SIPP - Transferring into

jmartinscotland

Hello

My husband and I are looking to transfer our Personnal Pensions into a SIPP.

We are doing this for a number or reasons:

1. My husband who is 46 has just "retired" from local council so his pension is currently frozen in the council's superannuation scheme. Value of pension is £160,000. He is currently being "creative" and not making any contributions.
2. My pension (I am 43) is currently in 2 x Lincoln Policies and 1 x Abbey totaling £28000
3. I run a number of Childrens Nurseries and we are looking to expand. One method to utlilize the funds that are currently frozen is to use these funds to purchase another nursery property and the business to rent it from the pension fund.

We have taken advice and feel this is a good use of the current pension and allows the pension to grow in a tax efficient manner.

My question is that I keep getting conflicting advice with regard to the cost of transferring and managing the sipp. They range from a one-off fee to a yearly commission, from us having to pay the transfer fee out of our own pockets to it being paid by the fund etc etc etc

The fee to transfer seems to be around 3% of the fund value- that would be a fee of around £5600 - how difficult can transferring funds be? What is involved in transferring into a sipp that would command such a high cost?

Any help and advice would be appreciated.

Jennifer

TerryBlue

SIPPs are a minefield aren't they!

I left Local Authority employment several years ago and recently tried to move my 'frozen' LGPS pension into a SIPP, but couldn't as it was a 'contracted out scheme'.

Still not sure what to do...

I found this Investment Information site useful for finding SIPP companies. The best seem to be:

(Not affiliate links)

Hargreaves Lansdown
Killik & Co
Barclays Stockbrokers
James Hay

Does anyone know where you CAN move a LGPS pension to?

dunstonh

Can you clarify...

Are you proposing moving final salary pension schemes into a SIPP?

What is involved in transferring into a sipp that would command such a high cost?

Cost of liability as well as admin, knowledge and experience. If the pensions are final salary schemes then probably mis-selling if they do it.

jmartinscotland

Yes it is a Final Salary

Why, if Mike does not expect to make any futher contributions to this Final Salary Pension, is it not a good idea to get it out into something that will grow at a decent rate and get regular contributions from a rental income?

Mike has also lost his Death In Service benefit.

Why is this such a bad idea

purch

Why,

It's in the rules.......:rolleyes:

'Any I.F.A. who recommends transferring out of a Final Salary scheme into anything that isn't a Final Salary scheme, will be beaten about the head with 20 year old copies of the Daily Mirror, and then lobbed off the roof of Canary Wharf !!!!:eek: '

dunstonh

The "real" reason is that consumers complain and ask for redress when they find out what they have done is wrong. It is estimated that in 9/10 cases transferring out of a final occ scheme (especially a govt scheme) is the wrong thing to do.

With such a high failure rate, most pension providers will not accept final salary pension transfers without an IFA signing off on them first to protect themselves from future claims.

EdInvestor

jmartinscotland wrote: »

Why, if Mike does not expect to make any futher contributions to this Final Salary Pension, is it not a good idea to get it out into something that will grow at a decent rate and get regular contributions from a rental income?

Why is this such a bad idea

The LGPS pension benefits are guaranteed to grow in line with inflation up to the level of 5%.´The pension is not in fact frozen. Transfer values normally understate the amount needed to replicate the benefits through private investment, particularly when costs are deducted and they take no account of the shift in risk.

In addition you can´t yet put contracted out (protected rights) money into a SIPP.

It´s definitely not a good idea for a married person to move a Government guaranteed final salary pension into a SIPP and I doubt if any IFA would recommend it or provider accept it.

No reason why the other pensions can´t go into a Sipp though.

www.sippdeal.co.uk
www.h-l.co.uk

are low cost providers who won´t require you to get approval from an IFA to do so.

jmartinscotland

What a great site - this is exactly what I need - to see both sides of the argument (but according to all the experts on this site there is no argument!!!)

I have spoken to 2 IFA's and neither has indicated that moving a Final Salary Pension to a Sipp was a ridiculous idea. In their defence they did have more information about the state of our finances than I have given you guys.

We currently have various investments\businesses worth around 1.5million so I suppose that when we look at a pension of 12K a year, which we can't do anything with for 10/20 years, it seems like dead money. By investing it expanding our business we not only potentially increase the fund by more than inflation but also net an additional £25K a year return in the further investment. So I suppose we are not looking to Mike's pension as a "pension" Also we are both concerned that if anything happens to him in the next 20 years the widows pension is only returning £4K per annum.

Can someone tell me how much of a pension pot you would need to achieve a annuity of £12K a year (I hope that's the correct terminology!!).

EdInvestor

jmartinscotland wrote: »

Can someone tell me how much of a pension pot you would need to achieve a annuity of £12K a year (I hope that's the correct terminology!!).

www.fsa.gov.uk/tables

Don´t forget to factor in spouse benefit and (especially) index linking which is very expensive. About 450k is probably the current damage, more if you are looking at earlyish retirement.

jmartinscotland

Edinvestor - thankyou for that link it is very helpful - it will allow me to look at different scenarios. Mike's current pension is not accessible until he is 65 - we could potentially build the pot to around £350K in 10 years through rental which means that we could transfer that to an annuity and start drawing down earlier if we wanted to and it wouldn't be far off the 12K plus we would also have had 10 years worth of additional return on our investment.

Point taken re. the spouse pension - I keep forgetting about it....

If we decide to go down this road can anyone give me some pointers to what to expect re. the costs involved in moving this to a SIPP.

EdInvestor

Online SIPPs are cheap.

www.sippdeal.co.uk
www.h-l.co.uk
www.alliancetrust.co.uk

But they don´t do commercial property investment, for which you have to pay much more.

Don´t forget you will lose control of the capital in the pension and can only now borrow 50% of the value of the pension fund. Another disadvanatge is that you will probablyhave to sell the property when you want to take the income, and it may be a bad time to do that.

IMHO it is better to keep CP investments outside pensions.