Getting started with a SIPP

Johnny_P · 14 March 2019 at 5:17PM

Hi
I am just preparing for retirement and have come across this forum. Having read lots here and elsewhere and with my pensionwise meeting under my belt, I feel reasonably aware of my core options and decided on the way I want to go forward.
In the first of what will probably become many posts I would appreciate some guidance and opinion as I work my way through.
I am approaching 55 and have approx £500K made up of 4 DC schemes and a Final Salary DB scheme with a quoted transfer of £150K (including £30K from an AVC scheme) .
I also have savings and no mortgage.
My plan is to transfer all into a SIPP and manage it myself from there, moving it in lumps into 'paid up' accounts from where I will take the tax free bit and dribble a pension to keep below tax levels. I do not intent to use a Financial Advisor.
The plan is to have this is place in time for my 55th birthday at the end of this year, so that I can then begin to take some money out (more on that one in the future).

My first questions are therefore simple ones ( think).
Looking at what appear to be the most popular SIPP providers, on £500K fund, HL charge £1700 and Fidelity £1100 a year. The only concerning negative re Fidelity appears to be clunkiness of the website, which I think I can live with for £600 a year saving on charges. Accepting that some ongoing charges may vary so this is not a definitive difference, is this correct or should I look at other providers?

Also what is the accepted process for setting up a SIPP? Is it reasonable to expect them to see me in person (me to them or them to me) and get to ask the difficult questions and see a demo of fund selection/management etc? Or should I expect to just go to the website and set it up from there and then transfer my existing funds over one by one?

Thanks for advice

MallyGirl · 14 March 2019 at 5:24PM

You have to use a financial advisor if you want to transfer out of a DB scheme and the transfer value is more than £30k.

You will be hit with significant fees for this, after you have managed to find someone prepared to advise. If their advice is not to transfer and you still want to then you will have to find a SIPP provider who will take that money when it is against advice.

MallyGirl · 14 March 2019 at 5:27PM

Johnny_P wrote: »

My first questions are therefore simple ones ( think).
Looking at what appear to be the most popular SIPP providers, on £500K fund, HL charge £1700 and Fidelity £1100 a year. The only concerning negative re Fidelity appears to be clunkiness of the website, which I think I can live with for £600 a year saving on charges. Accepting that some ongoing charges may vary so this is not a definitive difference, is this correct or should I look at other providers?

I think you need to look at some of the fixed fee providers - maybe interactive investor?

Johnny_P wrote: »

Also what is the accepted process for setting up a SIPP? Is it reasonable to expect them to see me in person (me to them or them to me) and get to ask the difficult questions and see a demo of fund selection/management etc? Or should I expect to just go to the website and set it up from there and then transfer my existing funds over one by one?

Thanks for advice

it will just be apply online and fill in any required forms - if you go down the DIY route

Johnny_P · 14 March 2019 at 5:40PM

Thanks Mallygirl and my apologies for starting well in mixing up my DC and DC schemes. I have corrected therm above in my post as it doesn't change the relevance of your comments.

I have contacted my DB provider as I thought I needed formal advice to be allowed to transfer out as a cash equivalent, but they have said that they would recommend but not require advice. I can recheck this with them, but is there a Govt 'rule' reference I can crosscheck with?

Appreciate the other comment. I had a feeling that they would point me at the website to set up the SIPP.

Albermarle · 14 March 2019 at 5:49PM

I have contacted my DB provider as I thought I needed formal advice to be allowed to transfer out as a cash equivalent, but they have said that they would recommend but not require advice.

This is not correct. To transfer out of a DB pension you have to go to an IFA with the correct qualifications , who will do a detailed analysis of whether it would be a good decision or not. It will cost a few Grand but without it your DB scheme is not allowed to start any transfer .
More importantly with £500K already exposed to the market , why would you want to give up the security of a fixed income to expose yourself even more to the market ?

OldMusicGuy · 14 March 2019 at 5:58PM

Albermarle wrote: »

More importantly with £500K already exposed to the market , why would you want to give up the security of a fixed income to expose yourself even more to the market ?

I can only agree with this. Some secure income from a DB pension (which will be augmented by SP when you get to that age) plus a reasonable sized DC pot seems the ideal combination to me.

I have everything in a big DC pot and would much rather be in your current situation. Of course, it's your call if you feel confident about managing investments.

xylophone · 14 March 2019 at 6:15PM

I have contacted my DB provider as I thought I needed formal advice to be allowed to transfer out as a cash equivalent,

And you thought correctly.

See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-transfers-conversions/

xylophone · 14 March 2019 at 6:23PM

And have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Johnny_P · 14 March 2019 at 6:30PM

Thanks for confirmation Albermarle.

To be honest my initial plan was to take the DB pension as a secure regular pension and the rest as a SIPP. However, a friend went through this with a FA and ended up taking cash for 3 DB pensions. It made me look at the option myself.
I am a spreadsheet person and if I assume RPI at 3% and that I die at 90 as my baseline.
There are a number of options on the DB pension but the total paid out is in the order of £265K.
If I take the cash equivalent and take the same pension and get 2.5% growth in the remaining sum then at 90 I still have £30K in the bank, so a 10%+ difference. There are other benefits should I die young in respect to how much my wife would get (50% pension compared to payout of the lump left).
It is close as I get why the difference would not be enough to counter the risk of a 2008 hit to the pot. However, to me the money is not going to be critical to my lifestyle so the benefit is just there.
Having said that, if it becomes a real fag to make it happen then that might outweigh it and I guess I could move everything else and just leave this pot alone and make a decision as to pension or cash equivalent after the dust has settled on the rest.
Really appreciate the challenges, this is what I need to make sure I have thought things through, this has already given me a thought on a mid plan that holds the options open.

Johnny_P · 14 March 2019 at 6:32PM

and thanks Xylophone yes I have a state forecast, am OK with 33 years, £10 short a month of maximum.

shinytop · 14 March 2019 at 7:07PM

I'm also in the process of researching SIPP providers. Another alternative is AJ Bell - seems about the same price as Fidelity for your size of pot but with less of the complaints about the interface.

BTW I also have DB plus DC. I've had a CETV for the DB and even though it's a lot of zeroes, I'm not tempted.

Getting started with a SIPP

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