Individual Personal Pension or SIPP?
Discussion
So, I recently changed jobs and I have to decide what I am going to do with my previous group pension. Basically I have four options:
1. Leave it paid up so it coverts to an individual personal pension. The management fees will increase slightly.
2. Convert to an IPP and continue to pay into it at a nominal amount (£20/month) which will reduce the fees slightly from 1.
3. Transfer the benefits to another pension provider i.e. my new group pension scheme.
4. Transfer to a SIPP which will be managed by the administrator of the original group plan.
Now, the new scheme is administered by a very large group and so far the service I have had has been one phone call and an e-mail. The old scheme is administered by a local company that I can pop into and speak with my advisor when I need to and their service has been very good for the last 10 years and is very personalised.
1. Isn't really an option as I can afford 2. I'm yet to find out if there are any costs involved in doing 3. I don't think thre are however I am a little worried that the administration and advice isn't going to be as good as I have been getting so far. With regards to the last option, in the last year my pension returned 16% and my advisor is telling me that their SIPP returned 20% in the same period. The fees are a little higher and I am yet to see the detail but he tells me that they would have been easily offset had I transferred to their SIPP 12 months ago. I value the service they have given me over the years and it has extended further than just pension advice.
I do need to see the figures surrounding fees etc which he preparing for me but I am convincing myself that the last option is going to work for me. I am just wondering whether anyone has had a similar experience or could offer some advice that might help me make my decision?
1. Leave it paid up so it coverts to an individual personal pension. The management fees will increase slightly.
2. Convert to an IPP and continue to pay into it at a nominal amount (£20/month) which will reduce the fees slightly from 1.
3. Transfer the benefits to another pension provider i.e. my new group pension scheme.
4. Transfer to a SIPP which will be managed by the administrator of the original group plan.
Now, the new scheme is administered by a very large group and so far the service I have had has been one phone call and an e-mail. The old scheme is administered by a local company that I can pop into and speak with my advisor when I need to and their service has been very good for the last 10 years and is very personalised.
1. Isn't really an option as I can afford 2. I'm yet to find out if there are any costs involved in doing 3. I don't think thre are however I am a little worried that the administration and advice isn't going to be as good as I have been getting so far. With regards to the last option, in the last year my pension returned 16% and my advisor is telling me that their SIPP returned 20% in the same period. The fees are a little higher and I am yet to see the detail but he tells me that they would have been easily offset had I transferred to their SIPP 12 months ago. I value the service they have given me over the years and it has extended further than just pension advice.
I do need to see the figures surrounding fees etc which he preparing for me but I am convincing myself that the last option is going to work for me. I am just wondering whether anyone has had a similar experience or could offer some advice that might help me make my decision?
The SIPP will cost you more to run. If you commute 300 yards to work, would you buy a Speed Twelve to do it in, or would you get a bike? If you're putting modest amounts in, if your needs are modest then your first objective should be to address the basics and keep the costs down, avoid SIPPS like the plague. It'd be like treading water with weights around your ankles. In effect, you're paying for functionality and features that you don't need.
Can I ask, you say that your adviser refs to 'their' SIPP? What firm is that? Ask him what the reduction in yield will be if you choose to go down the SIPP route and incur the extra costs, and ask him, if the pension itself is just the wrapper and returns are generated by the underlying funds, why the f@ck didn't your personal pension return 20 in that case?! Is he going to increase your risk exposure to get those extra returns and don't forget, he is relying on a snapshot of 12 months - how old are you, how much longer does your pension have to work for you?
I'm not suggesting that cheapest is always the best but for the overwhelming majority of folk, SIPPs are expensive and wasteful, needless and pointless.
Can I ask, you say that your adviser refs to 'their' SIPP? What firm is that? Ask him what the reduction in yield will be if you choose to go down the SIPP route and incur the extra costs, and ask him, if the pension itself is just the wrapper and returns are generated by the underlying funds, why the f@ck didn't your personal pension return 20 in that case?! Is he going to increase your risk exposure to get those extra returns and don't forget, he is relying on a snapshot of 12 months - how old are you, how much longer does your pension have to work for you?
I'm not suggesting that cheapest is always the best but for the overwhelming majority of folk, SIPPs are expensive and wasteful, needless and pointless.
I suspect that the SIPP being promoted is a platform-based Personal Pension and not a true SIPP. OP do you need/want to invest in anything unconventional such as commercial property? No? In which case a full SIPP is pointlessly expensive. A platform-based Personal Pension should give you all the equities you/your adviser needs either as funds or single stocks to create a decent portfolio.
Transferring to another provider will cost you something if you take advice, or you can DIY if you fancy being the master of your own destiny.
Transferring to another provider will cost you something if you take advice, or you can DIY if you fancy being the master of your own destiny.
I don't profess to be very astute when it comes to pensions so bear with me. If it matters, I'm 39.
From how it was explained to me, what they are offering me is a SIPP provided by Standard Life, the difference being that the admin company manage which funds that are invested in on a daily basis and spend a lot of time in doing this for their clients.
My old group pension was provided by a different provider and the admin company just administered it with a yearly meeting to dicuss performance and to advise on any fund changes if they thought necessary.
As I understand it, what I will be paying for with the SIPP is the closer level of management in terms of which funds are invested in. Not something that I have any knowledge or indeed time to do but I am interested in being the master of my own destiny but as long as someone is going to hold me hand. I'm imagining that it is just like a IPP but with the admin company working harder to earn more growth for me?
I suppose that it is all really down to the numbers. If the better growth of the fund less the fees is higher than that of the IPP then is better or have I got this all wrong?
Forgive my ignorance, but like many others I have not really paid much attention to how my pension works. I think I need to get a grip...
From how it was explained to me, what they are offering me is a SIPP provided by Standard Life, the difference being that the admin company manage which funds that are invested in on a daily basis and spend a lot of time in doing this for their clients.
My old group pension was provided by a different provider and the admin company just administered it with a yearly meeting to dicuss performance and to advise on any fund changes if they thought necessary.
As I understand it, what I will be paying for with the SIPP is the closer level of management in terms of which funds are invested in. Not something that I have any knowledge or indeed time to do but I am interested in being the master of my own destiny but as long as someone is going to hold me hand. I'm imagining that it is just like a IPP but with the admin company working harder to earn more growth for me?
I suppose that it is all really down to the numbers. If the better growth of the fund less the fees is higher than that of the IPP then is better or have I got this all wrong?
Forgive my ignorance, but like many others I have not really paid much attention to how my pension works. I think I need to get a grip...
I actually deleted "such as Standard Life" from my earlier post about platform based Personal Pensions, which is what this is. And there's nothing wrong with that, it just isn't a SIPP in the technical sense.
These are all about the charges, full transparency. I dislike the SL SIPP because of the continued use of mirror funds which hide a layer of charges taken by SL.
Mirror funds are where funds that you can purchase (heavily discounted in any case) on any platform are "rebranded" and a different charge applied.
For eg the Aberdeen or Blackrock range of funds become the SL Aberdeen or SL Blackrock range of funds. Look the same, smell the same, but cost different amounts.
An unnecessary layer of opacity in this day and age.
These are all about the charges, full transparency. I dislike the SL SIPP because of the continued use of mirror funds which hide a layer of charges taken by SL.
Mirror funds are where funds that you can purchase (heavily discounted in any case) on any platform are "rebranded" and a different charge applied.
For eg the Aberdeen or Blackrock range of funds become the SL Aberdeen or SL Blackrock range of funds. Look the same, smell the same, but cost different amounts.
An unnecessary layer of opacity in this day and age.
Ginge R said:
I'm not suggesting that cheapest is always the best but for the overwhelming majority of folk, SIPPs are expensive and wasteful, needless and pointless.
Not wishing to thread-crash but for a self-employed person with about £130K in the pot, and stuck in the most inflexibile pension ever devised, I've been advised to move to a James Hay modular SIPP. 7IM and index linking are in it somewhere. Am I about to make a terrible mistake? PM if preferred!Simpo 
The biggest enemy of any SIPP or pension are the fees. When compounded over 20 or 30 years, they represent a massive sum of money.
All providers hav fees but the ones you manage your self, like the HL SIPP, and much cheaper than fully managed pensions from small high street companies or the bigger bank backed providers.
Have a good read around on the HL (and similar) sites, and if you haven't done so already, have a good read up about passive investing in the Monevator website and the Oblivious Investor site too. They're both a wealth of independent tips and advice.
My SIPP is a similar size to yours and I'm self employed. I discovered just how vast the fees we that my high street FA company were charging me, so I took it off them and have put it in an HL SIPP. I have 80 of my money in one fund, the Vanguard Life Strategy 80% fund. Fees are tiny and with it being a balanced passive fund, there is nothing to do or worry about. It 'should' outperform 99% of managed funds over a 30 year period and will cost a fraction of the amount to run.
Happy to chat more if you like mate.
The biggest enemy of any SIPP or pension are the fees. When compounded over 20 or 30 years, they represent a massive sum of money.
All providers hav fees but the ones you manage your self, like the HL SIPP, and much cheaper than fully managed pensions from small high street companies or the bigger bank backed providers.
Have a good read around on the HL (and similar) sites, and if you haven't done so already, have a good read up about passive investing in the Monevator website and the Oblivious Investor site too. They're both a wealth of independent tips and advice.
My SIPP is a similar size to yours and I'm self employed. I discovered just how vast the fees we that my high street FA company were charging me, so I took it off them and have put it in an HL SIPP. I have 80 of my money in one fund, the Vanguard Life Strategy 80% fund. Fees are tiny and with it being a balanced passive fund, there is nothing to do or worry about. It 'should' outperform 99% of managed funds over a 30 year period and will cost a fraction of the amount to run.
Happy to chat more if you like mate.
Like Mr Noble says, the Vanguard fund is cheap, which it should be because it is a collection of index trackers so there is little creative investment expertise involved in running it. It will therefore return a little less (the charged effect) than those indices over te life of the investment.
Investment expertise is what you pay for if you want a better return than the index. Sadly it comes with no guarantees that you will get it, which is why the passive approach is popular.
What has happened is that fund managers who charge like Active Managers but actually just hog the index have now been exposed as expensive.
It would be naive to assume that out-performance isn't possible though, the advice industry isn't entirely made up of snake oil merchants.
Investment expertise is what you pay for if you want a better return than the index. Sadly it comes with no guarantees that you will get it, which is why the passive approach is popular.
What has happened is that fund managers who charge like Active Managers but actually just hog the index have now been exposed as expensive.
It would be naive to assume that out-performance isn't possible though, the advice industry isn't entirely made up of snake oil merchants.
Agree to a large part with the above post, but I don't think that there are more than 0.5% of active fund managers who will outperform the index, year after year, over a ten year period. And even less so over twenty or thirty years.
If an active fund manager's fund performs better than the related index, he/she is said to have succeeded, but if their fund under performs the index, it's just bad market performance sir. To think that any fund manager will manage to outperform the index year after year after year, is a little optimistic in my opinion.
That's why passive approaches are far more 'safe' over the long run.
Although, in totally opposite to this view, I am invested with about £25k in Harry Nimo's Standard life UK smaller companies fund.
If an active fund manager's fund performs better than the related index, he/she is said to have succeeded, but if their fund under performs the index, it's just bad market performance sir. To think that any fund manager will manage to outperform the index year after year after year, is a little optimistic in my opinion.
That's why passive approaches are far more 'safe' over the long run.
Although, in totally opposite to this view, I am invested with about £25k in Harry Nimo's Standard life UK smaller companies fund.
Edited by Mr Noble on Monday 28th October 18:47
Mr Noble said:
Agree to a large part with the above post, but I don't think that there are more than 0.5% of active fund managers who will outperform the index, year after year, over a ten year period. And even less so over twenty or thirty years.
If an active fund manager's fund performs better than the related index, he/she is said to have succeeded, but if their fund under performs the index, it's just bad market performance sir. To think that any fund manager will manage to outperform the index year after year after year, is a little optimistic in my opinion.
That's why passive approaches are far more 'safe' over the long run.
Although, in totally opposite to this view, I am invested with about £25k in Harry Nimo's Standard life UK smaller companies fund.
I wouldn't stick with one active manager for ten years though, let alone twenty or thirty! It requires some monitoring, but then I get paid to do that! I agree you can't be passive in choosing your active managers!If an active fund manager's fund performs better than the related index, he/she is said to have succeeded, but if their fund under performs the index, it's just bad market performance sir. To think that any fund manager will manage to outperform the index year after year after year, is a little optimistic in my opinion.
That's why passive approaches are far more 'safe' over the long run.
Although, in totally opposite to this view, I am invested with about £25k in Harry Nimo's Standard life UK smaller companies fund.
Edited by Mr Noble on Monday 28th October 18:47
What he said!
pacoryan said:
I actually deleted "such as Standard Life" from my earlier post about platform based Personal Pensions, which is what this is. And there's nothing wrong with that, it just isn't a SIPP in the technical sense.
These are all about the charges, full transparency. I dislike the SL SIPP because of the continued use of mirror funds which hide a layer of charges taken by SL.
Mirror funds are where funds that you can purchase (heavily discounted in any case) on any platform are "rebranded" and a different charge applied.
For eg the Aberdeen or Blackrock range of funds become the SL Aberdeen or SL Blackrock range of funds. Look the same, smell the same, but cost different amounts.
An unnecessary layer of opacity in this day and age.
These are all about the charges, full transparency. I dislike the SL SIPP because of the continued use of mirror funds which hide a layer of charges taken by SL.
Mirror funds are where funds that you can purchase (heavily discounted in any case) on any platform are "rebranded" and a different charge applied.
For eg the Aberdeen or Blackrock range of funds become the SL Aberdeen or SL Blackrock range of funds. Look the same, smell the same, but cost different amounts.
An unnecessary layer of opacity in this day and age.
Simpo, the biggest enemy at outset will be cost and that's as near as damnit, a fixed certainty. The variable is performance and functionality, but the cost remains. If you work for you, then you could use a SSIP or SSAS to buy your own commercial premises..
http://www.ifaonline.co.uk/retirement-planner/feat...
.. but there are lots of really really good personal pensions out there which will give you all you need and with a pot such as the one you have, you'll be able to benefit from some decent discounts too. Cheap isn't always the best, but if you don't want or need the sexy functionality, then why pay for it?
I like the 7IM offering, but is it for you?
Why is your current pension inflexible; is it an old contract (1990s?)?
http://www.ifaonline.co.uk/retirement-planner/feat...
.. but there are lots of really really good personal pensions out there which will give you all you need and with a pot such as the one you have, you'll be able to benefit from some decent discounts too. Cheap isn't always the best, but if you don't want or need the sexy functionality, then why pay for it?
I like the 7IM offering, but is it for you?
Why is your current pension inflexible; is it an old contract (1990s?)?
Simpo Two said:
Not wishing to thread-crash but for a self-employed person with about £130K in the pot, and stuck in the most inflexibile pension ever devised, I've been advised to move to a James Hay modular SIPP. 7IM and index linking are in it somewhere. Am I about to make a terrible mistake? PM if preferred!
Far be it for me to ponder why some key HL personnel have decided to cash in some shares shortly before HL commit to a far more transparent pricing model in November..!
http://www.hl.co.uk/investor-relations/share-price...
The fees are tiny, but it'll be interesting to see what they have been quietly skimming off, an extra 0.75-0.8% maybe..?
Some fund managers aren't playing ball. HL has massive clout and it'll be interesting to see who blinks first; HL or the fund managers. If it all goes Pete Tong, it'll be interesting to see how much money HL loses as clients realise the true cost and it'll be interesting to see what happens to the share price too.
http://www.hl.co.uk/investor-relations/share-price...
The fees are tiny, but it'll be interesting to see what they have been quietly skimming off, an extra 0.75-0.8% maybe..?
Some fund managers aren't playing ball. HL has massive clout and it'll be interesting to see who blinks first; HL or the fund managers. If it all goes Pete Tong, it'll be interesting to see how much money HL loses as clients realise the true cost and it'll be interesting to see what happens to the share price too.
Mr Noble said:
Simpo
The biggest enemy of any SIPP or pension are the fees. When compounded over 20 or 30 years, they represent a massive sum of money.
All providers hav fees but the ones you manage your self, like the HL SIPP, and much cheaper than fully managed pensions from small high street companies or the bigger bank backed providers.
Have a good read around on the HL (and similar) sites, and if you haven't done so already, have a good read up about passive investing in the Monevator website and the Oblivious Investor site too. They're both a wealth of independent tips and advice.
My SIPP is a similar size to yours and I'm self employed. I discovered just how vast the fees we that my high street FA company were charging me, so I took it off them and have put it in an HL SIPP. I have 80 of my money in one fund, the Vanguard Life Strategy 80% fund. Fees are tiny and with it being a balanced passive fund, there is nothing to do or worry about. It 'should' outperform 99% of managed funds over a 30 year period and will cost a fraction of the amount to run.
Happy to chat more if you like mate.
The biggest enemy of any SIPP or pension are the fees. When compounded over 20 or 30 years, they represent a massive sum of money.
All providers hav fees but the ones you manage your self, like the HL SIPP, and much cheaper than fully managed pensions from small high street companies or the bigger bank backed providers.
Have a good read around on the HL (and similar) sites, and if you haven't done so already, have a good read up about passive investing in the Monevator website and the Oblivious Investor site too. They're both a wealth of independent tips and advice.
My SIPP is a similar size to yours and I'm self employed. I discovered just how vast the fees we that my high street FA company were charging me, so I took it off them and have put it in an HL SIPP. I have 80 of my money in one fund, the Vanguard Life Strategy 80% fund. Fees are tiny and with it being a balanced passive fund, there is nothing to do or worry about. It 'should' outperform 99% of managed funds over a 30 year period and will cost a fraction of the amount to run.
Happy to chat more if you like mate.
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