An interesting comment arrives on my blog on the deficiencies of L&G’s workplace pensions.
So why haven’t you just transferred it to a cheap SIPP from a supplier with a good app/website, invested in a nice index fund, sat back and enjoyed your retirement? I’ve just put some of my SIPP into drawdown. It was almost instant and I knew exactly what my investments were worth, I know how much of my SIPP is in drawdown and how much is yet to be placed in drawdown. There are no charges for taking money from the SIPP and platform charges are very low. There’s no point moaning about bad service, that’s not going to change anything – vote with your feet.
thanks Peter Wilson. There are some other interesting comments , well worth a read
I don’t have a good answer to this question but I have a number of bad ones.
A vain hope that L&G will invest in what was their flagship product
Sometime in the late 1990s I was involved in parcelling off the Eagle Star DC admin platform to L&G so that we could use a shiny new PC based system. I laughed then that all the technological developments L&G were building were “lipstick on a pig”. Despite many discussions since, the underlying admin system at L&G is still the Eagle Star system we dumped. Re platforming has now become just too fraught with reputational risk. I suspect that Worksave and other legacy pension products will go their graves on the Eagle Star system which wasn’t fit for purpose last Century, let alone this. I really should have learned by now that fundamental improvements in service are led or hindered by technology.
A vain hope that improving customer service is a commercial imperative
I have been involved in delivering workplace pensions at Eagle Star and Zurich at the start of the boom years for DC (coinciding with the collapse of Equitable Life in 2000).
Over this time I have seen a chronic under-investment in workplace plans. The commercial imperative is to reduce costs not to invest in service. The plan was to make administration self-service but without a back-end that can manage the straight through processing of member requests , the service of L&G and others is stuck.
This is why Peter Wilson’s comments are correct. By transferring away to a “nice cheap SIPP” the customer gets an upgrade, I would like to say a free upgrade.
A vain hope for “free upgrades”
One of the great lies peddled to DC pension consumers is the “free switch”. You may be able to switch bank accounts or energy suppliers “free”, but you do not switch out of a DC pot for free. The funds that my DC pension pot are invested in exist on another DC platform. I got a quote for the transfer of my funds from the L&G series I was in , to the series I would transfer to and the cost was over £1000.
I would have ended up paying marginally more for my free upgrade by way of annual management charges but would have lost a lot of money in the switch. It was only because the receiving provider got a quote for me to switch, that I knew this “hidden” cost. The cost is of course related to the various duties imposed on buying and selling of assets. In this case I thought I would avoid such costs through re-registration but even though I was staying with LGIM funds, I would have lost in the trade.
“Inertia” or the hope that something better will come along.
When the money for my tax-free cash arrived in my bank account (just over 5 weeks after being requested), I was able to use it to pay off my mortgage in a fifteen minute phone call. At the start of that call I had a large bank balance and a large mortgage, at the end I had a small bank balance and no mortgage. Chapeau to First Direct who managed this process on the phone (though I could have done it on the web). The service I get from First Direct and even more so Starling Bank, is light years better than what I get from my workplace pension provider.
To get money out of my pension I had to wade through various packs of information, sign various disclaimers, tax forms and an application form which reminded me that I was acting unadvisedly. Some of this is the law but the way I had to print out forms and send them back to L&G , in second class pre-paids or with my own postage suggests that the process I followed hasn’t been fundamentally improved since the 1990s. This is where the lipstick on the pig is cracking and the beast’s true physiognomy is showing through.
Dealing with my pension provider was such a bad experience that I may just cut and run and do what Peter Wilson says.
Finally – one good reason to leave my workplace pension
But I really don’t want a SIPP, I don’t want drawdown. I want something better to come along. I want to invest my remaining money in a scheme pension called Pension SuperHaven!
The only reason for me to get off the pot and leave my workplace pension, is if that workplace pension, doesn’t provide me with a pension.
But if L&G want to talk with me about putting Pension SuperHaven within its workplace pensions, I am all ears, and I promise no lipstick.
I too have recently moved my pension pot out of a 20 year old personal pension product with one of the major players into a “cheap” online SIPP. I enquired about transferring the underlying funds (I self-selected the funds from a wide range of managers) in specie to the new platform, but I was informed that this was not permissible under the terms of my pension policy. The transfer payment was therefore £000’s less than their limited and creaky online platform said my policy was worth. After 5 weeks, I have not yet received any statement showing the make up of the transfer payment so I assume the 2% shortfall was the hidden costs you refer to.
As I was able to state that I was not intending to draw on my pension in the next couple of years the transfer was not subject to the significant “red flag” rules but still took nearly 4 weeks to complete. I did however take up a PensionWise appointment and despite my long term experience with pensions and tax, I did find it useful.
The 2% transfer “penalty” will be made up by savings in management charges within 2 years. I am incurring modest transaction costs in building up my portfolio again – but the effect is limited because I am investing larger sums and all charges are entire transparent on the online platform.
At present, despite my advanced age, I am not intending to drawdown my SIPP or use it to purchase a pension. As the trustees are likely to follow my expression of wishes, my will has assumed it will be treated separately from the allocation of the rest of my estate. Considering the suggestion that IHT may be levied and thinking about it, I still intend to follow this course allowing the fund to build tax free. I am planning on dying after age 75 anyway!
I am very pleased to hear you found the Pension Wise service useful. I am sure the Money Helper specialists always try to add value in a conversation whether it be a longer specialist booked call such as Pension Wise, Transfer Safeguarding, Pensions & Divorce, Self-Employed Pension Review or a free flowing Helpline call.
The helpline for any pension questions is of course 0800 011 3797.