Should I transfer my SL pension to my SIPP

happyhero · 12 May 2018 at 10:42AM

Hi, I have just had my Standard Life Group Personal Pension One statement.

I ‘m going to ask these questions in what will probably come across as a very gung ho or blase way which will probably make you think my attitude is all wrong to handle large sums of money, but I believe I should ask how I see it.

I am considering transferring this pension to my SIPP to manage it myself as I do not think the return looks great, so can you tell me what you think please? I think I can do a lot better.

I am 57 and have been actively investing in shares and funds with ISA’s and a SIPP since 1992. I have managed to stay in the game without losing it all and I would say have consistently made profit for more than 10 years now. As my pot, as I call it, goes up I take half to live on and invest the other half to increase my pot. This is my main income. Dividends I always take as cash but re-invest them manually.

Now I have a standard Life pension from my last job and I have been calculating the figures, here they are, and I do not contribute a penny to this anymore since I left my job. So this is how it has grown over the years.

Start at APRIL 2006 was £16889.66
APRIL 2007 £19775.58
APRIL 2008 £19446.11
APRIL 2009 £15488.32
APRIL 2010 £20456.49
APRIL 2011 £21887.86
APRIL 2012 £21588.36
APRIL 2013 £24908.29
APRIL 2014 £26640.57
APRIL 2015 £29967.85
APRIL 2016 £28511.31
APRIL 2017 £33746.79
APRIL 2018 £34740.93

I have calculated the average interest rate increase for the above and make it 7%.

The statement I have just received says that my pension could reach £40,800 by January 2026 which is the scheduled payout date for this pension and this could generate a pension of £1026 which I calculate at a percentage of 2.51% of the pot. This figure assumes no lump sum taken. I feel this 2.51% is a pathetic payout on my £40,800 that they will keep. So I am feeling it better to transfer the lot to my SIPP and grow it myself to the £40,800 or hopefully more and keep the £40,800 or more plus the growth on it which I am sure will be more than 2.51%.

With these low rates I feel it a small task to beat what Standard Life is offering me but what do you think?

I would like to give figures here for my performance of the years investing but its not so simple as I have slowly added sums of money over the years from various sources and taken income each year so the figures would not be clear to judge my performance

Any advive/comments appreciated.

El_Torro · 12 May 2018 at 10:58AM

7% growth since 2006 looks OK, more or less what you!!!8217;d expect the long term average to be. So leaving it where it is until you want to start drawing down is not a bad option. Moving it to your SIPP now is not a bad idea either, assuming you invest it sensibly.

You are right in saying that the annuity rate you have been offered is poor. So your idea to drawdown instead is sensible enough. Like i said though you do not need to do anything about it now if you want to wait.

MK62 · 12 May 2018 at 11:05AM

I suspect the payout projection is for buying an annuity - I think SL offer drawdown as an alternative, but you may have to ask for your scheme. Annuities aren't the best value at the moment, but that could change by 2026.

As to whether 7%pa over 12 years is bad, it really depends on what the pension is invested in....if it's invested in high risk assets, then it's arguably a bit on the low side, but if it's in lower risk assets, then personally I don't think it's too bad for a pension, but I suppose we all have our own view on risk/return.

Have you checked on the charges involved and whether you'd save anything by moving it - you can often invest in exactly the same assets for less at an alternative provider, but it can just as easily work the other way too.

dunstonh · 12 May 2018 at 12:57PM

I am considering transferring this pension to my SIPP to manage it myself as I do not think the return looks great, so can you tell me what you think please? I think I can do a lot better.

Why do you think the returns do not look great? This is important as if you cant understand how investments work and made bad decisions based on that then you are likely to end up with worse outcomes.

The statement I have just received says that my pension could reach £40,800 by January 2026 which is the scheduled payout date for this pension and this could generate a pension of £1026 which I calculate at a percentage of 2.51% of the pot.

Projections are just a selection of assumptions which may or may not be accurate. Plus, there is the reduction to show it in todays spending power rather than the actual value it will be. Which you do not appear to have taken into account. Plus, the assumptions assume worst case options typically. i.e. using an annuity with spouse on an increasing basis. an option hardly anyone goes for. So, do the assumptions match what you will be doing?

I feel this 2.51% is a pathetic payout on my £40,800 that they will keep. So I am feeling it better to transfer the lot to my SIPP and grow it myself to the £40,800 or hopefully more and keep the £40,800 or more plus the growth on it which I am sure will be more than 2.51%.

That figure is made up. Its a hypothetical. Your SIPP would have the same figures if you used the same assumptions in the calculation. Investment returns have absolutely nothing to do with hypothetical calculations on what you may get back.

ColdIron · 12 May 2018 at 2:12PM

Group plans have capped charges, my SL pension was 0.55% before I moved it for drawdown. They often have death in service benefits as well. Would your employer pay into your SIPP? I'd consider these factors and any others before jumping

MK62 · 12 May 2018 at 2:38PM

My SL Group Pension has high-ish charges on the funds themselves, but then applies a 0.75% scheme discount to those charges - which makes it quite competitive, especially as there are no further charges...eg for withdrawals.
So it's worth checking your SL scheme out thoroughly before making any decision.

You may also find there are alternative funds you can move into if you aren't happy with the performance of the fund(s) you are currently invested in.

dunstonh · 12 May 2018 at 3:17PM

My SL Group Pension has high-ish charges on the funds themselves, but then applies a 0.75% scheme discount to those charges - which makes it quite competitive, especially as there are no further charges...eg for withdrawals.

Although the standalone insurance company based pensions are usually cheaper. Typically around 0.35% to 0.55% nowadays. The workplace scheme cap brought charges down but it sort of acted as a benchmark to hit. Whereas there is no such benchmark on individual plans (technically, the old 2001 RU64 rule still exists but that was a 1% benchmark to make sure stakeholders were considered. So, its long out of date).

I have seen SL workplace schemes at 0.25%-0.35% as well as those at 0.75%. (and of course, all the non-personalised literature, such as fund factsheets, refers to them as 1% despite the real charges being much lower).

cloud_dog · 12 May 2018 at 3:27PM

happyhero wrote: »

I am 57 and have been actively investing in shares and funds with ISA’s and a SIPP since 1992. I have managed to stay in the game without losing it all and I would say have consistently made profit for more than 10 years now. As my pot, as I call it, goes up I take half to live on and invest the other half to increase my pot. This is my main income. Dividends I always take as cash but re-invest them manually.

Just a word of caution....it is easy to make money in a rising market. And, we have been in a bull market for the last 10 years.

happyhero · 12 May 2018 at 6:24PM

To try an answer some of the questions above, I explain further why I am thinking the way I am. I can!!!8217;t easily illustrate my own ISA and SIPP performance with all the top ups and withdrawals but I manage my families ISA!!!8217;s and SIPP!!!8217;s too. Their ISA!!!8217;s and SIPP!!!8217;s contain different pots but resemble very closely the holdings in my account and so I feel give a good guide to my progress (I tend to buy and sell the same stocks and funds in all accounts with a variety in holdings to protect against risk). So looking at my sister in laws accounts which I have managed for 6 years now as a guide, accounts which have not had anything added to or taken away from them the average return over the 6 years has been just over 12%(this is after all charges) .

Now when I look at the average rate of 7% growth on my Standard Life account hopefully you can see why I see it as a low average compared to what I can do with it over the next 8 years until 2026 arrives. Compounded over the years it makes a fair difference.

Then when I look at their hypothetical figures of £40,800 and giving me a return of 2.51% and they keep the £40,800 it doesn!!!8217;t feel like its worth considering leaving it with SL. If I take it, I get to figure the £40,800 or whatever the amount is into my drawdown income, using it when I am really old or passing it on as inheritance and there!!!8217;s a big difference between 2.51% and 12% but even if I only manage half that I still get the £40,800 or probably much more and 6% is still much better than their rate.

I can appreciate that 2.51% is their hypothetical rate for the future and could change either way, so could I not argue that my 12% may also change either way. I have found my achievable rate always seemed to be significantly higher than what these types of accounts were offering for over 10 years now looking at families dealings with their pensions. I know I!!!8217;m generalising a bit but that is all I have as a guide as there is nothing concrete in investing so far as far as I can see.

Personally when I saw 7%, I thought well that!!!8217;s not great but when I then saw their illustration of 2.51% and compared that with my families paperwork in recent times which seemed closer to 5% it sort of confirmed to me that I have no choice but to take this money and manage it myself through my SIPP and Drawdown.(I could be making a return of 12% on that £40800 or more if I'm lucky).

By the way I have no employer as I live off my investments (ColdIron above mentioned my employer).

zagfles · 12 May 2018 at 6:56PM

happyhero wrote: »

Start at APRIL 2006 was £16889.66
APRIL 2007 £19775.58
APRIL 2008 £19446.11
APRIL 2009 £15488.32
APRIL 2010 £20456.49
APRIL 2011 £21887.86
APRIL 2012 £21588.36
APRIL 2013 £24908.29
APRIL 2014 £26640.57
APRIL 2015 £29967.85
APRIL 2016 £28511.31
APRIL 2017 £33746.79
APRIL 2018 £34740.93

I have calculated the average interest rate increase for the above and make it 7%.

How have you calculated that? I make it 6.19%.

You've either not accounted for compounding properly or you're incorrectly using the arithmetric average rather than geometric.

The statement I have just received says that my pension could reach £40,800 by January 2026 which is the scheduled payout date for this pension and this could generate a pension of £1026 which I calculate at a percentage of 2.51% of the pot. This figure assumes no lump sum taken. I feel this 2.51% is a pathetic payout on my £40,800 that they will keep.

It'll be an illustration they'll be forced to use, not a prediction. Also what do you mean "that they will keep"? It's presumably on the assumption they'll use it to buy to annuity.

Thrugelmir · 12 May 2018 at 6:59PM

happyhero wrote: »

I would say have consistently made profit for more than 10 years now.

Very difficult not to. The GFC hit the markets between 2006-2008. Since when Central Banks globally have had the entire financial system on life support. Allowing banks and other financial institutions to rebuild their balance sheets. While forcing savers and investors alike to buy risky assets. As cash on deposit earns sub inflation level rates of return. Resulting in a huge level of complacency in investors. Who believe markets only head in one direction.

Low interest rates have kept many zombie companies alive. Though as the recent events on the High Street have shown. Even this is no longer enough. Eventually there's a tipping point which will trigger a chain reaction in the most unexpected quarters.

Should I transfer my SL pension to my SIPP

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