Over your working life you may have worked for a variety of employers and accumulated various workplace pensions. Keeping track of all these pensions can be a challenge. You may be considering consolidating these small pension pots into a self invested personal pension (SIPP). We look at some of the key points you should consider.
Why transfer into a self invested personal pension (SIPP)?
While having all your pensions in one place can make your life easier the reason for consolidating your pensions should be based on:
- Reducing costs. Some older pension plans have very high associated annual management charges. The impact of these costs over time can be significant.
- Accessing better performing investment options with wider choice
- Review of existing pension plan exit charges. If exit charges apply do they mitigate the benefits of transferring to a new scheme?
What are the pros & cons of consolidating your pensions into a SIPP
Pros:
- Reducing costs; Over time the impact of charges applied by your pension providers can really add up. A low cost SIPP can help keep costs down.
- Wider investment choice; One of the attractions of a SIPP is that you have a lot of control of what your pension monies are invested in. Most SIPP platform providers provide a wide range of options including investment funds, investment trusts, exchange traded funds (ETFs), individual company shares and bonds and more.
- Management; Having your pensions in one place makes life easier.
- Additional services; Some SIPP providers offer advisory services if required. Mobile apps are becoming increasingly a desired option with many SIPP providers investing in apps with clever functionality. Most SIPP providers offer investment commentary and expert opinion to help you in your decision making.
Cons:
- Type of scheme; For some types of pension scheme moving to a SIPP may not be in your interests e.g. with pension schemes based on final salary transferring is often not recommended
- Exit penalties: Some pension providers will charge an exit penalty if you transfer your pension away from them. This can be a significant sum.
- For older pension schemes there may be benefits that could be lost if you transfer away. Some old pension schemes had guaranteed annuity rates built in and a right to take more than 25% tax free cash on retirement
- Under current pension rules there can be an advantage in keeping your pensions seperate. So currently you may be able to take 3 of your pension pots up to £10,000 which are considered “trivial” as a one off lump sum provided the pension schemes allow this. Click here for more information about taking a small pension as a lump sum.
If you are unsure of whether moving your pensions is the right thing to do then you should seek independent financial advice
How to transfer your pension to a SIPP?
It is advisable to get independent advice on whether transferring into a SIPP is right for you.
Once you have decided to proceed you will need to check whether you can transfer your pension based on its type.
What types of pension can I transfer into a SIPP?
Typically you can transfer the following types of pension plan into as Self Invested Personal Pension (SIPP):
- Personal Pension Plans
- Other SIPPs
- Stakeholder Pension Plans
- Retirement Annuity Plans
- Executive Pension Plans (EPPs)
- Occupational Money Purchase
Plans - Small Self-Administered Schemes (SSAS)
- Defined Benefit Occupational Pension Schemes and some Recognised
Overseas Pension Schemes.
What SIPP provider should I opt for?
There are basically 2 types of self invested personal pension.
(a) Full SIPP – Aimed at sophisticated investors who require the full range of options including the ability to invest in commercial property, unquoted shares and offshore funds. Suited to larger pension holdings fulls SIPPs are generally more expensive with setup fees and higher ongoing management charges.
(b) Low Cost SIPP – Offered by fundsupermarkets and specialist providers, they are suited to people with smaller pension funds and while still offering a wide range of investment options are run on a lower cost basis.
In this review we focus the low cost SIPP options available.
Do it with me SIPP platforms and Do it for me SIPP platforms
Are you someone who wants to make your own investment decisions about what your pension is invested in?
or
Would you prefer to give over the investment selection process to an expert in this area?
Many SIPP platforms offer both. Catering for first time investors through suggested fund options or strategies through to experienced investors where the focus is on providing advanced tools to allow independent decisions.
You get a range of active investment management, from advice and assistance to completely hands-free:
SIPP Platforms that do both:
See below 4 of the largest platforms in the market:
Thousands of funds to choose from; Select 50 – Browse a list of expert picks. Pathfinder – Risk profiled fund options. Investment Finder – Search 1000s of investment ideas.
Service Fee
Less than £25,000: 0.35% if you have a regular savings plan or £90 (£7.50 a month) if you don’t
£25,000 or more but less than £250,000: 0.35%
£250,000 or more but less than £1 million: 0.20% – and you will automatically qualify for Fidelity’s Wealth Management Service benefits
£1 million+: 0.20% a year for the first £1 million and no service fee for investments over £1 million
Transfer In Existing Pensions
Why we like it: The Fidelity SIPP offers low cost pricing with an extensive range of investment options with user friendly selection tools as well as planning calculators and retirement guidance. If you are transferring from an existing SIPP they will cover up to £500 of transfer out fees. Fidelity with over $300 billion of assets, are one of the largest money managers in the world. With investments, your capital is at risk.
Thousands of funds to choose from; Select 50 – Browse a list of expert picks. Pathfinder – Risk profiled fund options. Investment Finder – Search 1000s of investment ideas.
Less than £25,000: 0.35% if you have a regular savings plan or £90 (£7.50 a month) if you don’t
£25,000 or more but less than £250,000: 0.35%
£250,000 or more but less than £1 million: 0.20% – and you will automatically qualify for Fidelity’s Wealth Management Service benefits
£1 million+: 0.20% a year for the first £1 million and no service fee for investments over £1 million
Over 11,000 investments to choose from including funds, investment trusts, ETFs, company shares, bonds and more.
Admin Charges:
£0 – £250k: 0.45%
£250k – £1m: 0.25%
£1m – £2m: 0.10%
Over £2m: FREE
Transfer In Existing Pensions:
Why we like it: Award winning pension provider, HL are a FTSE 100 Company and the UKs biggest SIPP provider which is testimony to the service they offer their 1m+ clients. With no setup or transfer in charges, and no charges to buy or sell funds, Hargreaves Lansdown offer a flexible SIPP where you invest as little as £25 pm. With investments, your capital is at risk.
Over 11,000 investments to choose from including funds, investment trusts, ETFs, company shares, bonds and more.
£0 – £250k: 0.45%
£250k – £1m: 0.25%
£1m – £2m: 0.10%
Over £2m: FREE
A low cost award-winning SIPP that gives you a choice of over 40,000 investments; Selected funds; Ready made portfolios.
Admin Charges:
Sipp fee: £5.99 pm – assets up to £50,000, £12.99 pm – assets over £50,000
Transfer In Existing Pensions:
Why we like it: A new, straightforward way to build your pension has arrived. Open an ii SIPP for just £5.99 a month (assets up to £50,000. Over £50,000 the fee is £12.99 pm). Which? Recommended SIPP Provider 2023. Transfer your pension to an ii SIPP. Terms apply. Capital at risk
A low cost award-winning SIPP that gives you a choice of over 40,000 investments; Selected funds; Ready made portfolios.
Sipp fee: £5.99 pm – assets up to £50,000, £12.99 pm – assets over £50,000
Why we like it: A new, straightforward way to build your pension has arrived. Open an ii SIPP for just £5.99 a month (assets up to £50,000. Over £50,000 the fee is £12.99 pm). Which? Recommended SIPP Provider 2023. Transfer your pension to an ii SIPP. Terms apply. Capital at risk
A wide choice of investments, including over 2,000 funds, shares from 25 markets, ETFs, investment trusts and more
Platform Fees:
£0 – £250k: 0.25%
£250k – £500km: 0.1%
Over £500k: FREE
Transfer In existing Pensions:
Why we like it: There are no charges to set up their SIPP and if you are moving an existing SIPP to them there are no transfer in charges. With AJ Bell you can deal from as little as £1.50, and you will never pay more than £5.00 per online deal. With investments, your capital is at risk.
A wide choice of investments, including over 2,000 funds, shares from 25 markets, ETFs, investment trusts and more
£0 – £250k: 0.25%
£250k – £500km: 0.1%
Over £500k: FREE
Do it for me pension platforms
With do it for me platforms you get an expert to do the investing for you – typically you choose how cautious or adventurous you want to be and the timescales you want to work to. See two selected such providers below:
There are no tables for this criteria
DI
Funds selected for you based on risk profile
Admin Charges:
0.6% annual fee on balances under £100,000, 0.3% annual fee on the portion over £100,000
Transfer In Existing Pensions:
Good news – Wealthify’s Personal Pension fees have reduced! Pension balances up to £100,000 continue to be charged at 0.6% per annum, but any amount thereafter will now be charged just half the usual fee (0.3% per annum). Charged monthly
Why we like it: For investors who want an expert plan put together for them based on timescales and investment risk profile Wealthify (part of the Aviva group)
offer a tech savvy low cost option. Your money is invested in a range of funds including shares, bonds, property and commodities using mainly low cost passive
investments such as mutual funds. Wealthify also offer an ethical investment option.
With investments, your capital is at risk. The tax treatment of your investment will depend on your individual circumstances and may change in the future
Funds selected for you based on risk profile
Good news – Wealthify’s Personal Pension fees have reduced! Pension balances up to £100,000 continue to be charged at 0.6% per annum, but any amount thereafter will now be charged just half the usual fee (0.3% per annum). Charged monthly
Why we like it: For investors who want an expert plan put together for them based on timescales and investment risk profile Wealthify (part of the Aviva group) offer a tech savvy low cost option. Your money is invested in a range of funds including shares, bonds, property and commodities using mainly low cost passive investments such as mutual funds. Wealthify also offer an ethical investment option.
With investments, your capital is at risk. The tax treatment of your investment will depend on your individual circumstances and may change in the future
How does the pension transfer process into a SIPP work?
Once you have opened a SIPP the good news is that most providers will do most of the work for you in liaising with your existing pension companies. Your existing pension provider may require a signed transfer form from you. A valuation and discharge form will be sent to you by your provider that authorizes your existing pension investments to be sent to your new SIPP provider. This will need to be done for each pension pot you transfer.
For in-specie transfers where you move the investments in your current scheme to your SIPP as long as those investments are available via the SIPP they can simply be transferred across. Please note this process can typically take between six and eight weeks to complete especially if you are transferring funds (unit trusts and OEICs). If you are transferring cash only the transfer process can be much quicker.
If you hold your current pension pot (s) with a life assurance company you may need to sell your current investments before you can transfer over to a SIPP. It is advisable to check this with your current pension provider before you start the transfer process.
What information will my existing pension provider require of me to transfer into a new SIPP?
Some of the typical questions you may be asked as part of your transfer request include:
- What is the SIPP pension scheme reference number – your new SIPP provider will give this to you
- Confirmation that the SIPP is a registered pension scheme under the Finance Act 2004 – your new SIPP provider should confirm this
- The name of the scheme’s authorised practitioner/administrator and their address – your new SIPP provider should confirm this
- Who is the SIPP scheme trustee – your new SIPP provider should confirm this
- Who should the pension transfer cheques be made payable to – your new SIPP provider should confirm this
Special Offer:
Its a good idea to check whether your current provider will charge you for transferring out. AJ Bell will pay you up to £500 to cover your exit fees when you move an account worth £20,000 or more. See transfer offer for more info.
Important Risk Information:
This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of pensions is based on current tax law and there is no guarantee that tax rules will stay the same in the future.
Different types of investment carry different levels of risk and may not be suitable for all investors. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
* Details of how the Financial Services Compensation Scheme applies to investment firms can be found at fscs.org.uk.