Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

Transferring out of a stakeholder pension

Including Financial Independence and Retiring Early (FIRE)
portmoon
Posts: 11
Joined: March 4th, 2017, 7:07 am
Has thanked: 24 times

Transferring out of a stakeholder pension

#169298

Postby portmoon » September 26th, 2018, 9:48 pm

Many moons ago when the Motley Fool book came out and I was a young spring chicken I opened up a couple of index trackers. I am now 45 and starting to think I don't want to work until I'm 67.

I probably misunderstood the book at the time, but I've ended up with:

1. A FTSE ASX Index Tracker ISA with an annual fee of 0.1%
2. A FTSE ASX Index Tracking Stakeholder Pension with an annual fee of 1%

The ISA only has £3k in it because I stupidly dipped into it on several occasions. The Stakeholder Pension has £27k in it, but I've only just recently realised that a 1% fee is too much to be paying for a passive fund (because I'm an idiot).

I have £15k in Premium Bonds as a rainy day fund.

Thankfully, I also have a public sector defined benefit pension that I've been paying into for 12 years. So as long as I keep working I won't be living on baked beans in front of a Superser. BUT it would be nice to have a little extra put away, especially if it gives me the choice of taking 25% of it out, tax free when I'm 55. I'm a higher rate tax payer so I'm guessing it makes more sense to get the 40% tax relief from paying into a pension than to keep paying into the Index Tracker ISA.

Looking back I'm starting to feel like I have been a right numpty because;

1. 1% is far too much to be paying for a passive fund
2. I've been overpaying my mortgage by £500 for the last 18 months because I liked the idea of getting it paid off a bit earlier, but that money would also have been better going into a pension or some other sort of investment.

Also I've been on a few boards and have been told that it doesn't make sense to put all your money into one index, that you're better spreading it over different world economies.

So my questions are;

1. Should I transfer the money from my Stakeholder Pension? (and can I?)
2. If yes, where should I put it?
3. Should I put the 3k that I have in the tracker into a pension as well? (I'm guessing yes)
4. Can you get a pension that tracks a few different indexes over the globe and how do you what % put into each?

many thanks

uspaul666
2 Lemon pips
Posts: 232
Joined: November 4th, 2016, 6:35 am
Has thanked: 195 times
Been thanked: 111 times

Re: Transferring out of a stakeholder pension

#169309

Postby uspaul666 » September 26th, 2018, 10:22 pm

1. Yes but only to another pension.
2. A cheaper pension.
3. No. Never withdraw from an ISA. It can provide tax free income.
4. Hmm. Big question. Some like to limit investments to companies in the country you wish to retire in. Some say put at least 50% in US.

Anyone else?

Alaric
Lemon Half
Posts: 6033
Joined: November 5th, 2016, 9:05 am
Has thanked: 20 times
Been thanked: 1399 times

Re: Transferring out of a stakeholder pension

#169318

Postby Alaric » September 26th, 2018, 11:19 pm

portmoon wrote:1. Should I transfer the money from my Stakeholder Pension? (and can I?)


You should have a choice of funds within the Stakeholder pension but if they all charge 1% perhaps you should switch for charge reasons rather than diversification of assets.

TUK020
Lemon Quarter
Posts: 2039
Joined: November 5th, 2016, 7:41 am
Has thanked: 762 times
Been thanked: 1175 times

Re: Transferring out of a stakeholder pension

#169350

Postby TUK020 » September 27th, 2018, 7:19 am

portmoon wrote:Looking back I'm starting to feel like I have been a right numpty because;

2. I've been overpaying my mortgage by £500 for the last 18 months because I liked the idea of getting it paid off a bit earlier, but that money would also have been better going into a pension or some other sort of investment.


When I was younger, I also concentrated on paying off the mortgage, and got there about 10 years ago. While there may have been more optimal financial strategies, it was a huge personal milestone to get completely debt free.
Don't discount the sense of freedom and achievement that comes with it.

Darka
Lemon Slice
Posts: 773
Joined: November 4th, 2016, 2:18 pm
Has thanked: 1819 times
Been thanked: 704 times

Re: Transferring out of a stakeholder pension

#169359

Postby Darka » September 27th, 2018, 8:25 am

Completely agree with Tuk020, paying off the mortgage may not be the best solution financially (although it's very good) but from a security/physiological point of view, it's priceless.

Even more so if you want to FIRE and retire early.

regards,

Alaric
Lemon Half
Posts: 6033
Joined: November 5th, 2016, 9:05 am
Has thanked: 20 times
Been thanked: 1399 times

Re: Transferring out of a stakeholder pension

#169360

Postby Alaric » September 27th, 2018, 8:28 am

TUK020 wrote:Don't discount the sense of freedom and achievement that comes with it.


If there were to be a period in life where by accident or design, there is no regular income, it considerably reduces financial stress if there isn't a monthly mortgage or rental payment to make.

ursaminortaur
Lemon Half
Posts: 6944
Joined: November 4th, 2016, 3:26 pm
Has thanked: 447 times
Been thanked: 1718 times

Re: Transferring out of a stakeholder pension

#169376

Postby ursaminortaur » September 27th, 2018, 9:42 am

Alaric wrote:
TUK020 wrote:Don't discount the sense of freedom and achievement that comes with it.


If there were to be a period in life where by accident or design, there is no regular income, it considerably reduces financial stress if there isn't a monthly mortgage or rental payment to make.


I'd second paying off the mortgage as being a good idea. Interest rates since the financial crash have been abnormally low and are bound at some point to return to more normal levels or even to the double digit levels seen in the early 1990s.

StepOne
Lemon Slice
Posts: 668
Joined: November 4th, 2016, 9:17 am
Has thanked: 195 times
Been thanked: 185 times

Re: Transferring out of a stakeholder pension

#169381

Postby StepOne » September 27th, 2018, 10:00 am

portmoon wrote:So my questions are;

1. Should I transfer the money from my Stakeholder Pension? (and can I?)
2. If yes, where should I put it?
3. Should I put the 3k that I have in the tracker into a pension as well? (I'm guessing yes)
4. Can you get a pension that tracks a few different indexes over the globe and how do you what % put into each?

many thanks


Hi portmon,

I also opened a stakeholder pension in the days when they were supposed to be the smarter option, with charges capped at 'just!' 1%! I finally got around to closing mine a couple of years ago and have now transferred into a SIPP with iWeb. iWeb because their charges are low, and are a flat fee rather than percentage based. Depending on the size of your portfolio and how much trading you expect to do, there may be other options which are better for you. You can see a list of SIPP providers and their charges on the Monevator website http://monevator.com/compare-uk-cheapes ... e-brokers/

To point 4 - yes you can invest Global trackers, e.g. Vanguards All-World ETF (VWRL) charges 0.25% I think. You can also get Vanguard UK and US trackers for 0.06%.

Good luck!

StepOne

hiriskpaul
Lemon Quarter
Posts: 3852
Joined: November 4th, 2016, 1:04 pm
Has thanked: 682 times
Been thanked: 1489 times

Re: Transferring out of a stakeholder pension

#169659

Postby hiriskpaul » September 27th, 2018, 10:23 pm

portmoon wrote:1. Should I transfer the money from my Stakeholder Pension? (and can I?)

Yes and yes.

2. If yes, where should I put it?

Not too sure, you need to do some calculations on the various charges. A very simple charging one is the Fidelity SIPP, for which you would pay a single fee of 0.35% plus the charge on the funds you invest in, which start at around 0.07% for UK and US trackers. World trackers, which you really should be in if you only invest in 1 fund, start at about 0.15% (Fidelity World Tracker). There is no exit charge for the Fidelity SIPP, so as the funds grow there would be no disincentive to moving elsewhere to a flat charging structure, or to one you consider more suitable for drawdown. Youinvest may well work out cheaper for you, but the charges are more complicated and you must arrange for cash to be available to pay the custodial charge each quarter. Fidelity simply sell some units in your largest fund to collect the charge if there is no cash in your account, at no cost to you.

3. Should I put the 3k that I have in the tracker into a pension as well? (I'm guessing yes)

Probably, unless you want to keep the option of being able to draw before you are 55. The maths works out like this for a 20% taxpayer, withdrawing from a pension as a 20% taxpayer: Pay in £3k and get £750 added to your SIPP by the government, total £3,750 in the SIPP. Taking 25% lump sum at zero tax (£937.50) and the rest at 20% tax (£2,812.50*80% = £2,250), gives you back a total of £3,187.50. A boost of 6.25% for moving the £3k from an ISA to a SIPP. Obviously you would hope to get back more than £3,187.50, but the amount does not actually matter for the calculation, whatever you get back will be 6.25% more than it would be if left in an ISA and invested in the same way. As you are a 40% taxpayer you should benefit from lower tax as well.[/quote]
4. Can you get a pension that tracks a few different indexes over the globe and how do you what % put into each?

Yes, you can invest by region or single country. Popular and cost efficient trackers cover US, UK, Europe excluding UK, Emerging markets, Japan, Asia/Pacific excluding Japan. Or you can invest in world trackers.

You should really consider investing in bond funds as well. How you decide what to allocate to bonds, if you do at all, is a little involved and I don't have time to comment on that now.

dmukgr
Posts: 40
Joined: September 14th, 2018, 3:35 pm
Has thanked: 61 times
Been thanked: 15 times

Re: Transferring out of a stakeholder pension

#169732

Postby dmukgr » September 28th, 2018, 9:32 am

TUK020 wrote:
portmoon wrote:Looking back I'm starting to feel like I have been a right numpty because;

2. I've been overpaying my mortgage by £500 for the last 18 months because I liked the idea of getting it paid off a bit earlier, but that money would also have been better going into a pension or some other sort of investment.


When I was younger, I also concentrated on paying off the mortgage, and got there about 10 years ago. While there may have been more optimal financial strategies, it was a huge personal milestone to get completely debt free.
Don't discount the sense of freedom and achievement that comes with it.


I was going to reply with something on similar lines.


Return to “Retirement Investing (inc FIRE)”

Who is online

Users browsing this forum: No registered users and 18 guests