Should I stay with my current pension provider and transfer into one of their drawdown funds when the time comes?
14 December 2021
Question by Keith
I’m planning to retire in 2 years time. I currently have a personal pension scheme pot of 600k. When I retire I’m looking to take a drawdown pension. It has been suggested that I move my fund into a SIPP as this will make it easier to get a drawdown in the future.
Is this correct or should I just stay with my current pension fund provider and transfer into one of their drawdown funds when the time comes?
Answered by Boring Money
Modern flexible personal pension plans provide virtually all the same functionality as SIPPs.
Older style insurance companies personal pension plans, which were established before the introduction of flexible pension benefits, are generally unable to offer flexible drawdown. This should not be an issue as all the main insurance company pension providers have very good modern plans that will incorporate all aspects of flexible drawdown.
There is normally very little difficulty in switching between providers. The main point is to check whether there are any unusual contractual terms with your existing pension plan, such as any guaranteed income rates, the ability to take more than 25% of the fund value as tax-free cash or any bonuses. It is also worth checking to make sure that there would be no penalty for transferring.
There is very little difference between the main pension providers on costs and investment choice. What is important is to ensure that your drawdown pension plan has a suitable range of funds to match your attitude to risk.