Take a SIPP

By THIS IS MONEY
Updated:

 

I am in my early 40s and have built up a total pension find of around £150,000 in five different pension plans, two of which I still pay into. A friend suggests I transfer them all to a managed self-invested personal pension plan (SIPP) as this is more flexible and likely to show better returns. If I do terminate my pension plans I will suffer termination charges of around £18,000. Is this penalty worth the extra flexibility? I do not have the inclination to manage a SIPP myself. Are there brokers who specialise in this service? MK, London.

Jon Minchin from independent financial advisers Pensionline says: There are lots of issues here. First there is no such thing as a managed SIPP. As the name implies, SIPPs require you to do the investing yourself, and if you do not want to do this then perhaps you should think again. What is more, though a fund of £150,000 might be considered enough to justify the cost savings of a SIPP, it will still cost you about £500 to start the SIPP and then annual charges of £300-400 for administration.

On top of this you have to pay the charges associated with doing your own investments. So a SIPP may not be the answer. But that does not mean your collection of pension funds could not benefit from a weeding operation - among those five it is quite likely you have one or two underperformers with high charges. Comparing performances and charges and deciding which to consolidate can be very complicated especially with five funds, so I suggest you speak to an independent financial adviser who knows about pensions.

Your £18,000 'penalty' sounds a bit high - is it that you have received projections of future performance from some of these funds and found that this is how much you stand to lose out if you leave the money where it is? Remember these projections are only notional figures. Once again, a visit to a pensions IFA could be a good idea.

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