How should I choose a SIPP for cash transfer from a Public Service Pension?

Hello,

Could I get some guidance on choosing a SIPP for cash transfer from a Public Service Pension?

Thanks.

Hi,

Transferring a public service pension into a Self-Invested Personal Pension (SIPP) is a big decision – and not one to take lightly.

First and foremost, many public sector pensions are defined benefit (DB) schemes, meaning they come with guaranteed benefits - such as an inflation-proofed income for life. If you transfer out, you could lose these guarantees, so it’s a legal requirement to get regulated financial advice if your pension is worth £30,000 or more. But it's a very good idea to get advice even if the scheme is worth less than that.

In many cases, advisers recommend staying put with a DB pension, as public service schemes offer valuable perks that are hard to replace and it may not be worth the hassle.

If you’ve already taken advice and decided a transfer is right for your pension plans, here are some areas you want to pay attention to when selecting a new home for your money:

1. Costs and fees – What are you paying for?

The SIPP market is large and different providers come with different pricing models. Some charge a flat annual fee, while others take a percentage of your pension pot. Specific charges to check include:

• Platform fees – this is the administration cost for managing your SIPP account and holding your investments.

• Trading fees – this is the charge that is triggered when you buy or sell investments within your SIPP.

• Exit fees – this is the cost that some providers charge if you decide to transfer your funds out of your SIPP.

Lower fees can boost your pension pot over time as the costs aren't eating away at your investment returns so much. However, the the cheapest option isn’t always the best. Consider value for money rather than just price. Does the provider offer the range of investments and customer support you want that make it worth the price point?

2. Investment choice – How much control do you want?

Now onto the choice of investments. SIPPs give you the freedom to choose what your pension is invested in, but not all providers offer the same range. For example, some let you pick and mix from thousands of shares, funds, and ETFs, while others focus on ready-made portfolios for a simpler, pre-packaged approach.

The right mix of investments for you is not necessarily the same as someone else, even if you both have SIPPs and you're both saving for retirement. For example, if you're close to retiring, you might want to focus your portfolio on lower-risk assets such as money market funds, bonds, and cash-like products to reduce the risk of your portfolio being in a dip when you need to cash in. Or, if you've still got a decades or two to go until you retire, you might want to maintain exposure to the stock market to give your pot the opportunity to grow and not get weighed down by inflation over the longer-term.

Ultimately, what your SIPP is invested in is a personal choice. Just make sure to do the research on what your chosen provider can offer you in terms of range and choice of investments. You want to be certain you're happy before you transfer your funds into a SIPP and then potentially face an exit fee if you want to move it back out again!

3. Reputation and customer service – Is the provider reliable?

As well as cost and investment choice, it’s also worth checking reviews and ratings to see what existing customers think of a SIPP provider before you transfer.

After all, your pension pot is something you spend a lifetime saving towards and is supposed to keep you afloat throughout retirement - it's a big deal. You want to make sure that if you need any guidance, have any questions or (touch wood!) something goes wrong, your provider has adequate customer service who you can reach out to without a faff.

Boring Money’s Best For Customer Service awards highlight the best providers in this area, ranking them on a range of areas our readers care about and drawing from thousands of real-life customer reviews. If you want a reputable option, this is a great list to start searching with! Click the link below to see the latest winners.

4. Advice is crucial – Think carefully before you transfer

Finally, moving out of a public service pension is a one-way decision – once it’s done, you can’t go back. If you’re unsure, it’s absolutely vital to get financial advice before making a move. Losing guaranteed benefits could mean a less secure retirement, so make sure you’re fully aware of the risks.

For more guidance, the government's MoneyHelper service offers impartial information on SIPPs and pension transfers. And if in doubt, definitely speak to a financial adviser – it could be the most important pension decision you make.

Hope this helps!