Legal and General Pension Transfer Options

AdrianGB23

My work pension plan is closing and I am being asked to either transfer it into a Legal & general deferred annuity policy OR a Legal and General SIPP Group Pension Plan with an admin charge of 0.125%pa.

I am 37 and earn £54k

Do you think I should transfer into the SIPP or find a new SIPP? Is the L&G product (A consensus Index fund) a decent one for the long term?

Also if I do find a new SIPP will that mean I won't get employer contributions (which whilst low, still exist)?

Sorry for the question - I am normally okay with finance, but pensions just baffle me completely.

dunstonh

Do you think I should transfer into the SIPP or find a new SIPP?

Do you have the knowledge and experience and desire to utilise direct investments and run a product which is generally designed for the more experienced investor?

Is the L&G product (A consensus Index fund) a decent one for the long term?

Dont mix up product and investment. L&G do a good stakeholder. Their personal pension is a bit of a let down and the Section32 buy out bond will depend on the terms given. The SIPP has a few good things and a few bad. If you are just picking mutual funds and not unit trusts then it will have charges that match the personal pension/stakeholder.

The investment fund you are picking is wasteful for the amount you have.

Also if I do find a new SIPP will that mean I won't get employer contributions (which whilst low, still exist)?

You need to ask the employer if they will make contributions direct to your own scheme. Probable answer is no.

I am normally okay with finance, but pensions just baffle me completely.

Which makes the choice of SIPP seem inappropriate. The L&G SIPP may be more suitable though with its option of basic investments at lower cost.

bigbloke45

The L&G deferred annuity seems to merely be the buy out for your pension i.e. your employer is transferring his pensions liabilty to L&G for some sort of premium, on this basis I think that your pension rights accrued to date will be guaranteed by L&G.

The gamble then is, do you think transferring to an L&G SIPP will get you more money at retirement? The answer is, you will only find out at your retirement!

If there is an ongoing employer contribution, then I think you should take it. The L&G concensus fund is merely a fund that looks at the average of what all of the other managed funds are investing in and then does it!

Keep on checking!

Retired_I.F.A.

bigbloke45 wrote: »

The L&G deferred annuity seems to merely be the buy out for your pension i.e. your employer is transferring his pensions liabilty to L&G for some sort of premium, on this basis I think that your pension rights accrued to date will be guaranteed by L&G.

Correct, its a section 32 buyout bond purchased by the company.There is no investment risk/reward involved the member merely gets a pension on maturity stated in the policy. However it's value up until then will fluctuate.
When an employer finally pulls the plug on a scheme he has to meet the liability still so he asks an insurance company to quote for taking over that liabilty in this case L+G. and if the member does nothing it'll go to them by default. but can still be transfered anywhere at any time by the member but as I said it's value will fluctuate.

The gamble then is, do you think transferring to an L&G SIPP will get you more money at retirement? The answer is, you will only find out at your retirement!

There is a very good chance of improving on it actually especially if the ceeding scheme is underfunded.as L+G costed the purchase price not on future equity expectations but on current gilt yields. In my experience defered annuty contracts have always given a higher transfer value within days after being purchased by the company because the employer would have prefered the member to take the schemes transfer value which accounted for possible underfunding. The purchase price of the defered annuity certainly did not..

AdrianGB23

Thanks guys for the responses - some of which went above my head!

It looks like the employer will only contribute into the Group Personal Plan option ie the L&G SIPP - so it looks like I will have to do that.

I will continue to use it because I guess it makes tax sense - but I do not think I will have a great fund to rely on in retirement from it.