Pension fund consolidation advice

[Urbandreamer]

I would also argue that you need to do some serious thinking about what we are all posting.

For example there is much talk about a SIPP. I have one which I use as an investment play thing*. If you are happy with index trackers then your Aviva pension might be as good a solution (I have one of those as well which I consolidated FSAVC's and a former DC into).

I'm not clear on your exact point here, Urbandreamer.

I was concerned about the apparent assumption that you should have a SIPP. There is nothing wrong with doing so, but you would have to stop contributing to the Aviva pension that you currently hold were you to decide to do so.

I know nothing bad about any of the companies concerned, though I personally prefer the Aviva website and offering to the SW one that was previously contributed to by my employer.

Ok, sure. All I can really contribute to any such debate is that SL recently acquired Aberdeen I do believe. Wondered how successful (well informed etc) the whole thing was, and whether there was any trouble lurking there.

Matt

Somewhat ammusingly I hold SLA shares in my SIPP.
They provide a good yield and I believe that people have not lost interest in Aberdeen's funds.

[Alaric]

There is nothing wrong with doing so, but you would have to stop contributing to the Aviva pension that you currently hold were you to decide to do so.

Surely you can set up a SIPP to handle transfers from the schemes of the ex-employers without it affecting current contributions and their destination?

[ursaminortaur]

There is nothing wrong with doing so, but you would have to stop contributing to the Aviva pension that you currently hold were you to decide to do so.

Surely you can set up a SIPP to handle transfers from the schemes of the ex-employers without it affecting current contributions and their destination?

Ever since A-day in 2006 you have been free to invest in as many pension schemes as you wish and can contribute to whichever ones you wish to subject only to the Annual Allowance limit (and Lifetime Allowance limit).

https://www.theguardian.com/business/2006/apr/06/pensions.aday

While previously only those earning below £30,000 a year could invest in a personal scheme alongside their occupation scheme, now everyone can. Anyone can be a member of as many different pension schemes as they like, as long as the amount they pay in is not any more than their annual allowance.

http://www.pensionschemes.co.uk/managing-pension/contributing-to-several-pension-schemes-at-once.html

Since the 6th April 2006, new tax rules allow you to contribute to as many different pension schemes as you wish. It means you could contribute into a stakeholder pension, an occupational pension and a personal pension all at the same time. Whilst this option offers great flexibility, it is worth keeping in mind that each of these schemes will have its own administration charges, and so it is always a good idea to consult an independent adviser before doing so.

[TheMotorcycleBoy]

I would also argue that you need to do some serious thinking about what we are all posting.

For example there is much talk about a SIPP. I have one which I use as an investment play thing*. If you are happy with index trackers then your Aviva pension might be as good a solution (I have one of those as well which I consolidated FSAVC's and a former DC into).

I'm not clear on your exact point here, Urbandreamer.

I was concerned about the apparent assumption that you should have a SIPP. There is nothing wrong with doing so, but you would have to stop contributing to the Aviva pension that you currently hold were you to decide to do so.

Aha...thanks I see what you mean. Don't just jump straight over to a SIPP. No don't worry, I'll do some research first. Indeed perhaps a SIPP will not suit all my requirements.

Somewhat ammusingly I hold SLA shares in my SIPP.
They provide a good yield and I believe that people have not lost interest in Aberdeen's funds.

Yes, I imagine the M&A went ok. I only mention what I did because I work in Tech, we were a UK firm with about 3,500 employees, but 4 years ago were acquired by a US multinational with 30,000+. The transistion, over the past years, has been interesting to say the least, with signs that lots of things are not being managed quite as efficiently as they were under the former regime.

[melonfool]

There is nothing wrong with doing so, but you would have to stop contributing to the Aviva pension that you currently hold were you to decide to do so.

Surely you can set up a SIPP to handle transfers from the schemes of the ex-employers without it affecting current contributions and their destination?

Yes, definitely.

I pay into three pensions currently, two regularly, one just at the end of the tax year to ameliorate my tax bill.

I've consolidated two into the SIPP so far and put another £12k or so of my 'own money' into it too.

I have two more to move into the SIPP, or maybe three, then when I leave the current job I'll transfer that pension into the SIPP too. My co only pays to other pensions for directors, as I have to manage the pension scheme and every person who pays it separately is an extra admin task, I won't be changing that rule!

Matt/Mel - transferring pensions is easy. It's just a form or two.

Try to separate in your mind the 'wrapper' and the 'investment'. You say you're currently researching investing so don't have time to look at pensions too - but it's the same thing, just with a slightly different objective perhaps.

The wrapper is just the type of scheme. An ISA is also a wrapper. To my mind, the most important thing about the wrapper is the provider fees and their accessibility (i.e. how good their website is, in most cases).

You could start by moving the smallest one and see how you get on. I use YouInvest as I like the website and the fee structure.

Mel

[TheMotorcycleBoy]

Matt/Mel - transferring pensions is easy. It's just a form or two.

So, were I to ditch my IFA (or at least go ahead and undertake the admin myself), then when you say "a form or two", is this just a case of phoning the pension firm and getting a paper form sent out? Would I be right to guess that the better administrated websites might even permit the whole operation over an E-form?

Try to separate in your mind the 'wrapper' and the 'investment'.

Ok, so I'm going to attempt to confirm in my mind these terminologies:

So with our shares, bonds and funds, they are the 'investments', and our IWeb ISA is the 'wrapper'. Furthermore the 'wrapper' in this case has a charging structure (so too do any investment fund investment entities, however, their fee should be transparent).

And with my pension, the discrete packaged up funds within are the 'investments'. And the analogous 'wrapper', is either the pension firm, e.g. Aviva, or the administer of the SIPP?

You say you're currently researching investing so don't have time to look at pensions too - but it's the same thing, just with a slightly different objective perhaps.

Yes, you've got a good point. Part of my apprehensiveness is psychological, i.e. up until about age 50, I've ignored any type of pension admin. and really just "keep paying the contribs.", so it's just been a blackbox.

With investments, once upon a time, Mel were content to put any savings we had in building society interest bearing account, or into NS&I bonds. But of course ever since QE/credit crunch, that seems to have become pointless, and we've spent about the last 10 years, not really being too bothered by this.....but after clearing the mortgage, it become apparent that our savings were doing nothing and that's why we undertook our investment idea.

I will get the time to research pensions in more depth, but currently, we are focussing our little free time, on figuring out schemes to determine which companies are good/bad investment vehicles (e.g. margins, ratios, FCF, ROCE) so in that time, we are playing with spreadsheets and annual reports etc. - since buying into the market now (we think) is quite fraught, lots of assets highly priced, uncertainity in the UK and abroad, and so on. (To be frank, this time of year is very labour intensive for us, we have a fair bit of home/garden maintenance, and our kids are both teenagers, vying for free-taxi services!).

Anyway sorry to waffle! I just want at least find out what a SIPP actually is...before I deduce exactly what to do with these pensions.

You could start by moving the smallest one and see how you get on. I use YouInvest as I like the website and the fee structure.

I probably will Mel, but as I said above, I do need to slow down my current activities first. I will definitely get back to this subject very soon....but I've already learnt many useful things from this thread, and I'm already starting to act on one of them, i.e. to detach the IFA from the Aviva fund and start learning and managing these things myself.

many thanks
Matt

[Alaric]

I just want at least find out what a SIPP actually is

If you already have a Self Select ISA and a dealing account, in other words an account with someone like Interactive Investor, a SIPP can look and feel exactly like an ISA but with different rules on contributions and withdrawals.

[TheMotorcycleBoy]

I just want at least find out what a SIPP actually is

If you already have a Self Select ISA and a dealing account, in other words an account with someone like Interactive Investor, a SIPP can look and feel exactly like an ISA but with different rules on contributions and withdrawals.

Thanks Alaric,

This is clear now. In that case, what's the difference between having ones pension funds in a SIPP (e.g. youinvest), or in Aviva (as an example)?

Matt

[TUK020]

Matt/Melanie,
Up until about 10 years ago I was fortunate enough to work for a company with a Defined Benefit (i.e. Final Salary) scheme, and I also had a personal pension plan (Defined Contribution) with Aviva on the side as a top up. The Aviva plan had been set up under the guidance of an IFA.
10 years ago, I moved company and this resulted in a major review/shake up of my finances. I have left the DB scheme untouched, and it will form a major part of my retirement income.
I set up a SIPP with Hargreaves Landsdowne, and transferred my Aviva scheme into it (to the disappointment of my IFA). Hargreaves Landsdowne sent me a form to fill in, and then handled everything from there - it took about 4-6 weeks to complete, but required no further intervention from me.
Since then I have worked for 3 different companies. Two of these accept my SIPP as the recipient of employer/employee pension contributions and pay directly into my SIPP. One company would only deal with their in-house pension scheme, so I paid into that. On leaving I transferred the entire thing into my SIPP. Again one form via Hargreaves Landsdowne.

Within the SIPP, I have the bulk of the money invested into individual shares, along the lines of a High Yield Portfolio described on this website. I also have a fair portion in a basket of Investment Trusts, and a much smaller portion in a Physical Gold Holdings Exchange Traded Fund (ETF) as an insurance pot to re-invest in the case of a market melt down.
Along the way, during one of the market dips, I crystallized a portion of my pension, and withdrew the 25% tax free lump sum. This has been fed into my ISA shares portfolio - trying to manage my future tax position.

My experience is that:
- dealing with HG is straightforward. Using the website, and making investments within it is easy. I manage everything on line.
- transferring DC pensions is very easy, albeit slow. HG handle the process.
- having my money in HG has given me much better understanding and confidence in my investments. No opaque 'with profits' fund jargon. HG site gives good overview of portfolio split by stocks etc etc.

I am not saying that HG is the best option, any research that I did is 10 years out of date. But I am saying that I have been happy that the process is straightforward.
tuk020

[Raptor]

Matt/Melanie,
Up until about 10 years ago I was fortunate enough to work for a company with a Defined Benefit (i.e. Final Salary) scheme, and I also had a personal pension plan (Defined Contribution) with Aviva on the side as a top up. The Aviva plan had been set up under the guidance of an IFA.
10 years ago, I moved company and this resulted in a major review/shake up of my finances. I have left the DB scheme untouched, and it will form a major part of my retirement income.
I set up a SIPP with Hargreaves Landsdowne, and transferred my Aviva scheme into it (to the disappointment of my IFA). Hargreaves Landsdowne sent me a form to fill in, and then handled everything from there - it took about 4-6 weeks to complete, but required no further intervention from me.
Since then I have worked for 3 different companies. Two of these accept my SIPP as the recipient of employer/employee pension contributions and pay directly into my SIPP. One company would only deal with their in-house pension scheme, so I paid into that. On leaving I transferred the entire thing into my SIPP. Again one form via Hargreaves Landsdowne.

Within the SIPP, I have the bulk of the money invested into individual shares, along the lines of a High Yield Portfolio described on this website. I also have a fair portion in a basket of Investment Trusts, and a much smaller portion in a Physical Gold Holdings Exchange Traded Fund (ETF) as an insurance pot to re-invest in the case of a market melt down.
Along the way, during one of the market dips, I crystallized a portion of my pension, and withdrew the 25% tax free lump sum. This has been fed into my ISA shares portfolio - trying to manage my future tax position.

My experience is that:
- dealing with HG is straightforward. Using the website, and making investments within it is easy. I manage everything on line.
- transferring DC pensions is very easy, albeit slow. HG handle the process.
- having my money in HG has given me much better understanding and confidence in my investments. No opaque 'with profits' fund jargon. HG site gives good overview of portfolio split by stocks etc etc.

I am not saying that HG is the best option, any research that I did is 10 years out of date. But I am saying that I have been happy that the process is straightforward.
tuk020

I can second this. Did almost the same 5 years back. Was already drawing a final salary pension. Had consolidated 3 previous company pension funds with St James to manage. Was happy with them but when I wanted to go into drawdown (taking the 25% tax free to boost my ISA), they were less than happy and did not seem to be set-up for this. Contacted HL, couple of calls from them to make sure that I understood everything and to keep me up to date, one form and they did it all, St James just ignored me, never contacted me at all once process started. Later I transferred a very small DB scheme to them (under £3K so no need to go thru the hoops of an IFA), again another form and all done. Like TUK020 my SIPP contains a "basket of ITs" plus a few HYP shares. Easy to do and a good web-site to see everything you need. Cost is (currently) £200 per year or £16.67 per month.

My current part-time employer will not use them for Pension contributions, so have their L&G scheme, but I picked the funds. When I "finally" hand in the keys I will transfer that to my HL SIPP.

I would recommend you go for it. It was straight forward for me and there are other suppliers, you just need to make sure you understand any charges. Like share dealing, custody charge, charge for drawdown (if any), etc......

Raptor.

[Urbandreamer]

I just want at least find out what a SIPP actually is

If you already have a Self Select ISA and a dealing account, in other words an account with someone like Interactive Investor, a SIPP can look and feel exactly like an ISA but with different rules on contributions and withdrawals.

Thanks Alaric,

This is clear now. In that case, what's the difference between having ones pension funds in a SIPP (e.g. youinvest), or in Aviva (as an example)?

Matt

Ok, the principle difference between having a personal pension with Aviva and a SIPP is that with Aviva the money will go into Aviva investments. If you are happy with their products then there could be very little difference.

A SIPP can look very symilar or only slightly different. For example you might like a US tracker from Vangard and combine this with a UK ETF from Ishares (as an example). It's still fairly symilar, you just decided to use different funds.

However it could look very different. For example, as I said I hold SLA in my SIPP. Thats not an investment fund but a share in a individual company (significantly higher risk). Some seek speciallity SIPP providers. They can hold comercial property and other more esoteric assetts.

What is being done here is a shift from a more paternal pension structure (that normaly moves from equities towards cash as you approach retirment) to one where the owner makes more investment choices and takes on more risk (hopeing for better returns).

With respect to "wrappers",

As Alaric says, you can run a SIPP exactly like you run a Self Select ISA. The same risk, symilar reward and a slight difference in costs. Which brings us back to the concept of a wrapper. You could buy exactly the same funds/equities in a SIPP, an ISA and a dealing account. Money used to buy in the ISA and dealing account will have been taxed. Money used to buy for a SIPP recieves the tax back, making it easier to make good investment returns.
Tax may be due on dividends and capital gains on things held in the dealing account.
Taking money from the ISA is tax free.
Taking money from the SIPP (pension) is complicated in that 25% can be had tax free and the rest is taxed at your nominal rate.

When you die your spouse gets a ISA allowance the size of your ISA, however depending on circumstances IHT may be due on the value of the dealing account and the ISA (ie if passes to children).
The SIPP (pension) passes tax free if you are under 75 and is taxed at the recipients marginal rate if you are over 75.

Remember all three invested in the same things, what is different is the tax wrapper (or lack of).

[TheMotorcycleBoy]

Thanks again everyone. Once we feel more comfortable with our understanding of what we are doing with our S&S ISA, I'll get into this enquiry in more depth.

Cost is (currently) £200 per year or £16.67 per month.

Is this a typical cost? And how does the charging work, is based on your size the pension pot, value of the contributions?

The reason I'm querying this, is because MelonFool did recommend I start by moving my smallest existing DC schemes into a SIPP to see how I get on. That is, small pots only of less than 10k, about 6k in the case of my Halifax one....so £200/year charges against that seems quite steep....so presumably the charges must depend on x,y,z, etc. etc?

[melonfool]

The charging structure depends a lot on the provider - so if your pension is going to be low, go for a fee based on holdings, if you're going to build it, go for a capped or flat fee. Mine has £47k ish in it, and the charge is more like £100pa. But, don't forget, the difference is that the charges are transparent, with the others you just don't see the fees, they are within the funds, and possibly us much as 1% - so on my £47k that's £470pa, not under £100.

And look at the charges for drawdown and transferring out too.

Re the 'E form' - I think with each I have had to send a hard copy signed form in the post, but other than that it's easy. You do it via the 'to' scheme, not the 'from' one. The 'to' scheme contacts the 'from' one (except with DB schemes but that's a whole different ballgame and you don't have any anyway).

Ignore the IFA, he will fizzle away. I had one on an old Skandia scheme and I tried to ask him about transferring out and he was just awful so I did it without any input from him.

But, I'm no expert, I've moved three now I think and still have three or four to do, but it is daunting.

Mel

[Urbandreamer]

Thanks again everyone. Once we feel more comfortable with our understanding of what we are doing with our S&S ISA, I'll get into this enquiry in more depth.

Cost is (currently) £200 per year or £16.67 per month.

Is this a typical cost? And how does the charging work, is based on your size the pension pot, value of the contributions?

The reason I'm querying this, is because MelonFool did recommend I start by moving my smallest existing DC schemes into a SIPP to see how I get on. That is, small pots only of less than 10k, about 6k in the case of my Halifax one....so £200/year charges against that seems quite steep....so presumably the charges must depend on x,y,z, etc. etc?

Again, it depends upon how you measure things and what you expect.

For example, my SIPP costs me £100pa. You would probably pay the same with A J Bell for a 10k pot, AND having more than one provider will mean extra expenses.
Is this the right amount to pay? Well there is more work for the provider in providing a SIPP than an ISA. My ISA with the same provider costs me £30pa and is of a symilar size to my SIPP.

Then again I pay £140pa for an ISA with a different provider (somewhat coincidentally it's the same amount that I pay in total to A J Bell and covers the roughly the same value of assetts).

Most SIPP providers have a minimum charge and charge a percentage on top. That percentage is often tiered with lower rates being charged as the pot gets bigger. Also there is often a reflection of other earnings streams. For example at A J Bell I would pay an annual percentage upon funds/unit trusts if i were to buy them, but don't upon shares, ETF's or IT's. The reason is that when I buy shares I pay them commission, while they recieve little to nothing if I buy funds. Some providers are even known to cap their charges when your pot exceeds a certain size.

As you are new to investing can I issue a warning. Don't focus TOO much upon costs. There is a hell of a lot to learn and while costs are a drag upon returns you can quickly lose track of your objectives if you focus on any single aspect of investing.

I would also echo MelonFool. Start small. Also accept your loses and costs. Learning and experience doesn't come without costs and it's a good idea to ensure that you don't get wiped out early in your journey. Review the situation every year and see how it goes.

The mag MoneyObserver publishes tables of costs every year and you can find the slightly out of date info for free online.
Some providers are cheaper as you start out, others if you have a big pot. Then again yet others are better when you start to draw your pension.

[TheMotorcycleBoy]

Thanks for everything, folks.

I've sent to my IFA for some details about the fees etc. with Aviva. But I have a busy next few days (work and home) so I'll hopefully post back on here sometime after then, once I've digested what you've all written and thought some more about things.

thanks again
Matt

[TheMotorcycleBoy]

By the way of an update, I've two stories to tell:

In addition to making contact with Aviva and asking them about detaching the IFA (it's easy), I also exchanged some emails with the IFA himself, and yes I have now terminated "whatever obligation" there was between us. Upon clarification, he just asked that I confirm this in paper which I will in due course. There is no explicit penalty etc. on me, upon this termination.

The second story is that I have contacted both Fidelity and Aviva over the phone to discuss charges. Aviva (my current private scheme) were hideous, the receptionist was very very vague, I almost had to spoon feed him. Eventually I whittled out that there's a 0.4% annual charge on the whole value of all funds (charged pro-rota per month), the funds I'm in don't attract any additional charges, but the whole topic of "how much goes to my IFA" he found rather mind-blowing. He mentioned 0.5% annual basic charge, which I considered to be plenty, and then proceeded to refer to 3 other charges due to the IFA, which I couldn't fathom out - i.e. if there were one-offs, regular, one-off events spend out over a period of time. Hopeless.

Fidelity (my current employer scheme) were a lot clearer. Charges apparently are only applied to new contributions (not upon the entire lump). (I forgot to ask how they make any money when you stop contributing, hmmm....and the information was not volunteered....another phone call coming up). Furthermore (apparently) the charging is just the managing fee of the particular fund(s) in which you are invested. In my case, that is currently just a single fund (Diversified World Equity? will check), and that only attracts 0.33% annual charge.

Given the above (i.e. the cost-effiency of the Fid scheme), I may well merely reappraise all the fidelity funds on offer, do any reallocations I fancy (comparing each fees charges/benefits etc, also the act of swapping between the fid funds is free of charge); and when I'm happy transfer all my monies from Aviva to Fidelity. I'm just taking the view that given i) the cheap cost of the fidelity scheme, and ii) the fact that Mel and I will confine any stocks/shares/bonds playing to our ISA, that this option for now, will suffice, and I'm not sure that I personally need to pursue the SIPP option any further.

Matt

[melonfool]

Fidelity may well be cheaper because employers get discounted deals - you need to ask what the cost will be when/if you move away - you'd normally find it more than doubles.

In terms of how they make money when you stop paying in - they totally change the fee structure when you stop paying in, and you lose the discounted rate if you move away from the employer (i.e. no employer conts). Some will keep the fee structure if you pay in £x pm from when you leave it as an employer scheme, where x varies, with Aegon it used to be £20pm, but if you stopped you could not restart on that fee structure so it had to be continuous.

I like the SIPP as it's easy to throw extra cash in there at the end of the tax year to avoid some tax, with the employer scheme I have to think about that a lot more and make an amendment via payroll and I buffer up against my employer's rules too (which, being Head of HR, I actually make - but even so....).

Mel

[TheMotorcycleBoy]

Fidelity may well be cheaper because employers get discounted deals - you need to ask what the cost will be when/if you move away - you'd normally find it more than doubles.

In terms of how they make money when you stop paying in - they totally change the fee structure when you stop paying in, and you lose the discounted rate if you move away from the employer (i.e. no employer conts). Some will keep the fee structure if you pay in £x pm from when you leave it as an employer scheme, where x varies, with Aegon it used to be £20pm, but if you stopped you could not restart on that fee structure so it had to be continuous.

I like the SIPP as it's easy to throw extra cash in there at the end of the tax year to avoid some tax, with the employer scheme I have to think about that a lot more and make an amendment via payroll and I buffer up against my employer's rules too (which, being Head of HR, I actually make - but even so....).

Mel

Thanks Mel,

Another phone call to Fidelity may well be justified. By default we all were put on 1 single fund when we, as a firm, switched over to Fidelity. It's called

Fidelity Qualcomm Diversified "Blah" Fund I think.

One of my colleagues, has researched a load more of their funds which they offer (presumably to all pension clients? I think there are several, 100 or so perhaps). He did find a very similar fund called Fidelity Diversified "Blah" Fund, and he claims the fee is identical. Hmm....I definitely need to do more research, I'll get all my questions handy, and ring them this weekend, try to clear some things up. But yes, I'm sure you are correct in what you say that we got a good discount deal from Fidelity, there was a big song-and-dance when we switched across.

Yes, I can certainly see the attraction of a SIPP - you actually know exactly what you are paying for!

Matt

[Urbandreamer]

Yes, I can certainly see the attraction of a SIPP - you actually know exactly what you are paying for!

Matt

There are a great many attractions of a SIPP, of which that is just one. However as my previous posts tried to suggest it's not automatically the "best" solution.

Take my circumstances. If I add to my corperate pension it is done through a salary sacrifice. That means I get an uplift by both my and my employers NI that would have been charged on said money. The pension is with Aviva and I could mix and match any of the many funds that they offer, changing them upon occaision. Aviva have also offered the company a good deal on fees.

Why on earth do I pay into a SIPP, given that it actually costs me money before the provider charges me a penny?

Well....

Until recently I use to pay that money into my ISA. Both allow me to indulge my hobby of stock picking and company research. Had I retired at 50 (as I originally wanted to) I could not have touched a pension, but could have used my ISA to live upon. Now over 55, I can take money out of my pension when ever I want to. Sure there are serious downsides to doing so, but it's not prohibited. Since that is the case why should I not divert funds into a wraper free from IHT (SIPP) from one subject to IHT (ISA)?

For me the choice is not SIPP or company pension but SIPP or ISA. But I pay for that choice and it wouldn't be the "best" choice for everyone.

[melonfool]

UD - I agree totally.

Having a SIPP does not necessarily mean paying into a SIPP all the time. I threw a few hundred into mine at the end of this tax year after I'd done the tax calcs, I could not get my employer one to move that quickly as payroll is only monthly and the payments in are the following month.

But, nearly all my saving is into my employer pension currently as we have sal sac, as you say, so I get the NI saving PLUS my employer rebates 50% of their NI saving too so an immediate 6.8% uplift which is more than I would expect on any return anywhere right now, frankly. So, I put 20% of my salary in, employer puts 5%. I got a bonus last year of £9k and I put it all in (had to get special permission as it went over our sal sac cap of 35% [for that month only though], a cap I personally imposed - doh!).

Other than that each month I don't save much - £500 into regular savers and that's about it. I will probably fling them into the SIPP when they end, assuming I get a new job at the end of this one.

Mel