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Considering SIPP

Including Financial Independence and Retiring Early (FIRE)
Bena48
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Considering SIPP

#224595

Postby Bena48 » May 26th, 2019, 8:06 pm

Background
Own our home. Have modest but adequate occupational pensions. Hold a HYP portfolio. A few other modest investments. I am 56 and my wife 58. I aim to retire at 61/62

Issue
I have the two pensions listed below with the current estimated pensions pots. I wish to take both pots and put them in a SIPP and divert the very modest contribution I make to the Standard Life pension each month into the SIPP.
I wish to keep things very simple and use one world tracker e.g. Vanguard Lifestrategy 60% accum.

Aviva personal pension-53K
Standard Life stakeholder pension-38K

Desired outcome
To grow the combined capital sum at a greater rate than the current providers do. Take a modest income from 61/62 onwards.

Questions
1) Both providers state that the pots can only be transferred into pensions. How do I make this practically happen? Do I have to set up an account with a platform 1st?
2)Aviva state there are no transfer fees. Standard life seem more coy on the subject in their paperwork. What questions should i ask Standard Life?
3) Is here an efficient way to draw down the income? I will not be interested in taking an initial 25%.

Thanks in advance.
Ben

Alaric
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Re: Considering SIPP

#224596

Postby Alaric » May 26th, 2019, 8:18 pm

Bena48 wrote:Questions
1) Both providers state that the pots can only be transferred into pensions. How do I make this practically happen? Do I have to set up an account with a platform 1st?


You start a SIPP with one of the usual online Brokers. You then instruct the existing providers to transfer your existing pension funds to it. They might take an eternity to do it. At the same time you cease paying into the existing arrangement and pay to your new SIPP instead.

Bena48 wrote:Is here an efficient way to draw down the income?


That will depend on which SIPP provider you choose and how they operate. It's going to have to go through income taxation which probably means setting up PAYE. You may need to decide whether you want to take pension income as a single sum each year or as a regular monthly or quarterly payment.

uspaul666
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Re: Considering SIPP

#224599

Postby uspaul666 » May 26th, 2019, 8:27 pm

Just a quick FYI. Since the standard life pension is a stakeholder pension it has to adhere to certain rules one of which is that there must be no exit fee on transfers out.

TUK020
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Re: Considering SIPP

#224637

Postby TUK020 » May 27th, 2019, 6:52 am

worth taking a look at Monevator website to choose platform

https://monevator.com/compare-uk-cheape ... e-brokers/

paulnumbers
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Re: Considering SIPP

#224711

Postby paulnumbers » May 27th, 2019, 12:36 pm

TUK020 wrote:worth taking a look at Monevator website to choose platform

https://monevator.com/compare-uk-cheape ... e-brokers/


Be particularly mindful of exit fee's. Vanguard's SIPP is allegedly coming along soon, and one might imagine it will be cheaper to run than the current best buy's.

Hariseldon58
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Re: Considering SIPP

#224791

Postby Hariseldon58 » May 27th, 2019, 5:55 pm

Appreciate you are looking at Vanguard Life Strategy 60, this is an OEIC and depending on your chosen platform may be more expensive to hold (% platform fees ) than say an ETF tracker or Investment Trust.

The saving up bit is much simpler to manage than the drawdown element, when you retire and a split between your bonds and equities in drawdown gives you a chance to choose where you draw income from, its a non trivial subject, probably worth a bit of online reading.

Bena48
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Re: Considering SIPP

#224851

Postby Bena48 » May 27th, 2019, 11:15 pm

Thanks for the responses thus far, without exception all helpful.

Just another question.

What are the implications for using an accumulator fund when drawing down?

Alaric
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Re: Considering SIPP

#224852

Postby Alaric » May 27th, 2019, 11:18 pm

Bena48 wrote:What are the implications for using an accumulator fund when drawing down?


You would periodically have to sell units to raise cash for the draw down. If you have a fund with distributions, you can use those.

It can be dangerous in the longer run to sell units to a higher value than the fund was earning by way of income and capital growth.

JohnB
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Re: Considering SIPP

#224861

Postby JohnB » May 28th, 2019, 12:21 am

You'll probably be selling units in both ACC and INC funds most years in drawdown. In the early years, and in a bull market dividends might be sufficient, but perhaps 1/4 of your total return will be in capital gains after inflation, and you'll need to sell to realise that, and depending on your SIPP inheritance plan, you will be selling a lot towards the end, and some to bridge the gap before state pension kicks in.

ACC units might save some bother and transaction fees, but not a lot.

Chrysalis
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Re: Considering SIPP

#224882

Postby Chrysalis » May 28th, 2019, 8:28 am

Before you set up a SIPP, have a close look at both your current providers charges and fund choices. I believe Standard Life offer Vanguard funds (at least my spouses occ pension through SL did).
You may find that you can achieve what you want in a cost effective way with one of your existing providers. Make sure you compare ALL charges with whatever SIPP platform you are considering- dealing fees (often free with pension providers), investment fund charges, platform fees, exit/transfer out fees etc.

Chrysalis
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Re: Considering SIPP

#224883

Postby Chrysalis » May 28th, 2019, 8:30 am

If you don’t want an initial 25% lump sum, then the withdrawal option you want is UFPLS (uncrystallised funds pension lump sum). Have a look at Pensionwise website. https://www.pensionwise.gov.uk/en/take-cash-in-chunks
Again, I’d look carefully at the cost structure of SIPPs vs your current providers before making a decision.

BusyBumbleBee
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Re: Considering SIPP

#225345

Postby BusyBumbleBee » May 29th, 2019, 7:26 pm

Alaric said
You then instruct the existing providers to transfer your existing pension funds to it.

That is probably the wrong way round : it is generally easier and faster to ask the SIPP provider to do the work rather than your existing providers and you are certain to get the money transferred to the right account!.

Read this page from YouInvest so you understand the mechanism: https://www.youinvest.co.uk/transferring-to-us. I can promise you it is easy peasy to do this and I would recommend that platform anyway.

The OP also asked
Is there an efficient way to draw down the income?
I agree with Jabd2001 who suggests
the withdrawal option you want is UFPLS (uncrystallised funds pension lump sum).
but would add to this that you effectively draw down a regular UFPLS so that effectively 25% of every payment you get from your pension is tax free.

Everyone - regardless of earnings - is entitled to contribute £3600 (£2880 net of tax) to their pension until they are 75. You should also consider this and try to make an annual contribution of £2880 each year because the government will add £720 to this - which is nearly £15 per week!!. You can adjust your withdrawals to cover this if finding that sum each year is (or will be) a problem. You can do this until your 75th birthday even after you start to draw your pension.

Hariseldon58, suggests
that an OEIC and depending on your chosen platform may be more expensive to hold (% platform fees ) than say an ETF tracker or Investment Trust
I wholeheartedly agree with this and often wonder why anyone would ever hold a unit trust or an OEIC which seem to me to be products invented by the so-called financial services industry to give them an income - at the expense of the investor. There is a rich diversity of Investment Trusts - including REITs and VCTs to mention a few and there is plenty of advice on which ones to choose elsewhere on the Lemon Fool.

Hope this is useful - regards - BBB

PhaseThree
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Re: Considering SIPP

#225347

Postby PhaseThree » May 29th, 2019, 7:42 pm

I've just (last month) transfered Aviva and Scottish Widows pensions to YouInvest. This was extremely easy and done as a "Pull" transaction from YouInvest. i.e. in your YouInvest account you enter the details of the pension you want to transfer-in and press the go button. One week later the monies are in your account. A stress free and professional service as far as I am concerned.

Alaric
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Re: Considering SIPP

#225355

Postby Alaric » May 29th, 2019, 8:13 pm

BusyBumbleBee wrote:often wonder why anyone would ever hold a unit trust or an OEIC


Historically they gave cheaper dealing for smaller investments. If you were investing £ 200 a month, then £ 20 in broker commission siphoned off 10% before you had even started. (But not all roses as there was often a 5% spread between "buy" and "sell" prices).

That's rather less relevant today, but a platform offering no dealing charge investment into OEICs will be cheaper until the funds have built up and the % of fund charges start to bite.

Bena48
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Re: Considering SIPP

#225372

Postby Bena48 » May 29th, 2019, 9:49 pm

Hariseldon58, suggests
that an OEIC and depending on your chosen platform may be more expensive to hold (% platform fees ) than say an ETF tracker or Investment Trust
I wholeheartedly agree with this and often wonder why anyone would ever hold a unit trust or an OEIC which seem to me to be products invented by the so-called financial services industry to give them an income - at the expense of the investor. There is a rich diversity of Investment Trusts - including REITs and VCTs to mention a few and there is plenty of advice on which ones to choose elsewhere on the Lemon Fool.


Thanks again for all the useful advice and information.

AJ Bell's calculator suggests that if I do 2 trades a year with custody charge I could expect to pay them £233

I find a lot of conflicting views on costs for the various types of units. AJ Bell charge a percentage for ITs, ETFs,OIECs and other types of unit. Vanguard charge 0.22 % annually which seems reasonable when compared against the IT's I have researched. Am I missing something?

Alaric
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Re: Considering SIPP

#225384

Postby Alaric » May 29th, 2019, 10:31 pm

Bena48 wrote: Vanguard charge 0.22 % annually which seems reasonable when compared against the IT's I have researched. Am I missing something?


Generally speaking Vanguard funds are trackers. They decide what shares to buy using pre-determined (external) rules. That way they reflect the "average" market performance including both the stars and the duds. ITs generally use "active" management. They employ people to make decisions, sometimes successfully about which shares are stars and which are duds. They may also be specialised.

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Re: Considering SIPP

#225451

Postby jonesa1 » May 30th, 2019, 9:56 am

Bena48 wrote:
I find a lot of conflicting views on costs for the various types of units. AJ Bell charge a percentage for ITs, ETFs,OIECs and other types of unit. Vanguard charge 0.22 % annually which seems reasonable when compared against the IT's I have researched. Am I missing something?


The fund charges are included within the fund pricing (or net asset value for ITs). What matters is the return, if a fund with higher charges also delivers higher returns, then it could be worth it. Many brokers (including AJ Bell) have a cap on the charges for shares, ITs and ETFs, so once the portfolio is big enough, there can be significant savings for holding exchange traded investments compared with funds (these may be offset by higher trading charges, if you do much trading).

hiriskpaul
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Re: Considering SIPP

#225468

Postby hiriskpaul » May 30th, 2019, 11:12 am

Bena48 wrote:Background
Own our home. Have modest but adequate occupational pensions. Hold a HYP portfolio. A few other modest investments. I am 56 and my wife 58. I aim to retire at 61/62

Issue
I have the two pensions listed below with the current estimated pensions pots. I wish to take both pots and put them in a SIPP and divert the very modest contribution I make to the Standard Life pension each month into the SIPP.
I wish to keep things very simple and use one world tracker e.g. Vanguard Lifestrategy 60% accum.

Aviva personal pension-53K
Standard Life stakeholder pension-38K

Desired outcome
To grow the combined capital sum at a greater rate than the current providers do. Take a modest income from 61/62 onwards.

Questions
1) Both providers state that the pots can only be transferred into pensions. How do I make this practically happen? Do I have to set up an account with a platform 1st?
2)Aviva state there are no transfer fees. Standard life seem more coy on the subject in their paperwork. What questions should i ask Standard Life?
3) Is here an efficient way to draw down the income? I will not be interested in taking an initial 25%.

Thanks in advance.
Ben

If you value simplicity, a Fidelity SIPP might be one to look at. They would charge you a platform fee of 0.35%, which is high, but there are no other charges. For a £91k investment, that works out at £318.50 per year. If you were to put everything into a Vanguard Lifestrategy fund, the platform fee would be paid by the automatic selling of units each month and unlike many other SIPP providers, there is no additional fee for this.

For drawdown, you can set up regular monthly payments or do ad-hoc withdrawals, again with no additional fees. I am not sure whether it is still the case, but one annoyance is that you cannot set up regular UFPLS withdrawals. UFPLS withdrawals can only be ad-hoc, so if you wanted regular monthly UFPLS withdrawals, you would need to instruct monthly.

The Vanguard SIPP may well turn out to be cheaper and just as simple as the Fidelity SIPP, in which case you could transfer to it when it becomes available. Fidelity don't charge exit fees.

hiriskpaul
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Re: Considering SIPP

#225475

Postby hiriskpaul » May 30th, 2019, 11:34 am

On second thought, Interactive Investor might be a better platform for you at the moment. They would charge you £120 per year, plus investment costs, but if you set up a regular monthly investment that is only £1 per purchase. That is very likely to work out less than using the Vanguard platform for a £91k SIPP. Before you go into drawdown though, review your platform again and possibly switch at the time. II charge an additional £120 per year when in drawdown and may prove more complicated to operate than other SIPP providers. II do not charge exit fees.

JohnB
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Re: Considering SIPP

#225495

Postby JohnB » May 30th, 2019, 12:43 pm

I'd say a cheap SIPP is £100 p/a, and an expensive one is £200. Even Hargreaves Lansdown, which is viewed a high quality, high charges provider, only charge me £200 p/a on >£500k because I use ETFs (plus £50 dealing charges for my quarterly reinvestment)

Some brokers allow their fees to be taken out of either the pension pot or a separate account, the latter can be viewed as getting more per year into pension protection.


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