grow much because it would be in safe, lower-risk assets like bonds and cash?

As you can tell, I'm gradually learning more about all of this, so points like yours are helpful to check my understanding!

If you were in 100% equity in drawdown it could be quite a bumpy ride. In the first year of your retirement it might drop 40% , so you would be very exposed to 'sequence of returns' risk ( google it) .
A mix of 50/60% equities and the rest mainly bonds/gilts/cash is a more usual mix.

Aylesbury_Duck

Albermarle said:

El_Torro said:

Aylesbury_Duck said:

El_Torro said:

Do you plan to buy an annuity? If so the lifestyling makes sense, otherwise it doesn't. 

Vanguard probably offers lower total fees than anything Scottish Widows could offer you, so from that perspective it makes sense to ditch Scottish Widows and move to Vanguard. Just depends on how much the accidental death benefit is worth to you.

If your concern is paying the lowest fees then there are cheaper platforms out there than Vanguard.

Thank you.  Is that because lifestyling is designed to provide the most secure pot by a target retirement age with which to buy an annuity, whereas if I were to invest fully in equity funds, for example, I might use flexible drawdown and therefore would ideally have continual growth of the plan as I draw from it?  If I lifestyled and went for drawdown, I suppose the remainder wouldn't be expected to grow much because it would be in safe, lower-risk assets like bonds and cash?

As you can tell, I'm gradually learning more about all of this, so points like yours are helpful to check my understanding!

Basically yes. Lifestyling assumes you will spend all your pot (or at least the 75% left after you take out 25% tax free) on an annuity. 

Drawdown can be a bit more complicated. I am not close to retirement myself but my plan when I get there is to have some of the pension in cash to draw from in the early years, then some in medium risk funds for drawing down in 5 years time or so, then the rest can stay in funds with a lot of equities for spending in 10 years time, or more.

Having all your money in a lifestyled fund and not buying an annuity means that you will probably miss out on good growth on the part of the pot that won't be spent for some years to come. 

Traditionally lifestyling was geared towards buying an annuity.
However this has been changing in recent years.
Most plans will now have a choice of lifestyling options; for annuity: for drawdown; for a short drawdown etc
Some providers at least now use lifestyling for drawdown as their default option for new customers.
Probably there will be lots of people still in historical annuity lifestyling plans that are innappropiate, but you can not just assume all lifestyling plans are geared towards annuities.
OP you need to check what kind of lifestyle fund it is.

Thank you.  That's my task this week, then!

Aylesbury_Duck

Albermarle said:

Aylesbury_Duck said:

El_Torro said:

Do you plan to buy an annuity? If so the lifestyling makes sense, otherwise it doesn't. 

Vanguard probably offers lower total fees than anything Scottish Widows could offer you, so from that perspective it makes sense to ditch Scottish Widows and move to Vanguard. Just depends on how much the accidental death benefit is worth to you.

If your concern is paying the lowest fees then there are cheaper platforms out there than Vanguard.

Thank you.  Is that because lifestyling is designed to provide the most secure pot by a target retirement age with which to buy an annuity, whereas if I were to invest fully in equity funds, for example, I might use flexible drawdown and therefore would ideally have continual growth of the plan as I draw from it?  If I lifestyled and went for drawdown, I suppose the remainder wouldn't be expected to grow much because it would be in safe, lower-risk assets like bonds and cash?

As you can tell, I'm gradually learning more about all of this, so points like yours are helpful to check my understanding!

If you were in 100% equity in drawdown it could be quite a bumpy ride. In the first year of your retirement it might drop 40% , so you would be very exposed to 'sequence of returns' risk ( google it) .
A mix of 50/60% equities and the rest mainly bonds/gilts/cash is a more usual mix.

Thank you.  I see what you mean.  I think I'm fairly well insured there for two reasons.  One, a chunk of my and my wife's ISA investments are in VLS60, and two, we hold about £85k in cash ISAs.  We should, if all goes well, be able to leave pensions alone for a while in a bear market, and fall back on cash initially, but recognise that a sustained bear market would necessitate cutting some costs or dipping into those investments less affected by drops.

However, I'm naturally quote cautious, so I'd be unlikely to go 100% equities, probably favouring something like the VLS20-80 products.