Vanguard SIPP to launch in early 2020

[celticblue]

Hi,

Been waiting for them to launch this for a while. The details are on their website. Did not want to put them here in case it was assumed to be spam by a Vanguard employee. It seems to match their low cost ethos. Am intending to switch to them ASAP. Am I missing any hidden negatives? What do you all intend to do?

[never give up]

Good spot celticblue. It’s been a while coming. It looks good to me. I’m sure Monevator will have an article soon which will cover the pros and cons.

My ISA is with them though and from a platform/provider risk perspective it doesn’t feel right to have all my investments on one platform so I am unlikely to switch my current pension to them as well. If I was 18 again and starting from scratch I would be tempted to have a SIPP with them and ISA’s elsewhere.

Depending on your exact situation I’m sure it will be a great low cost way of investing your SIPP funds.

[TartanTallulah]

Thanks for the heads up! I shall be taking a keen interest.

[Playing with Fire UK]

I'm... kinda underwhelmed after waiting so long. There are cheaper options for me if I stick to ETFs and then I'm not limited to Vanguard funds.

[frugledoc]

I'm... kinda underwhelmed after waiting so long. There are cheaper options for me if I stick to ETFs and then I'm not limited to Vanguard funds.

Yeah, me too.  HL is £45 capped for ISA and £200 capped for SIPP

[cerat0n1a]

Doesn't the cap also include the fees for the Vanguard funds themselves? Not having the fee structure for the withdrawal aspects yet makes it hard to make a fair comparison for anyone close to wanting to take money out of a pension.

[shelivesthedream]

[Playing with Fire UK]

Doesn't the cap also include the fees for the Vanguard funds themselves? Not having the fee structure for the withdrawal aspects yet makes it hard to make a fair comparison for anyone close to wanting to take money out of a pension.

Oh, that does make a difference. The lack of drawdown and exit costs is a definite plus (but I'm a long way from needing that).

[frugledoc]

Doesn't the cap also include the fees for the Vanguard funds themselves? Not having the fee structure for the withdrawal aspects yet makes it hard to make a fair comparison for anyone close to wanting to take money out of a pension.

That would make it more attractive but think it includes the fund/etf fees

[MustacheAndaHalf]

Since I recently wrote about Vanguard becoming just another investment company to me, I'm probably the least likely person to be a shill / employee, so I'll post the link.  :)  The cost is listed as 0.15%/year.
https://www.vanguardinvestor.co.uk/articles/latest-thoughts/retirement/get-ready-for-the-vanguard-personal-pension

That does seem to be less than existing low-cost providers:
https://moneytothemasses.com/saving-for-your-future/pensions/the-best-cheapest-sipps-low-cost-diy-pensions


When a company launches a new product, they are more open to feedback - they might fail, and they want to avoid big problems.  In the U.S., Vanguard charges $0/trade for any ETF or stock.  Maybe next year is a good time to ask Vanguard why they don't charge $0/trade in the UK?  (They have their reasons, I'm sure, but early pressure might convince them to take another look)

[PhilB]

The key question for me will be what they charge for drawdown so I will await that with interest.  The time when I need to pick a provider and start transferring work pensions will soon be upon me.  Eek!

[celticblue]

Woke up this morning at 6am to see an email from Vanguard saying I can now open my SIPP with them. By the 6.15am I had completed their very easy online transfer process to move my pension from Aviva, which has always been ridiculously expensive. I think I will save about 100 pounds per month in fees. Waiting to see how long it will all take to go through

[Playing with Fire UK]

Please keep us updated on how it all works!

[shelivesthedream]

I am excited! Also planning to transfer a SIPP from another provider and also try to extract Mr SLTD's ye olde workplace pension (which has about 3p in it) but suspect such admin might go the way of all flesh for a while. Is there any reason I should make an effort to do it this tax year? I doubt we'll make any contributions for a while as we're focusing on LISAs.

[shelivesthedream]

Urgh, I can't get the website to work. They were very nice when I rang up but basically said clear cookies, try a different browser, try again tomorrow. :(

[MisterA]

Hi all,

Please excuse me, I'm new here. Great website, and some good philosophies. Since studying this website, I became aware of Vanguard and also the imminent launch of their SIPP. Now it's here.

I'd like to transfer another (old) pension into Vanguard. I'm not an experienced investor, so am looking at their target retirement funds. The charges are 0.24%, and the split between equities and bonds depends on your target retirement age. This is the fund that suits my target retirement age, with a 51% stock and 49% bond split:
https://www.vanguardinvestor.co.uk/investments/vanguard-target-retirement-2020-fund-accumulation-shares?intcmpgn=blendedtargetretirement_targetretirement2020fund_fund_link

From everything I've read here, and on the Vanguard website, this seems like a good option for me.

Or if I did this, am I missing something? would I be better off building my own portfolio (which scares me a bit!)?

[PhilB]

Probably best to start your own thread as answers to your query are likely to get lost in this one.  Are you intending to buy an annuity?  That looks like the kind of fund specifically designed for people who want to buy an annuity rather than stay invested and go into drawdown. 

[MisterA]

Thanks for your reply, no I'm not intending to buy an annuity.

I think I need to read more of the forum, but so little of it relates to the UK.

[shelivesthedream]

Woo hoo! That was easy!

[Playing with Fire UK]

Thanks for your reply, no I'm not intending to buy an annuity.

I think I need to read more of the forum, but so little of it relates to the UK.

This is not advice: If it is an old DC (defined contribution) pension, move to Vanguard, invest in LifeStrategy 60 (which is 60% stocks and 40% bonds), you can change it later if you can be bothered. If it is an old defined benefit pension, you need to read more first.
 
This is advice: Read Monevator for UK advice including LifeStrategy.

[MisterA]

This is not advice: If it is an old DC (defined contribution) pension, move to Vanguard, invest in LifeStrategy 60 (which is 60% stocks and 40% bonds), you can change it later if you can be bothered. If it is an old defined benefit pension, you need to read more first.
 
This is advice: Read Monevator for UK advice including LifeStrategy.

Thanks. I've followed your link and read about the LS funds.

No, my old pension is not a DB, unfortunately!

The Vanguard Target Retirement funds have just about the exact same returns as the Lifestyles, more or less the same portfolios and the same fees. But, the target retirements reduce equity exposure as time goes by. I can see the benefits and drawbacks of this.

More reading required!

[Playing with Fire UK]

ut, the target retirements reduce equity exposure as time goes by. I can see the benefits and drawbacks of this.

Like @PhilB says, reducing equity exposure is great if you need to buy and annuity on a fixed date (or if you have another big expense at a fixed time like paying of an interest only mortgage or really high educational costs). Otherwise, the (on average) higher growth from the higher, steady equity allocation will be better most of the time.

[celticblue]

UPDATE

So I applied to transfer just prior to the big crash (19th Feb)  I can see the money has left the Aviva account but it has not arrived in the Vanguard account. So right now I do not know if I got crazy lucky and got out of the market in time and will receive a one off, once in a lifetime boost of about 10 percent to the assets I own if I am back in the market next week (value stays the same of course, I just will own more).

This has an added an unexpected dollop of emotion to the process. I REMAIN AGAINST MARKET TIMING lol

[MisterA]

I can see the money has left the Aviva account but it has not arrived in the Vanguard account. So right now I do not know if I got crazy lucky and got out of the market in time and will receive a one off, once in a lifetime boost of about 10 percent to the assets I own if I am back in the market next week (value stays the same of course, I just will own more).

Well done! Why don't you ask them to hang on to your money for another few weeks before reinvesting, the markets are still only going one way.

The opposite is true for me. I intend to transfer a large (for me) lump into a Vanguard SIPP, either a Lifestyle or one of the Target Retirement funds. I'm currently virtually 100% equities. If I'd moved to Vanguard a month ago, my losses now would have been reduced - as I'd intended to get a 60:40 or 50:50 fund. Oh well, it'll rebound eventually.

[Ducknald Don]

Well done! Why don't you ask them to hang on to your money for another few weeks before reinvesting, the markets are still only going one way.

You don't know that.

[PhilB]

Well done! Why don't you ask them to hang on to your money for another few weeks before reinvesting, the markets are still only going one way.

You don't know that.

Maybe he's thorstach?

[skip207]

Anyone had any updates from Vanguard?  I did mine the day it was launched and still just showing in progress.

[shelivesthedream]

Mine zipped across quickly and easily from Aviva and is now fully transferred. Maybe your former provider is being unhelpful? I seem to recall my ISA transfer took a Lon time because of that.

[never give up]

Not to the SIPP, but I have transferred a couple of cash ISA’s to Vanguard and they have shown as “In Progress” for weeks after I have had the funds and actually invested it. If the money has not reached your Vanguard account it would imply it is your existing provider holding things up as shelivesthedream said.

[celticblue]

Am starting to get concerned as I requested my transfer from Aviva on 19th Feb. They sent me a letter immediately saying they had divested funds to Vanguard. So far Vanguard have said they have not received the funds. Others(above)  have said their Aviva funds have successfully gone through. I would not normally think twice about it but the market convulsions mean market timing has become a hazard.

[skip207]

Cheers will call them on Monday

[MisterA]

Well done! Why don't you ask them to hang on to your money for another few weeks before reinvesting, the markets are still only going one way.

You don't know that.

No I didn't, but it was a very good guess.

[celticblue]

FINAL UPDATE

I applied for the Vanguard SIPP on 19th February. Aviva received the divestment paperwork that day and sold the investments immediately. It took until 12th March for the funds to appear in Vanguard account and make the pre-ordered trade into Life Strategy 80:20

Miraculously 19th Feb turned out to be the peak and my funds were out of the market during the initial crash. Perhaps the luckiest event of my investing career. In total it avoided 14.6% of losses. So I guess I now have 14.6% more of my investments than I would have.  As this contained about 30percent of my portfolio it should mean that over time I will have 5 percent more than I would have had.

Combining this with the 100 pounds per month I am saving in fees I am pretty chuffed. Market timing is absolutely random and I just got plain lucky. Am sure this will make me feel better about the continuing volatility

[MisterA]

Miraculously 19th Feb turned out to be the peak and my funds were out of the market during the initial crash. Perhaps the luckiest event of my investing career. In total it avoided 14.6% of losses. So I guess I now have 14.6% more of my investments than I would have. 

That is fantastic, really. It'll stand you in good stead for any future volatility.

Thanks for the timeline and date information. I'm in the process of transferring a previous pension into a Vanguard SIPP. I completed the process over 2 weeks ago, and the money left my Scottish Widows scheme over a week ago. Seems like it's vanished into a black hole. But that seems to have been your experience, for a while. I just hope that a vaccine (and stock rise) isn't developed until my wad is safely transferred! (it won't be)

[helloyou]

I didn t contribute to it because I don t want my money to be locked for 20 years until I can withdraw

[shelivesthedream]

I didn t contribute to it because I don t want my money to be locked for 20 years until I can withdraw

Interesting. My understanding is that most UK FIRErs would do well to divide their stache into pre-pension-age and post-pension-age and save accordingly. I think I personally am in the small minority that would not particularly benefit tax-wise from saving into a SIPP (I may be wrong about this! But I don't think I am) but I save a small amount there anyway because it feels like a hedge against risk.

[cerat0n1a]

I didn t contribute to it because I don t want my money to be locked for 20 years until I can withdraw

Interesting. My understanding is that most UK FIRErs would do well to divide their stache into pre-pension-age and post-pension-age and save accordingly. I think I personally am in the small minority that would not particularly benefit tax-wise from saving into a SIPP (I may be wrong about this! But I don't think I am) but I save a small amount there anyway because it feels like a hedge against risk.

You get the 20% credit even if you're a non-taxpayer. Even if you have no earnings, you can still pay in £2880 per tax year (and that would be grossed up to £3600 inside the pension). Even the fact that it can't be touched for decades can be an advantage in some circumstances. Money in a pension fund doesn't count for assessing whether you can receive certain benefits (unlike ISAs) and has some protections e.g. if you get sued or go bankrupt.

There are a few cases where a pension might not help with trying to achieve FI status.

- You intend to retire before the age of 33 or so.
- Your taxable income in retirement will be enough to put you in the 40% income tax bracket
- You don't expect to live past 58 and you have no dependants or anyone who you're leaving the money to.

Needing the money to avoid/get out of debt, is of course, a good short-term reason to avoid pensions.

I suppose theoretically there might be people who think they can achieve a better rate of return on things which can't be held in a pension wrapper (e.g. a new system for beating the house at Monte Carlo or something).

[helloyou]

I didn t contribute to it because I don t want my money to be locked for 20 years until I can withdraw

Interesting. My understanding is that most UK FIRErs would do well to divide their stache into pre-pension-age and post-pension-age and save accordingly. I think I personally am in the small minority that would not particularly benefit tax-wise from saving into a SIPP (I may be wrong about this! But I don't think I am) but I save a small amount there anyway because it feels like a hedge against risk.

You get the 20% credit even if you're a non-taxpayer. Even if you have no earnings, you can still pay in £2880 per tax year (and that would be grossed up to £3600 inside the pension). Even the fact that it can't be touched for decades can be an advantage in some circumstances. Money in a pension fund doesn't count for assessing whether you can receive certain benefits (unlike ISAs) and has some protections e.g. if you get sued or go bankrupt.

There are a few cases where a pension might not help with trying to achieve FI status.

- You intend to retire before the age of 33 or so.
- Your taxable income in retirement will be enough to put you in the 40% income tax bracket
- You don't expect to live past 58 and you have no dependants or anyone who you're leaving the money to.

Needing the money to avoid/get out of debt, is of course, a good short-term reason to avoid pensions.

I suppose theoretically there might be people who think they can achieve a better rate of return on things which can't be held in a pension wrapper (e.g. a new system for beating the house at Monte Carlo or something).

I intend to FIRE between now (I'm 37) and 40. So it's not 33 but it's not that far. I know it's very beneficial but I just can't justify locking my money for so long. I highly value flexibility and who knows why might happen between now and when my pension will be available.

So many reasons not to keep:
- I could have completely moved to another country to live in and changed my tax regime (for the better or worse)
- I may have found an amazing deal (Maybe could buy a house in cash?) needing cash that would be unavailable otherwise
- I could have an idea to create a new business and need cash to bootstrap it
- Gov could have changed the law by then and increase withdrawal taxation as well as retirement age to get it.
- Gov could have decided to create a tax on wealth to pay for the deficit. How could I escape?
- I may have used a big chunk of my non-pension cash and would need some of it to pay for my lifestyle? (Hopefully, this wouldn't happen)

So for these reasons, I'm happy to lose my 30% tax gain... which is enormous but that's the price to pay for flexibility.

[cerat0n1a]

- Gov could have decided to create a tax on wealth to pay for the deficit. How could I escape?

The Conservative party and associated think tanks have been floating the idea of a wealth tax in the last couple of months. They even sent a poll on the subject to party members this week. Personal residence & pension were explicitly excluded from it - so that's actually an argument for hiding some money in a pension, not avoiding it.

Living abroad isn't really a problem either. You can transfer your pension to another country in many cases - google QROPS. In the past, some people have been known to do that to get access to the money earlier, or to avoid income tax. HMRC tightened up the rules to stop that, but you can still simply move the pension to other countries in many cases. Even if you can't transfer the pension itself, you simply withdraw money in the UK, possibly pay income tax and then transfer it.

Retiring at 40 means you need a pot of money outside of a pension to last until you're 58 and then enough money both inside and outside your pension to last the (possibly 40+ years) after that. Having some percentage of your net worth inside a pension wrapper is the most efficient way to achieve that. I did stop work in my forties, using this two pot approach. If you retire at 40, you probably need only 10-20% of your assets in the pension.

Obviously the gains are bigger if you're paying more tax now. Someone who is paying a marginal tax rate of 60% for income between £100k and approx £125k clearly derives a far bigger benefit than someone who is a non-taxpayer or basic rate taxpayer.

[MisterA]

Just wanted to share my experience of transferring a pension into a Vanguard SIPP.

I opened an account with Vanguard, and initiated a transfer on 24/06/20. The website states that transfers can take up to 30 days. I started to feel nervous that the transfer was not going well, before the 30 days, and I started chasing Vanguard. Anyway, fast forward many emails and phone calls from me (becoming quite irate at times), the transfer is now safely in my account. It went into my account on 28/09/20, so took a little over 3 months.

The transfer was from Scottish Widows, so hardly a small unknown company. During the 3 months there were no updates from Vanguard, unless I contacted them. Fortunately, the market did nothing during this time, and I haven't lost out. OK, they are new to SIPPs, and maybe their staff are all working from home, but over 3 months for a transfer? I can move my money anywhere, instantly.

Initially I thought that I might just have been unlucky, but Trustpilot reviews show that this is not uncommon.
https://uk.trustpilot.com/review/vanguardinvestor.co.uk

This is all quite ironic, if you read my other post about poorly performing passive index trackers!

[cerat0n1a]

Interesting - I had the opposite experience. Two pension transfers into Vanguard, from two different large providers. Both went through without a hitch, both in less than 2 weeks.

[helloyou]

I had the same very poor experience when transferring my vanguard ISA to Trading212. They also sold stock without telling me, leading to about £2k in losses... Of course they didn't pay back.