Pension transfer advice
Discussion
Hi
I have been in a company pension scheme for the last ten years and will likely remain with the company for the next few years. In that time I have built up a fund of c.£300K. The fund is managed by Standard Life and, consequentially, the only fund choices are SL ones.
A financial adviser has recommended I keep making contributions to the pension but that I transfer the fund which has built up to a third party platform. The main rationale for this is a greater choice of funds which have (historically) outperformed the majority of SL funds.
The fee for this transfer would be 1.65% of the fund. The ongoing costs (I can decline the trail commission) are approximately .1% greater than what I'm being charged now.
I understand the basis of the recommendation and the risk that SL might suddenly become the best performing funds the minute I transfer out and I would have been better off staying with them, etc. but is there anything else I should think about?
Thanks
I have been in a company pension scheme for the last ten years and will likely remain with the company for the next few years. In that time I have built up a fund of c.£300K. The fund is managed by Standard Life and, consequentially, the only fund choices are SL ones.
A financial adviser has recommended I keep making contributions to the pension but that I transfer the fund which has built up to a third party platform. The main rationale for this is a greater choice of funds which have (historically) outperformed the majority of SL funds.
The fee for this transfer would be 1.65% of the fund. The ongoing costs (I can decline the trail commission) are approximately .1% greater than what I'm being charged now.
I understand the basis of the recommendation and the risk that SL might suddenly become the best performing funds the minute I transfer out and I would have been better off staying with them, etc. but is there anything else I should think about?
Thanks
I think that the big question is to be asked of the employer: if you take the transfer of so far accumulated funds, can you continue to contribute to the employer's pension plan with SL, and if so, will the employer continue to make their contributions? If the answers are "no", what will you then decided to do?
R.
R.
Why should his fee be a percentage of your fund? It's no more work if you transferring £100k, £200k or £300k so if you insist on paying for something you can do yourself for nothing then agree a fixed fee. Is he also charging ongoing annual fees?
The first step is to understand the answers to the questions about ongoing contributions posted above.
The first step is to understand the answers to the questions about ongoing contributions posted above.
I'd say hang on before you think of transferring. You need to know some more details first. My guess is that the IFA is one of these St James Place affiliated types and they always "recommend" transferring to them and while it works for many folks, it certainly isn't a low cost approach.
I too have an SL pension and for me, the fees for it are remarkably low - something about the negotiated rates when the company set it up means that it is quite good value. You need to login to the platform and find out wha the current fees that you are paying are?
So much so that it doesn't make much sense (imho) for me to transfer it anywhere else - i.e. I could transfer it to Vanguard but the fee structure would then be higher than what I am paying with SL! (which is still 1pc less than a St James Place approach!
That plus the fact that the SL funds seem to have performed pretty well for me over the years means that I'd think carefully about moving it elsewhere without looking into it quite carefully.
I too have an SL pension and for me, the fees for it are remarkably low - something about the negotiated rates when the company set it up means that it is quite good value. You need to login to the platform and find out wha the current fees that you are paying are?
So much so that it doesn't make much sense (imho) for me to transfer it anywhere else - i.e. I could transfer it to Vanguard but the fee structure would then be higher than what I am paying with SL! (which is still 1pc less than a St James Place approach!
That plus the fact that the SL funds seem to have performed pretty well for me over the years means that I'd think carefully about moving it elsewhere without looking into it quite carefully.
1.65% Iniital Charge is a lot.
Please don't use St James' Place if it is them.
And I doubt very much that SL would allow a transfer out of an active employee pension (once you leave.....then it would be a different matter).
ETA: I don't know exactly what SL pension you have, but in general, SL (and other providers) offer a greater range than just SL funds. Even if the fund name has 'SL' in it, it may be SL's pooled investment at another provider's fund.
Please don't use St James' Place if it is them.
And I doubt very much that SL would allow a transfer out of an active employee pension (once you leave.....then it would be a different matter).
ETA: I don't know exactly what SL pension you have, but in general, SL (and other providers) offer a greater range than just SL funds. Even if the fund name has 'SL' in it, it may be SL's pooled investment at another provider's fund.
Edited by CharlesElliott on Monday 4th September 12:59
Work out what you're paying in fees now (double check because as mentioned often the fee you're paying as a negotiated/discounted rate isn't the same as the numbers on the factsheet).
Also what funds would you be moving the pension into and are there definitely not equivalents on the SL platform?
I have a similar thing with a Royal London pension where it's cheaper to keep it where it is than it is to move it to a low cost platform like Vanguard and the default Royal London funds actually perform pretty well too.
Also what funds would you be moving the pension into and are there definitely not equivalents on the SL platform?
I have a similar thing with a Royal London pension where it's cheaper to keep it where it is than it is to move it to a low cost platform like Vanguard and the default Royal London funds actually perform pretty well too.
Seti said:
Thank you for the replies.
I had just assumed SL would allow a transfer out and also allow contributions to continue. I will check.
The financial adviser does indeed receive the 1.65%.
I think its more likely the rules that your Company works to.I had just assumed SL would allow a transfer out and also allow contributions to continue. I will check.
The financial adviser does indeed receive the 1.65%.
Unless you are being told by the FA that you are transferring out the entirety of the Fund ( is it a DB or DC scheme ?) but either way once done I would be doubtful that any such contributions would then still be allowed by your Company into what is now closed.
alscar said:
Seti said:
Thank you for the replies.
I had just assumed SL would allow a transfer out and also allow contributions to continue. I will check.
The financial adviser does indeed receive the 1.65%.
I think its more likely the rules that your Company works to.I had just assumed SL would allow a transfer out and also allow contributions to continue. I will check.
The financial adviser does indeed receive the 1.65%.
Unless you are being told by the FA that you are transferring out the entirety of the Fund ( is it a DB or DC scheme ?) but either way once done I would be doubtful that any such contributions would then still be allowed by your Company into what is now closed.
OP, your employer will have selected Standard life to run the scheme & it's very unlikely that as an existing member, still contributing, you would be permitted to transfer out while still employed by them.
Any decent IFA would have established this as part of his research & confirmed in writing to you when presenting his reasoning for recommending a transfer.
Seti said:
A financial adviser has recommended I keep making contributions to the pension but that I transfer the fund which has built up to a third party platform. The main rationale for this is that he gets 1.65% of the fund.
FTFY.When there's £5K on the table it's easy to find reasons for taking it.
Am I being sceptical? Damn right I am.
I would be very cautious about leaving an employer's pension scheme while you're still working for that employer. In particular, if your employer currently contributes to your SL pension each month, will those contributions cease when you switch provider?
Personally, my first objective would be to review the SL funds held by the pension at the moment, then swap some of them for other SL funds if necessary.
Out of curiosity, did you contact the financial advisor OP, or did you respond to a cold call?
Personally, my first objective would be to review the SL funds held by the pension at the moment, then swap some of them for other SL funds if necessary.
Out of curiosity, did you contact the financial advisor OP, or did you respond to a cold call?
Seti said:
Hi
I have been in a company pension scheme for the last ten years and will likely remain with the company for the next few years. In that time I have built up a fund of c.£300K. The fund is managed by Standard Life and, consequentially, the only fund choices are SL ones.
A financial adviser has recommended I keep making contributions to the pension but that I transfer the fund which has built up to a third party platform. The main rationale for this is a greater choice of funds which have (historically) outperformed the majority of SL funds.
The fee for this transfer would be 1.65% of the fund. The ongoing costs (I can decline the trail commission) are approximately .1% greater than what I'm being charged now.
I understand the basis of the recommendation and the risk that SL might suddenly become the best performing funds the minute I transfer out and I would have been better off staying with them, etc. but is there anything else I should think about?
Thanks
Posting this only because you should be fully informed. SL offer 300 funds and several which are white labelled (vanguard, Blackrock et al) so not correct that they offer only SL products. And greater choice. Do you need more choice. Do you know exactly where your current pot is parked and is it achieving a return in line with your goals and risk appetite?I have been in a company pension scheme for the last ten years and will likely remain with the company for the next few years. In that time I have built up a fund of c.£300K. The fund is managed by Standard Life and, consequentially, the only fund choices are SL ones.
A financial adviser has recommended I keep making contributions to the pension but that I transfer the fund which has built up to a third party platform. The main rationale for this is a greater choice of funds which have (historically) outperformed the majority of SL funds.
The fee for this transfer would be 1.65% of the fund. The ongoing costs (I can decline the trail commission) are approximately .1% greater than what I'm being charged now.
I understand the basis of the recommendation and the risk that SL might suddenly become the best performing funds the minute I transfer out and I would have been better off staying with them, etc. but is there anything else I should think about?
Thanks
A greater choice of funds is only relevant if your current platform doesn't have funds that are suitable for you. Is this the case? What funds does the advisor say that you need that isn't available from SL?
Better performing funds (over what timeframes) historically tells you nothing about future performance. They will have to outperform by 1.65% initially plus 0.1% per year just to match your existing funds. It is generally possible to find one or more funds that outperform another over various timeframes but that alone doesn't make them suitable or appropriate.
Has your advisor provided a written rationale for the transfer?
Better performing funds (over what timeframes) historically tells you nothing about future performance. They will have to outperform by 1.65% initially plus 0.1% per year just to match your existing funds. It is generally possible to find one or more funds that outperform another over various timeframes but that alone doesn't make them suitable or appropriate.
Has your advisor provided a written rationale for the transfer?
Contrary to what has been stated by some it is sometimes possible to transfer out the majority of a DC pension scheme and leave the scheme running and taking ongoing employer and employee contributions, whether it is advisable to do so depends on many different factors, hopefully you have consulted an IFA and they can justify their advice, if you're unsure maybe run the advice past another IFA for a second opinion.
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