Thoughts - Do I need 2nd Pension provider?

Pat38493

I have recently retired, and I want to transfer out from my Aegon employer pension which has about £101K in it (uncrystalized).  This pension has 0.25% charges and also it will not let me use ETFs, and only a limited range of funds (although I do benefit from zero transaction charges).

I already have an Interactive Investor SIPP with £398K drawdown pot.

Other than that, my wife has a small pot with the £2880K per year currently worth 8K at AJ Bell SIPP.

Then we have about £160K outside of the pensions in Trading 212 S&S ISAs and GIAs spread between myself and wife (some of it is in uninvested cash).

Is this sufficient diversification in providers to mitigate IT risk?  I am not really worried about the risk of provider failure, only about the risk of not being able to make withdrawals due to cyberattack or other IT problems at the provider.

From a charges point of view it makes most sense to transfer the Aegon pension to II as I am already paying the fixed charges, and as far as I know, II does not charge seperately for drawdown and U/C so I ill save all the Aegon charges.

dunstonh

Is this sufficient diversification in providers to mitigate IT risk? 

The vast majority of people have one platform and have no issues.
The key is to avoid companies that are non mainstream or use legacy systems that will need software moves in the near future but don't have the budget available to do it.

Veloflyer

You and your missus seem to have II and Bell so should be fine. However, I would ensure there is roughly an equal pot in both - just in case. I'd also recommend holding about 2 years worth of spend in cash to draw on if the markets crash. Selling equities for income during a crash/low price does your future prospects no good whatsoever. 

gm0

I am probably one of the forum "pro" multiple provider advocates.  

And I am now less convinced than I was 4 years ago.  The changes to IHT in 2027 and the need for executors to work with additional providers - is going to make this more burdensome (for executor) than it was prior.  As the debits of IHT to pension benefits - and these being accurate.  Are a muddle. (As you would expect a priori now).  But complexity in the aftermath - is now higher.  Than before the reforms.

The more general argument to control the risks you can control - in terms of the hit (risk impact) to you of any one mistake - a selection you made, a fund manager scandal, an IT outage, unintended yet real impact on a tax wrapper of a tax code change - what ever it is.  All of these can be hedged by diversification of what, where and how you hold pension assets. And it is a risk you can control.  Should you?

As dunstonh with wide experience of advised clients and ex DIY folk observes.  Most people do not bother with this.  A lot more visibility into the data set than an individual DIYer like me - who does not work in the sector.

I did do it

I have a technology background and wide operational experience of large scale operations, critical stuff and DR and Busness Continuity.  You can't stop bad things happening.  You can - to an extent - wall off the impact of individual things proactively.  But in that world - as here - added complexity can bring its own unintended consequences.  Panaceas and free lunches are not regularly to be found.

So hedging - platforms -comes at a complexity cost.  It may come at a small incremental financial cost (that depends on what you hold where and whether you milk cashbacks.  It is not the main driver unless you choose your multiple platforms - poorly.

MallyGirl

I have opted for a HL SIPP alongside II but it is for the little twiddly stuff to keep II simple. HL will do the 3 small pots and will be where I put my £3600 a year contribution. II will not receive any more contributions so I won't need to faff around with the notional percentage split approach that they operate.

dunstonh

As dunstonh with wide experience of advised clients and ex DIY folk observes.  Most people do not bother with this.  A lot more visibility into the data set than an individual DIYer like me - who does not work in the sector.

That's a fair point, as advisers consider the platform's financials, have experience with the software, and know whether it is built in-house or third-party provided.      You also have track records.  For example, Lloyds has historically been a company that pours significant resources into a project that becomes its in-house fashion for a while.    Then it moves onto something else, and the resources dry up. Often, to a point where the old project is no longer viable, and they start again.  They are not the only ones, but it is one I have observed more closely than others.   Recently, they have been throwing money at advice and DIY platforms but my fear would be what happens when they move on.

Historically, IT issues have occurred when software is in-house, lacks resources, and becomes dated and difficult to code easily to reflect changes, or when they then have to start from scratch and migrate from old to new.  Migrations nearly always have an issue.   Usually minor but there have been cases or long delays on certain transactions post migration.       

gm0

I think they all do it.  

When ROI doesn't appear - sales and profit targets missed. Initial enthusiasm to push in a load of capital dries up.  Meanwhile an IT director may be trying to quietly tap the stream of new money around a new theme to achieve long necessary yet unfunded repairs to the motherships foundations.  More for less don't you know. 

More "technical debt" - in the jargon - than funding for maintenance. Sinking slowly into the swamp.  50 important ones but 2000 applications that people cling to like limpets.  IT capital planning via exploiting the solution and politics of the new new thing.  To resist this parasitic behaviour - some will argue to do a startup and spin out a green field solution. Just ignore everything.  Then run alongside.  Yay - yet more IT.  And stodgy retail banks as hands off VCs.  Bless their hearts.

Perhaps a totally separate brand?. Or use the brand but ruin the startup with big corporate oversight at each step because - must protect the brand/satisfy the regulator.  And this product cannot be the "only one" which ignores all those rules which as a big player we need to be seen to follow - as not actually a new entrant. 

All big retail banks are is an IT and customer service operation, with an interest rate spread setter stood at the back and a mediocre marketing department tacked onto the front. 

How they employ so many other people claiming to be bankers is a mystery.

Some have their mainframes and own clustered data centers still. With the 90s/00s wave of front ending with web/java/linux providing channel stuff on the front of old product stuff.  Then some more recent AWS cloud based stuff tacked on as well. (c.f the recent Amazon east coast US name resolution outage and it's read across to UK banks web sites.  Golly - if you code a load of third party stuff into your web apps and scripts without planning in great detail for it disappearing or being unreachable - and it in turn is dependent on who knows what else.  Expect excitement

Several have spent a fortune going after "wealth management for the mass affluent".  Comedy gold.  Let's take the personal service out (oh no that was wealth management's ONLY distinctive feature in the world of regulated advice processes - the pandering and veblen good exclusivity aspects).  Then try to leverage costly/skilled staff via shielding customers from them to balance few of those via cheap admin staff for volume (or now robo/AI) to aim for a lower cost to serve and profit. Yes - let's do it - "Impersonal banking style processes" for an offering that needs to feel exclusive or is nothing.  Our brand is strong enough. People trust us. Delusional.  We need to do it or go extinct when the robos or AI or the "new banks" come for us.  Existential crisis.  And then millions down the pan.  Again.

If I didn't own shares in institutions which regularly do this via UK equities fund holdings - I'd be more sanguine.

We'll not get into it here. But the popular meme "old system bad", "new system good" is a grotesque over simplification but very popular for all its wild innaccuracy. Widely used in non or partially tech literate journalistic coverage of enterprise IT affairs. Anyone outside the game would certainly get that impression.  Media report it that way.  But it is 80% shilling by people selling either software or implementation services.  10% yoof wanting the chance to do something new first time through for themselves.  And 10% true.