Your IndustryAug 20 2015

Vehicles to consolidate pension pots into

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Ultimately there is no right or wrong receiving scheme for pension consolidation, says Claire Trott, head of pensions technical at Talbot and Muir.

Ms Trott says it may be a scheme already in existence that others are transferred into or it may be a new scheme entirely.

When looking at a new scheme, Ms Trott says it should meet all the client’s requirements and be suitable for the size of pot and investment strategy.

There is no point in transferring to a simple platform self invested personal pension if the client’s long term plans are to buy a property with the partners in their business, which would be more suited to a small self-administered scheme, she notes.

Just as important are the issues of what death benefits or retirement benefits are available from the receiving scheme, if the client wants to use flexi-access drawdown then it needs to be available even if they don’t need it just yet.

Ms Trott says: “Future proofing the clients’ requirements will mean it will be less likely they will need to transfer in the future and hence saving them money.”

Modern pension thinking is to consolidate your pension pots into one contract, which will allow you to benefit from economies of scale in reducing charges, notes Adrian Mee, consultant at Mattioli Woods.

Accordingly, the charging structure of your new pension contract needs to be borne in mind, which can vary dramatically between Sipp, Ssas and other personal pension and occupational pension arrangements.

Mr Mee says a well-reasoned pension transfer should compare all available arrangements, including a personal pension adhering to the stakeholder charging regime (often viewed as the most cost-efficient pension structure), varying to your current company pension provider via their workplace pension fund.

He says the creation of a Sipp or Ssas does bring extra cost but also an enhanced level of investment flexibility, which opens up the ability to invest into unquoted shares, either third party or the member’s own business.

Also, Mr Mee says these arrangements enable loans to third parties, or for cash to be paid back to the member’s own business.

Direct commercial property purchase to include a commercial mortgage to be let to member’s own business or third party is also allowed.

Individual assets can also be purchased, which is not permitted by some other pension contracts.

Individual stocks and shares, fixed interest instruments (commonly government guilds and corporate bonds), structured products, investment syndication, offshore funds, can all be included in a Sipp or Ssas.

This wider investment choice is why despite some personal pensions offering a range of funds, David Trenner, technical director of Intelligent Pensions, says he cannot see any reason for not using a Sipp.

Mr Trenner says: “Sipps can be low-cost – often cheaper than personal pensions – and allow a range of funds to be used to meet the client’s long, medium and short term needs.

“Ssas still have their uses, but they are more expensive than Sipps and should only be used for clients with a company which wants to access these benefits (for example, loanback).”