Income Drawdown & SIPPS

Gatser

I am told that DRAWDOWN does not have to be made via a SIPP.

It is possible to transfer pension funds into a "Drawdown product" which can be cheaper than operating a SIPP.

Does anyone know about such products?
Is this correct ?

Thanks

dunstonh

I am told that DRAWDOWN does not have to be made via a SIPP.

Correct. A number of providers offer it on their personal pensions or specific drawdown plans.

It is possible to transfer pension funds into a "Drawdown product" which can be cheaper than operating a SIPP.

Yes.

Does anyone know about such products?

For larger fund values (100k plus) you are looking at Selestia, Scottish Widows Retirement account and transact as three potential "modern" plans that allow drawdown. However, all three require the transaction to be placed via an IFA (although it can be on execution only).

There are others but SW and Selestia have the advantage that they can have fund based trail rebates for unit trusts.

Gatser

I am surprised that most people go straight for a SIPP
(as the latest fashionable finanancial "must have")
when drawdown can be achieved more cost effectively via these GPP products.

It would be interesting to hear feedback on "Non-SIPP Drawdown"

The +'s and -'s ?

EdInvestor

Most insurers offewring drawdown will only accept large funds of 100k or more and the only cost-effective investment options are funds. Costs in insurer drawdown will be roughly the same as a low cost fund based SIPP, not cheaper, and you may find that service and fund choice is much better in the SIPP.

.However at the moment only insurer drawdowns can accept protected rights funds (this is expected to change in October).

There are also a wide range of cost levels in SIPP drawdowns.If you want to invest in say shares,gilts and investment trusts, have a fund of 100k or lower and don't need advice, you will be much better off in a low cost SIPP drawdown.

It's worth noting that the average pension fund in the UK is worth around 35k.

dunstonh

SIPPS are fashionable but far too many people have them who shouldnt. Both through advised and non-advised channels. I dont have a SIPP and invest in unit trusts/oeics/sicavs within my personal pension and pay less in charges than I would picking the same on a SIPP.

Most insurers offewring drawdown will only accept large funds of 100k or more and the only cost-effective investment options are funds.

Its been estimated that over 90% of SIPPs taken out after A day have gone into funds. Not what SIPPs were intended for. So, the funds limitation on most personal pensions isnt really an issue for most. Increasingly the drawdown limits are falling but there is still concern that from a regulatory point of view, income drawdown is not suitable for those with limited income sources and that typically means those with small fund values.

Costs in insurer drawdown will be roughly the same as a low cost fund based SIPP

I would say costs in an insurer drawdown will likely be more on small funds (under £100k) but less on larger funds. Remember that drawdown is still a minority event and the big providers are generally not interested in taking on small funds. It isnt cost effective for them.

and you may find that service and fund choice is much better in the SIPP.

I disagree. Smaller companies will often have better service but as they grow they will start to suffer the same problems all large companies have. We have seen evidence of HL's service starting slip with misinformation being given. Yet they are often held up as an example of a good SIPP provider.

It's worth noting that the average pension fund in the UK is worth around 35k.

Which is crazily low really. The old insurance salesforces were dinosaurs and created all sorts of issues regarding mis-selling but one thing they were good at was getting people to put money into regular contracts. With most of them gone now, people that were paying £50pm 15 years ago are still paying £50pm when it should have trebled in that time. The salesforces would have got many to increase their premiums over that period. A return of salesforces with a limited and fixed structured product range aimed at the bottom end of the market is what is needed.

Gatser

Thanks for the feedback.

My GPP funds (Std Life) are well above average, but the scheme limits me to a maximum of 14 funds, hence my need to look at transferring to a SIPP or other vehicle that will facilitate Drawdown in 5 years time.

Having said that, 30% of the fund is in Std Life Property so I will need to tread carefully. (Not even sure I will be allowed to cash in at this stage, although I believe Property funds are slowly recovering)

I suppose I should make a wish list and then compare the various SIPP and Insurers offerings. I thought of the following:
- Investment range (Funds / Shares / Gilts / Other)
- Discounts?
- Charges / Costs
- Online access?
- Other ?
Any suggestions for missing points?

EdInvestor

Also look at SIPP admin (costs and efficiency).For property funds, in a SIPP you can use offshore investment trusts, which have no hidden nasties such as lockins, and will continue to pay out your dividend income even if the capital value goes down. Ueful for anyone in drawdown, as are shares that pay dividend income, meaning you can can leave the capital alone to recover at times of market volatility.

Gatser

...and CASH in a DRAWDOWN vehicle, I felt that could be quite useful at times so I will also consider:
- Interest rate on the CASH Account.