Should I give up some of my private pension benefits for a SIPP with more flexibility?

Mr. Alan Owers | DUR| 24/07/2020 | 3

Mr. Alan Owers's question in full

hi, I am looking to invest my private works pension into a sipp. I know i am giving up certain benefits but i would like much more flexibility in withdrawing my pot which is £400,000. With been a novice investor, have been researching different platforms on your website and have narrowed it down to AJ bell Invest and Pension Bee. I am 60 years old looking to invest for a couple of years before taking drawdown.I am getting fianancial advice through work but they seem to want to push me towards Aegon or Royal London which i am not keen on due to poor reviews of platform and of cost, even though royal london seem to give out a yearly dividend. Any comments would be gratefully recieved. many Thanks Alan

Holly Mackay's Response

Hi Alan

I’m afraid your question makes me nervous. There are lots of times when I think people can DIY – but pensions and giving up benefits is not one of them.

I’d really suggest trying to get financial advice – now even if you don’t like the products your work advisers are suggesting, at least get them to articulate very clearly the impact of giving up these benefits as sometimes they can be significant.

As for Aegon and Royal London – they are definitely not at the ‘sexy’ end of user experience (!) but they are solid, mainstream brands. As a mutual, Royal London does have better motives than many.

In terms of costs, very broadly, without financial advice included, expect to pay no more than 0.75% a year for a ‘passive’ solution and about 1.25% a year for an ‘active’ solution. So see if the costs fall into these ballparks. There can be extra fees for drawdown and activity-related things (eg drawing out money.)

Now AJ Bell and PensionBee are both good – but they are chalk and cheese. AJ Bell is a good pension provider but the emphasis is on you to pick your own investments. To assemble the ingredients and build your own. As a novice investor needing to manage drawdown, this sounds a bit ambitious. PensionBee is a ready-made option which will be much simpler – but again, I think they are better for those saving up for a pension and trying to get everything under one roof, rather than for someone juggling drawdown. The thing about drawdown is it’s not just managing the money today – it’s about managing the timing of it all so you don’t run out of cash too early – or end up with loads left!

A few other ideas. Standard Life have a new semi-digital semi-human pensions advice service – you could check that out. You get a simpler drawdown service than a full DIY option and a bit of advice along the way. (I haven’t tried it myself so it’s just a thought not a recommendation.) Or speak to the Pensions Advisory Service – this impartial Government-funded body  wont advise on individual products but they can chat you through the benefits you’d be giving up and the pros and cons of DIY drawdown.

I hope that helps. Good luck. If you do look for external advice then expect to pay about £200 an hour. I’m sorry I cant be more specific in any suggestions as I don’t know your full situation and I’m not a qualified financial adviser.


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Holly Mackay

Founder and MD of Boring Money, Holly Mackay has been working in the investments space since 1998. She read Modern Languages at Oxford, with a special focus on Mediaeval French which was deeply interesting and arguably utterly useless.

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