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  • FIRST POST
    • happyhero
    • By happyhero 12th May 18, 10:42 AM
    • 1,146Posts
    • 54Thanks
    happyhero
    Should I transfer my SL pension to my SIPP
    • #1
    • 12th May 18, 10:42 AM
    Should I transfer my SL pension to my SIPP 12th May 18 at 10:42 AM
    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 ISAs 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.
    Last edited by happyhero; 13-05-2018 at 12:16 PM.
Page 1
    • El Torro
    • By El Torro 12th May 18, 10:58 AM
    • 304 Posts
    • 278 Thanks
    El Torro
    • #2
    • 12th May 18, 10:58 AM
    • #2
    • 12th May 18, 10:58 AM
    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
    • By MK62 12th May 18, 11:05 AM
    • 239 Posts
    • 168 Thanks
    MK62
    • #3
    • 12th May 18, 11:05 AM
    • #3
    • 12th May 18, 11:05 AM
    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
    • By dunstonh 12th May 18, 12:57 PM
    • 94,525 Posts
    • 62,471 Thanks
    dunstonh
    • #4
    • 12th May 18, 12:57 PM
    • #4
    • 12th May 18, 12:57 PM
    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.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • ColdIron
    • By ColdIron 12th May 18, 2:12 PM
    • 4,558 Posts
    • 5,847 Thanks
    ColdIron
    • #5
    • 12th May 18, 2:12 PM
    • #5
    • 12th May 18, 2:12 PM
    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
    • By MK62 12th May 18, 2:38 PM
    • 239 Posts
    • 168 Thanks
    MK62
    • #6
    • 12th May 18, 2:38 PM
    • #6
    • 12th May 18, 2:38 PM
    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
    • By dunstonh 12th May 18, 3:17 PM
    • 94,525 Posts
    • 62,471 Thanks
    dunstonh
    • #7
    • 12th May 18, 3:17 PM
    • #7
    • 12th May 18, 3:17 PM
    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).
    Last edited by dunstonh; 12-05-2018 at 4:13 PM.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • cloud_dog
    • By cloud_dog 12th May 18, 3:27 PM
    • 3,844 Posts
    • 2,284 Thanks
    cloud_dog
    • #8
    • 12th May 18, 3:27 PM
    • #8
    • 12th May 18, 3:27 PM
    I am 57 and have been actively investing in shares and funds with ISAs 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.
    Originally posted by happyhero
    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.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • happyhero
    • By happyhero 12th May 18, 6:24 PM
    • 1,146 Posts
    • 54 Thanks
    happyhero
    • #9
    • 12th May 18, 6:24 PM
    • #9
    • 12th May 18, 6:24 PM
    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).
    Last edited by happyhero; 12-05-2018 at 6:31 PM.
    • zagfles
    • By zagfles 12th May 18, 6:56 PM
    • 13,326 Posts
    • 11,309 Thanks
    zagfles
    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%.
    Originally posted by happyhero
    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
    • By Thrugelmir 12th May 18, 6:59 PM
    • 59,815 Posts
    • 53,171 Thanks
    Thrugelmir
    I would say have consistently made profit for more than 10 years now.
    Originally posted by happyhero
    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.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • dunstonh
    • By dunstonh 12th May 18, 7:04 PM
    • 94,525 Posts
    • 62,471 Thanks
    dunstonh
    What is the risk level of your ISAs compared to the pension? (perhaps tell us what the equity/bond/property ratio). My gut feeling is that there will be a risk difference (DIY investors tend to invest higher than default options)
    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.
    What if the next 8 years is the counter to the last 8?

    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.
    It sounds like you still dont understand this. If you used the same assumptions on your SIPP you would get the same outcome.

    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.
    They are using an artificially low rate to illustrate a worse than likely option. You are using an artificially high rate to illustrate a higher than likely option.

    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).
    You really really need to understand projections. At the moment, you are way off on what they are telling you. You also need to be much more realistic in your investment returns projections.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • MK62
    • By MK62 12th May 18, 7:39 PM
    • 239 Posts
    • 168 Thanks
    MK62
    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).
    Originally posted by dunstonh

    What I meant was it's competitive with SIPPs.....maybe should have explained that better.

    As an example

    SLI European Equity Income Pn S4.......fund charge is 1.87% (TER)....there's then the 0.75% discount, so net charge is 1.12%.
    The same fund at HL would cost 0.9% plus a 0.45% platform charge, so 1.35%.
    At AJ Bell it'd be 0.9% plus 0.25% platform charge, so 1.15%, but then there are other charges on top of that.
    At IWEB it'd cost me 0.9%, plus the % split of the account charge, plus any dealing/withdrawal charges.

    ....and so on.....

    So I feel it's competitive with the other options I could use!
    I could probably get it a bit cheaper I know, but then cheapest isn't always best way.
    • bostonerimus
    • By bostonerimus 12th May 18, 9:02 PM
    • 2,268 Posts
    • 1,568 Thanks
    bostonerimus
    Your interest rate is 6.1% not 7%. That's perfectly fine and in the range that most people should use for their planning. So does that match up with your expectations and requirements. If it does then you are doing ok.
    Misanthrope in search of similar for mutual loathing
    • sandsy
    • By sandsy 13th May 18, 3:27 PM
    • 1,377 Posts
    • 836 Thanks
    sandsy
    You've had 6.19% over the last 12 years.
    No one has any idea what you will get over the next few years, irrespective of whether you leave it with SL or move it.
    The projections you get won't be much different anyway as all companies have to use the same principles when sending out projections.
    The 40,800 projected figure allows for inflation of 2.5%pa, ie. if it didn't allow for inflation, the figure would be higher by 2.5%pa for each year of the projection.
    The 2.51% income sounds like it's based on an RPI linked annuity - ie. a guaranteed income for life that would increase in line with RPI every year and pay out a 50% spouse's benefit, I'm guessing.
    There's other ways of taking income so if you wanted a guaranteed income, you could take it another way and if you didn't want a guaranteed income, you could take it a different way.
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