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Vanguard finally reveals details on its long-awaited SIPP

Vanguard logo

Fans of Vanguard (Vanfans? Guardinstas? Fanguards?) have waited years for the fund giant to launch its own low-cost SIPP for UK investors.

The Vanguard Personal Pension was originally expected shortly after the company’s direct investment platform hit the UK in May 2017.

However the SIPP launch was delayed several times, for undisclosed reasons.

It’s understandable the US-headquartered company wanted to get its British tax and pension law exactly right – no easy matter – never mind fine-tuning the business sums. But you do wonder if the delays have caused some diehard Vanfans to delay pension contributions for longer than they would have?

Regardless, the end is in sight. Like a child on an interminable holiday trip to Wales who finally spots the uprights of the Severn Bridge, we’re not there yet – the SIPP won’t arrive until 2020 – but we can now see where we’re going.

To summarise from Vanguard’s latest update:

  • Vanguard’s SIPP will launch in ‘early 2020’; pension withdrawals will not be possible until 2021.
  • The account fee will be 0.15%.
  • There will be a cap of £375.
  • That cap will apply across all holdings in one name on Vanguard’s direct platform, except JISAs (so your SIPP, ISA, and general accounts).
  • You can invest from £100 a month, or lump sums of £500 or more.
  • The SIPP will offer 76 funds and ETFs, all from Vanguard.
  • There will be no fees for SIPP set-up, contributions, transfers in or exits, dealing in funds, reinvesting income, valuation statements, account closure, death processing, or divorce.
  • Restricted ‘bulk’ ETF dealing will be free, but if you want to trade ‘live’ you’ll pay £7.50 a pop.
  • There will be the usual annual fund costs docked from your returns. You’ll also be on the hook for internal fund transaction costs, as is standard with funds.

Vanguard offers the following comparison on the cost of investing £40,000 into a Vanguard Target Retirement Fund with its platform, compared to investing with the SIPPs of 14 rival platforms:

Fees-y win: £40k annual contribution across platforms compared.

Obviously we’re quoting numbers straight from the company here, not our own sums. It looks very competitive for contributions so far though.

As for drawdown mode, Vanguard says:

The Vanguard Personal Pension will also be competitive for investors who want to enter drawdown over the age of 55, once this option is available in the 2020-21 tax year.

Simply put, there will be no additional charges for going into drawdown in the Vanguard Personal Pension. […]

[Research company] Platforum ran the numbers for an investor with a £210,000 sum1 in a Vanguard Target Retirement Fund, looking to draw down 4% a year, after fees and charges, for 10 years.

Investors using the Vanguard Personal Pension in this scenario would have £3,975 more remaining in their pot compared with the highest cost SIPP in the market, having saved £5,089 in fees to withdraw the same amount of money.

We stan Vanguard

While we’re proudly independent here at Monevator, our focus on simple, low-cost investing and broad index tracker funds makes it hard not to come across as raving Guardinistas when it comes to most of Vanguard’s products.

The Vanguard Personal Pension isn’t going to buck that trend.

We’ll reserve our final judgement – and filling in the blank spot on our comparison table – until the rubber meets the road next year. But this does look like being an instant table-topper among the ‘percentage fee charging’ SIPP platforms.

My co-blogger The Accumulator points out the Vanguard SIPP should be particularly welcomed by younger or newer investors with smaller pots, as the low charges will extend the threshold at which you’d even need to consider switching to a flat-fee offering. And then there’s the fee cap to factor in, too.

Investing commission-free in ETFs also sounds splendiferous, provided you can cope with the bulk-dealing times Vanguard offers – and as a passive investor, why wouldn’t you?

That said, it’s not perfect; it only offers Vanguard products.

While in practice this will give nearly everyone all the choice they need to construct a low-cost passive retirement portfolio, it’s not amazing from the perspective of diversifying against the (extremely remote) possibility of some sort of systemic company or platform failure.

Vanguard is one of the biggest asset managers in the world and a SNAFU that caused some sort of permanent hit to your capital is pretty unthinkable. But we’re a paranoid lot around here.

A slightly more likely (though still very unlikely) issue would be something like delayed access to your money in a Financial Crisis 2.0. At least by diversifying between platform provider and funds you potentially have a bit more cover.

Of course you can always get around this by running two SIPPs – one with Vanguard and another with a third-party and non-Vanguard funds. And having all your money on any single platform from any company gives you a single point of failure risk.

Will you be in the vanguard?

There’s no rush to decide exactly what to do.

For one thing, the Vanguard Personal Pension is probably still a few months away. Plenty of time to think.

Moreover, your existing platform may well decide to cuts costs ahead of this launch.

In the very long-term it’s going to be hard for most rivals to compete with Vanguard on costs alone, just because of the economy of scale advantage enjoyed by the industry’s megalodon.

Competitors may choose instead to trumpet choice or other variables. Still, the collapse in share dealing commission in the US recently gives a good example of how quickly costs can fall if everyone gets religion.

  1. Cited as the median pension in payment for a 65-69 year old. []
{ 79 comments… add one }
  • 1 Lee December 2, 2019, 9:21 pm

    Thanks for this (and for everything else I’ve read over the last few years!). I intend to switch my small pension away from HL to Vanguard. The balance is only around 25k as my main pension is the Teachers Pension, so I probably wont need to move again to the flat fee boys. But ith a bit of luck, over the next 20 odd years the small chunks of fees I’ll save should buy me a few months of early retirement!

  • 2 Warren December 2, 2019, 10:04 pm

    Fanguards, surely

  • 3 The Investor December 2, 2019, 10:07 pm

    @Warren — Oh that’s good. I’ll add and refer to your comment!

  • 4 John B December 2, 2019, 11:54 pm

    £375 is a high cap. Only £200 at HL for their SIPP, and you can hold ETFs there unsheltered for free, though not funds. Still seem odd brokers can more for custody than managers doing the more complicated task of running a fund.

  • 5 Moneydog December 3, 2019, 12:02 am

    Another probable HL to Vanguard convert here. Vanguard look to be the cheapest SIPP for pots under £100k (and a bit beyond), but the £375 cap is high. People with six figure pots are better off staying with HL (£200 cap when sticking to ITs and ETFs) or another fixed fee broker. Fidelity look interesting too (£45 cap for ITs and ETFs!), but reports of poor customer service and long transfer times put me off. Also need to factor in both Fidelity and HL have dealing fees, unlike Vanguard.

    Hopefully Vanguard will lower their cap over time, and competitors will respond with lower % fees. But this is definitely great news for UK small investors.

  • 6 William December 3, 2019, 7:59 am

    Agree on initial view HL appear cheaper with a £200 SIPP cap if using ITs and etfs, however HL charge a £11.95 dealing fee. Whilst Vanguard offer bulk etf dealing at no charge. Also Vanguard cap (£375pa) covers a general investment, ISA and SIPP accounts. Will they offer a Junior SIPP? They do offer a Junior ISA.

  • 7 Faith A. December 3, 2019, 9:23 am

    Good to read your take. Looks like pension withdrawals should be available a bit earlier – during 2020/2021 tax year, so hopefully before 2021.

  • 8 Rui N. December 3, 2019, 10:24 am

    Can anyone point me to a good primer on SIPPs? (Maybe there is one right here at Monevator!)
    Having some trouble understanding some of the nuances of how they work. For example, the money you put in there is after-tax money? And then HMRC “tops” it up, in essence returning the tax that you had paid? Or how does it work?

  • 9 Mr Optimistic December 3, 2019, 10:51 am

    @Rui N. If you contribute via a company scheme, the paye sorts it out. You don’t pay tax on the contribution. You put in £100 say but it only costs you £ 80 if you are a basic rate tax payer. If you are contributing on a purely personal basis, you pay with ‘ after tax’ money but the sipp provider will apply to HMRC for recovery of your 20% tax to ‘ gross it up’. If you pay tax at a higher rate, you get the additional tax relief through your self assessment. So if you contribute £80 as a 20% tax payer, your account will be grossed up to £100 ( the additional £20 being 20% of £100).

  • 10 weenie December 3, 2019, 11:06 am

    Looks like I’ll transfer my small HL SIPP over too when it’s available and I might finally start looking at Vanguard’s Target Retirement Funds to see how they compare with the Lifestrategy funds. Or go with a combination.

  • 11 The Rhino December 3, 2019, 12:22 pm

    you might be better off just going iweb weenie? (which is actually youinvest on the SIPP, but with an iweb specific set of fees/charges)

    and expect any transfer to take forever – we’re talking multiple months

  • 12 weenie December 3, 2019, 2:15 pm

    @The Rhino

    Looking at the Broker Comparison table, iWeb is £25 to open an account and then £90 a year if SIPP is less than £50k.

    My HL SIPP’s around £30k so my annual fees will drop from £135 to £45 with Vanguard.

  • 13 ermine December 3, 2019, 2:32 pm

    Is it just me being a cynical bastard or is this a horrific violation of the principle of diversify everything? What happens when a Bernie Madoff shows up at Vanguard, endangering both your platform and your holdings?

    All good stuff if the Vanguard SIPP is perhaps half your pension holdings, and the other half is with other firms’ platforms and non-Vanguard funds, but otherwise it seems a serious concentration of very unlikely tail risk. The FSCS compensation is only £85k, which translates to an annual pension of £3400 at the commonly used 4% SWR. Most Monevator readers are presumably aiming higher

  • 14 JR December 3, 2019, 3:10 pm

    Newbie question: is there any advantage to saving via a SIPP over the life strategy ISA I have with Vanguard? It is an either/or scenario for me as I am on a low income. My savings are purely for the future as I have an emergency fund.

  • 15 DB1DCnil December 3, 2019, 3:34 pm

    @ermine you raise a very fair point about diversification and clearly putting all your eggs in one basket is a risk. It doesn’t mean it couldn’t happen but a couple of points on Vanguard. Happy to hear a different view if i’ve got this wrong.

    1) Madoff played on people’s greed. As investors in trackers, this is less likely to be a driver as typically these type of investors are only after their fair share not to beat the market.

    2) As i understand, vanguard is owned by its funds, which are owned by its investors. I think it’s less likely that these investors would let in a madoff type character but not impossible.

    In the event of a vanguard collapse, personally i would think we would be talking about wide spread civil unrest. Those with DB pensions might become a target then. They’d be easy to spot as they’d be the only people with lights still on in their house!

  • 16 The Investor December 3, 2019, 3:47 pm

    @DB1DCnil @ermine — Not to be defensive (much… 😉 ) but I did cite the ‘all eggs, one basket’ risk in the article. 🙂

    I do think it’s an issue one needs to consider once your portfolio is of reasonable size. Would it take civil unrest? Would it take confiscatory taxes? Some banana republic US suddenly freezing all assets linked to any US company? Systematic long-term long-conning at the heart of a fund manager? A computer not being backed up being hit by an asteroid?

    Who knows?

    The point of Black Swan style risks is you don’t even assess the possibility of them coming (unlike say a 25% bear market crash, which is entirely not a Black Swan — attention please 8/10 pundits).

    I think it’s extremely unlikely to be an issue — particularly in terms of permanently losing any assets for non-market related reasons such as those cited above. As I said above, much more ‘likely’ is losing access to assets for a period of time, which could be painful depending on the backdrop. But even here we’re probably talking say in the scope of ‘very unlikely’ for more than a few hours.

    But who knows? Two platforms, two fund managers and you can’t lose everything because of one bad actor. (Arguably you increase the chances of you losing a quarter though, especially as anyone but Vanguard is going to be perhaps very slightly more still-vanishingly-likely to suffer some sort of calamity.)

  • 17 The Rhino December 3, 2019, 4:02 pm

    @weenie – fair play, running a SIPP for £45 per year is really good going

    @ermine – yes this was discussed over in the analysis paralysis article as well -> https://monevator.com/analysis-paralysis/#comment-1182712

    Maybe a rule of thumb could be no more than 50% of assets with any one provider and a minimum of two brokers?

    Possibly doesn’t matter if that 50% sits wholly in your SIPP say, i.e. you could have a 100% vanguard SIPP but the other 50% of assets outside of your SIPP, i.e. taxable and ISA could be with someone else?

    That said, how many people have a pension with a single company? Its a tricky circle to square?

    My folks got shafted by equitable life, so it is in the back of my mind for sure.

  • 18 Alainrj December 3, 2019, 4:07 pm

    Great news but 20 years too late for me as I initiated SIPP flexible drawdown this year. Once the VG SIPP is up and running will investigate further. Great to see continued downward pressure on fees after the huge and opaque costs plus the lack of choice only available in the ’70s when I were a lad investing. I think you need to run a competition for the best VG followers word. Bogleista? Vanguardprimeros? (VGP), TheInCrowd? , KISSistas? (as in Keep It Simple Stupid – one of my guiding principles in life not only Investing). Mucho Fun to be had here!
    Keep up the good work Monevator!

  • 19 DB1DCnil December 3, 2019, 4:09 pm

    @TI sorry I recognise you had already called it out!

    Some pension saving diversification is obviously prudent (see woodford) & particularly important for those on DC schemes where the protection is much lower than the DB lifeboat. “Reasonable size” is obviously relative to the individual and their desired objectives. Theoretically if platforms & funds collapsed for whatever reason there should be a backstop to all who have paid national insurance and are eligible to a UK state pension (though i’m expecting it will be means tested in the future) which should(?) cover the basic costs of retirement and at worst pay for some tissues to dry your eyes at the collapse of a lifetime of hard work and effort.

    To cover the unknown surely equity, bonds, cash, gold, property, grow your own food, make fire, build shelter, bear grylls type skills are required by all!!!

  • 20 Tony December 3, 2019, 4:28 pm

    Well I’m likely in! My provider (Aviva) charges 0.5% of the pot. I’d been deterred from switching because SIPP providers all seemed to have some costs (IIRC) for drawdown plus different dealing charges and platform fees to compare. But this seems very simple. If true that V’s £375 cap applies across all accounts, might look at next year’s ISA too.
    Then there was the small concern about insolvency protection. Although I still don’t know if there is any difference in statutory protection between someone like Aviva holding a pension in its and third party funds and a platform. Presumably whatever legal protection Aviva has would be the same for Vanguard. Don’t know if “true” platforms like HL etc are any different. Is it the case that the only statutory protection is FSCS compensation of £85k? I had thought there were additional legal obligations applicable to pension holdings but don’t actually know.

  • 21 Haphazard December 3, 2019, 5:03 pm

    I would share Tony’s concern and it’s one of the things that makes me a bit hesitant about switching from a stakeholder to a SIPP.

    I found the following on the Aviva stakeholder pension terms and conditions:
    FSCS pay 100% of a claim if it is Aviva itself that gets into financial difficulties.
    But “if your investments through us are held by an external fund manager, then you would not be eligible to make a claim for compensation under the FSCS in the limited circumstances where the external fund manager is not able to pay claims/benefits because of financial difficulties”.

    I take it that means that if you have an Aviva stakeholder pension, invested in Aviva’s own funds, you are 100% protected. But (bizarrely), if you invested your Aviva stakeholder yourself in one of the other options, you would not be entitled to anything… even the 85,000?

  • 22 Ray Jardine December 3, 2019, 6:05 pm

    Every time I try to write this I sound like a miserable (insert a suitable noun). I waited a long time for this…. does not exactly meet my needs. I checked with VG yesterday by email and they are only taking cash….so they appear not to be able to take vanguard funds in any transfer, I can umderstand not taking other companies’ products. The choice of VG products is limited in comparison with the US website…. BUT these are first world problems. Its a good option.

  • 23 Moneydog December 3, 2019, 6:10 pm

    @JR A SIPP will probably be a bit lower taxed overall, at the cost of no access until pension age. Personally I’d do a combination of ISA and SIPP. Monevator dives into this issue here: https://monevator.com/pensions-versus-isas/

    @ermine @TI and others. I agree with @TI that the main risk is temporary lack of access, particularly if a broker is Too Big To Fail. Personally, I wouldn’t worry about diversifying platforms with more than three years to retirement (FSCS would step in). In retirement or with larger pots, I’d split between two large brokers (three if ultra paranoid or you’ve no other assets like ISAs, but no more than three; each large enough to be national headline if they failed). Split between a few different fund providers. With large pots, I wouldn’t worry about being under £85k limit for every fund provider – otherwise you’ll end up having to use smaller fund providers with higher risk and fees. Just make sure any one point of failure is survivable. Be conscious of the tradeoffs with risk, complexity, and costs.

  • 24 Vanguardfan December 3, 2019, 6:51 pm

    @ray so they’re not taking transfers in? Or only in cash?

  • 25 Ray Jardine December 3, 2019, 7:45 pm

    They said cash…..Which means that I have to liquidate with a cost in order to transfer. However…. The issue with online anything, from experience, is you don’t know the level of understanding of the call centre operator… Bah humbug

  • 26 diy investor (uk) December 3, 2019, 8:09 pm

    For those investors who are concerned about climate change, it’s worth pointing out that Vanguard (and Blackrock) have been criticised recently for protecting the big oil companies and routinely opposing motions aimed at forcing the directors of these fossil fuel majors to meet their climate obligations.

    Here’s a recent article from the Guardian

    Personally, I have closed my Vanguard ISA this year and would no longer be prepared to hold their funds until such time as they take a more responsible position on climate-related issues.

  • 27 Adrian December 3, 2019, 9:09 pm

    No word from Vanguard on whether they will include their accumulating unit ETFs on their own platform. Bizarrely they are available on HL, II and AJBell – but not on Vanguard Personal Investor.

  • 28 Jonny December 3, 2019, 9:36 pm

    Really glad to hear this update, and I too hope to transfer a SIPP over from HL, though cash only transfers would be a worry (especially if, as others have experienced with other providers, the transfer ended up taking months)

  • 29 ermine December 3, 2019, 10:20 pm

    @TI Sorry. I wasn’t party pooping for the sake of it 😉 I do think concentrating both your platform and your funds into the same firm is a greater step. I’m not a Vanguard hater, VWRL is my largest holding and not the only Vanguard fund I have. But this risk bothered me enough to be prepared to seek out a Legal & General fund to do something similar in another ISA platform. Yeah, I’m paying a smidge more running costs. I’m OK with that. Insurance always costs money.

    Interesting and fair point that these concerns aren’t so much a thing for people earlier in their FI/RE journey, when capital sums are lower and they are still endowed with plenty of human capital. I am more paranoid because I have earned all the money I will ever earn.

  • 30 Vanguardfan December 3, 2019, 10:58 pm

    @jonny in my experience cash transfers are much quicker than in specie.

  • 31 The Investor December 3, 2019, 11:06 pm

    @ermine — Evening! 🙂

    @TI Sorry. I wasn’t party pooping for the sake of it I do think concentrating both your platform and your funds into the same firm is a greater step.

    My entire and only complaint abiout your comment was when you wrote “Is it just me…” when I’d written four paragraphs in the article all about concentration risk and potential failure from going all-in on the platform.

    Partly this was a “harrumph!” 😉

    But partly it’s because we pay a high price for being an independent website, and if one very unlikely day Vanguard does mildly blow-up I don’t want anyone saying ‘Monevator was buy Vanguard rah-rah-rah’ without any caveats, when we have caveat-ed in the rare areas where it’s been possible to do so.

    So in short, it’s not just you — I said the same thing in the rest of the article! 🙂

    Perhaps I was just ‘triggered’ as the kids say by that phrasing. No complaints with the rest of your comments, which are appreciated as always.

  • 32 Jonny December 3, 2019, 11:34 pm

    @Vanguardfan as a passive buy and hold investor I don’t really care how long an in specie transfer takes. My point/worry in the previous comment was if it’s only possible to transfer as cash, the time out of the market for that transfer to take place, and potential opportunity cost while not invested.

  • 33 Mr Optimistic December 4, 2019, 8:38 am

    Since I view investing as a long term matter, with time in the market being the most important factor, I have never worried about the out of market delays involved with transfers, providing we are talking a few weeks. What is that in the context of 10 years ? As for the Vanguard SIPP, a flat fee provider is still likely to be a better bet for large portfolios. I can’t see Vanguard being interested in all the back office stuff of paying pensions so I assume they will the up with an established outfit for that.

  • 34 Matthew December 4, 2019, 9:16 am

    I’m still bothered by not being able to switch company pensions without employer refusing to pay in, we need a law to have a right to still get employers contribution towards any pension we choose

  • 35 Naeclue December 4, 2019, 10:43 am

    @Matthew, how do costs and choice of investments of your company pension compare with Vanguard?

  • 36 Moggers December 4, 2019, 11:04 am

    I’m yet to encounter a company pension provider who won’t if pushed, allow you to do a free *partial* transfer to a SIPP whilst keeping your pension open for your regular monthly contribution

    It’s not optimal, but I sweep everything bar the minimum out annually to my own. So there’s a lag of a year while I’m stuck with their crappy choice of funds but, hey.

  • 37 Mark Meldon December 4, 2019, 12:29 pm

    This https://www.ft.com/content/4f8107f8-0fd4-11ea-a7e6-62bf4f9e548a is what auto-enrolment and the switch to DC pensions will bring to the UK, I fear.

    This SIPP thing is quite simple, really. You either purchase a % fee based ‘packaged product’ (likely online) from the likes of Vanguard, HL, AJ Bell, et al and choose the investments yourself or you separate the administrative and investment functions by hiring a SIPP administrator which (should, if you know where to look) will charge £ fees, set up what the Americans call a ‘brokerage account’ and choose your investments or hire a suitably qualified adviser to help.

    Be very wary of ‘discretionary fund management’ offerings (‘trust me with your money’) as I happen to think they are eye-wateringly expensive in most cases. Better, by far, is an ‘advisory’ offering where the financial adviser has to justify a recommendation (and his/her fee) in writing and you have to agree with it. Oh, and you then have a person to shout at when things go wrong (if they do) and protection under the regulations (just ask HL investors about Woodford funds!).

  • 38 David C December 4, 2019, 3:07 pm

    Is there a point when “Too Big To Fail” becomes “Too Big To Bail Out”? Or are the UK/US/German governments/central-banks’ abilities to borrow big enough to deal with any conceivable financial institution going down the tubes? I realise they usually like to engineer a takeover of the failing company, but they usually have to back that up with some kind of financial input or guarantee.

  • 39 Naeclue December 4, 2019, 3:30 pm

    Judging by your comparison table, this Vanguard SIPP beats everyone else for SIPPs below about £37k. Above that Fidelity starts becoming cheaper provided you hold only ETFs (annual charge £45) and only trade once per year (£10 per trade). At the other end of the scale, Vanguard do not look particularly competitive. My HL SIPP, in drawdown, costs me £200 per year plus trades at £11.95 each. Vanguard would charge a flat £375, so HL works out cheaper if I do less than 15 trades per year, which I do.

    One other factor not mentioned is the cost of currency conversion of dividends paid by ETFs. HL charge 1% for this, which costs me around £300 per year. What do Vanguard charge for converting dividends?

  • 40 Matthew December 4, 2019, 5:32 pm

    @naclue – mine is db but I asked if I could keep what I accrued and employer contribution on my sipp instead, they said no, that they will only contribute to pensions they approve – but incidentally they do offer additional money purchase pensions through pru and (sun life i think) which had fees of about 0.7% for the wrapper and 1% for its funds, which are all active

    Looking at nest as well which I think is available to us a different way, is a 1.8% loading charge and 0.3% a year for the wrapper, but no obvious mention of fund charges i can see, you have to dig for this information, as if they think it shouldn’t be a factor in most peoples decisions

  • 41 Brod December 4, 2019, 5:57 pm

    A good development. More competition should drive down prices, which is good.

    Btw, I have a question for the great and good of Monevator. Can I draw my 25% PCLS over say 4 years, leaving the rest invested to potentially growing to increase the value of the 25%?

    Appreciative of “suggestions” – not advice! Thanks.

  • 42 Brod December 4, 2019, 6:11 pm

    Scrub my question above –


    suggests I can take multiple 25% lump sums while remaining invested. And this doesn’t trigger recycling rules.

    Second question: if I had a pension of say £400k, could I UFPLS £100k, and pop £20k into an ISA, invest £40k tax unsheltered and £40k back into my pension to get the tax relief? Next year UFPLS 25% of my £40k and pop the other tax unsheltered £40k into the pension so that the following year I could take 25% of the second year’s £40k?

    If I could and am a Basic Rate tax ayer (as I certainly will be in the future), how much sense would this make? 5%?

  • 43 Mark Meldon December 4, 2019, 6:23 pm

    @ Brod,

    The rules with PCLS (tax-free cash) are that the amount crystallised has to be drawn all at once or over a 12 month period. Let’s say you have a fund of £48,000 and you ‘switch on all of it’. 25% of £48,000 is, of course, £12,000. You can either have that in one go or in 12 instalments of £1,000. If you don’t draw out the PCLS in the 12 month period, you effectively lose the tax-free nature.

    You should, as a general rule, only crystallise as much fund as you need to to generate the PCLS you need.

    For those with large funds, crystallisation over a period of years is entirely possible. The uncrystallised portion of your fund will remain invested and, with a bit of luck, will grow, thus potentially replenishing your coffers in the future. Or it might shrink!

    Not all pension providers offer PCLS by instalment. so check with your provider.

  • 44 Brod December 4, 2019, 6:39 pm

    Thanks Mark.

    That’s disturbing. My objective is to transfer the pension to ISAs. So I either crystallise all and take £100k tax free in my example OR crystallise such that (Taxed Portion) + (25% of taxed portion) = £20k every year?

    Since I expect a state pension and small DB pension totalling £15k in 13 years when I’m 67, what’s my best strategy for legit tax minimisation. Crystallise (Taxed Portion) + (25% of taxed portion) each year?

    Arrrgh! This is insanely and unncecessarily complicated!

  • 45 Vanguardfan December 4, 2019, 6:47 pm

    @brod, I think the solution lies in Mark’s third paragraph. You crystallise in stages (I think it’s called phased drawdown).
    So if you want to access £20k tax free, crystallise £80k of your pot, take the tax free £20k and leave £60k untouched in drawdown (anything you take from that portion will be taxable).
    I’m pretty sure that’s the most tax efficient way for someone who has other income filling their personal allowance to draw down their pension.

  • 46 Vanguardfan December 4, 2019, 6:50 pm

    If you are wanting to draw down in years when you don’t have other income, it makes more sense to take taxable money out of the pension to use up the personal allowance. You can do this using drawdown as well, but you’d crystallise less and take some from the drawdown portion.
    Or you can use UFPLS, where you take a lump sum and a quarter of that lump sum is tax free and the rest is taxable. You can’t quite get £20k out of a pension tax free in one year though.

  • 47 Mark Meldon December 4, 2019, 7:05 pm


    Why take money from one tax-exempt ‘wrapper’ into another one? The pension could be seen as a kind of ‘super ISA’, especially when you consider the death benefits (not much use to you, personally, I’ll admit!).

    When saving: Pension first, ISA, second, ‘other stuff’ third.

    When drawing: ‘other stuff’ first, then ISA, pension last.

    That’s a good rule of thumb.

  • 48 Factor December 4, 2019, 7:22 pm

    @TI – in your section headed “We stan Vanguard”

    1. Query “stan”;

    2. Typo alert? “….. consider switching to a flat-free [sic] offering”.

  • 49 The Investor December 4, 2019, 7:59 pm

    @Factor — Thanks for the typo spot, re: (2). It made it past both me and @TA who proofed it!

    Re: (1) — Been around a long time, but becoming mainstream enough that I dared risk it (daddy-o) on the Monevator audience, by way of a cross head. 😉


  • 50 Factor December 4, 2019, 8:34 pm

    @TI re “stan”

    Another Fine Mess that could have got me into : )


  • 51 Brod December 4, 2019, 11:07 pm

    But we all stanning da Monevator man/dude/bro!

  • 52 Brod December 4, 2019, 11:34 pm

    @MM – aargh! Nooo!!!… I’m not going to die… 😉

    So as rules currently stand, while still working, am I better off crystallising £80k of my pension each year so I can pop £20k into an ISA to take advantage of being able to draw a tax-free income? Then, when retired and filling up my tax free allowance from SP and DB, drawing down the ISAs to top up my income and after empty draw from crystallised funds?

  • 53 Vanguardfan December 5, 2019, 12:01 am

    @brod are you still contributing to your pension? And/or using your ISA allowance?
    You need to be careful about drawing from your pension while you are still adding to it. If you take any taxable money from drawdown, you can’t get tax relief on more than £4K of pension contributions per year afterwards (the money purchase annual allowance). You may also have issues with recycling rules.

  • 54 Brod December 5, 2019, 12:23 am

    @Fanguard – yes, while I continue working through my small DB. So not money purchase.

    Thanks all for this great site and all your opinions. Nothing taken as advice.

    And thanks again to the TI, I’ve been listening to Marshall Mathers again. How did I forget?

  • 55 weenie December 5, 2019, 10:59 am

    I may have missed it but apparently, you need a minimum balance of £50k for withdrawals, but this can be across all accounts, not just your SIPP.

    Read about it here: https://www.muchmorewithless.co.uk/vanguard-pension/

  • 56 Mr Optimistic December 5, 2019, 11:18 am

    @Mark Nelson. Thank you very much for your comment above regarding order of accessing funds. That’s what I am currently mulling over. I have decided that any substantial call for money will have to be made from the ISAs hence I am de-risking those. It also has provided a bit more clarity on how to invest in the sipp ( longer term perspective justified and anyway short term covered by the ISAs, so somewhat greater proportion of equities ( still not more than 50% though – can’t fight my personality!).
    Thanks again, and thanks to @TI for the blog.

  • 57 Sipper December 5, 2019, 11:28 am

    As others say, this is good, but scarcely the deal of the century. A £40k pot would cost £60 for the platform fee, a £100k pot would be £150. Fidelity charge only £45 for ETFs and ITs, so it’s simple to get a few quality very low cost accumulation trackers on a buy-and-forget basis, which would be cheaper than Vanguard. I suppose the strength of Vanguard may be that they make reasonable charges available to a wider audience by making it simple for unsophisticated investors, and that is to be welcomed.

  • 58 Haphazard December 5, 2019, 12:21 pm

    Another thought about the SIPP fees.

    You pay the platform fee PLUS the TER for the funds you choose, if I’ve understood this.

    Whereas with a stakeholder, if you invest in the default fund, mine seems not to charge separately for the fund – the percentage charge for the pension itself seems to be all-in. Unless I’m missing something. The information is hard to unearth.

    The SIPP comparison table on Monveator is really helpful. But I’ve never found a good way to compare stakeholders, personal pensions and SIPPS – even in terms of cost, let alone other features. I used to ignore SIPPS thinking they were for “high net worth” types who wanted to invest in fancy things. Now I’m just not sure. The fact that stakeholders are more “regulated” makes it feel somehow safer and they are simple to deal with – but a cap of 1-1.5% does is not exactly reassuring!

    Perhaps we could have a beginner’s guide to setting up a SIPP on Monevator?

  • 59 Naeclue December 5, 2019, 12:40 pm

    @Brod, unless you are up against LTA issues, I don’t really understand why you feel you need to get money out of your SIPP into ISAs. There is no tax advantage in doing that. Best to draw from your SIPP at the lowest possible rate of tax, zero if you can use your personal allowance. I would avoid doing anything that takes you into higher rate tax territory.

    In my case I am likely to be over the LTA by my 75th birthday, but I would still prefer that than to pay higher rate tax on withdrawals.

  • 60 Naeclue December 5, 2019, 12:51 pm

    @Haphazard, I would be surprised if any stakeholder pension works out cheaper than the Vanguard SIPP. For example, you can hold the one of the Vanguard LifeStrategy funds for 0.37%, including the platform fee. Are there any stakeholders available for less than that?

    As the pension pot becomes larger there are even cheaper alternatives, cheaper funds at Vanguard and cheaper alternative platforms.

  • 61 Brod December 5, 2019, 2:34 pm

    @Naeclue – LTA is not a problem I’m likely ever to have 🙂

    I access my SIPP in Jan 2021 and just wanted to get as much money into ISAs at a low tax rate as possible so I have the freedom to access it without a tax hit. As I’m likely to be working for a few more years, I certainly don’t want to be making non-PCLS withdrawals as my personal allowance is full. Then at 67 my state and small DB pension kick in to fill up my personal allowance again. My wife is 15 years younger than me, so MM’s comments about inheritance advantages of pensions over everything else has made me think twice.

    What I might do though, is keep some distributing funds outside of a tax-efficient wrapper to take advantage of the £2k tax free allowance. That way I can realise £14,500 tax free income each year. That’s pretty close to what we live on now, so pretty good.

    Then convert some of my funds in II SIPP to equivalent ETFs offered by Fidelity and slowly transfer some of my pension there to take advantage of their ETF £45 cap and fee-free drawdown and spreading the very small risk of a platform going bust.

    Thanks for your comment.

  • 62 Naeclue December 5, 2019, 5:45 pm

    @Brod, there would be no inheritaneed tax to pay if you die and leave everything to your wife, regardless of the size of your estate. Instead, the inheritance tax would kick in on her death, but she inherits your allowance.

    I understand what you want to do now I think – boost your ISAs for more convenient access to cash should you need it. I would suggest the simplest way is to take UFPLS payments. Withdraw the amount that takes the 75% part you pay income tax on up to the basic rate tax limit. Don’t do that though if you are still contributing to a DC pension. (All sorts of potential ifs and buts here, but that’s the gist).

    Alternatively, crystallise pension amounts into drawdown, just taking the tax free PCLS. That will not place restrictions on your regular DC pension contributions. Be careful with this about charges though. Some pension providers, such as HL, create another account for drawdown and levy charges on it in addition to the charges on your uncrystallised account.

  • 63 Naeclue December 5, 2019, 5:58 pm

    @brod, just to add, the only income tax advantage here would come if at some stage you needed a sum of money such that you would go into higher rate tax were you to withdraw it from your pension. Being able to withdraw from an ISA as well mitigates that risk.

    The same investment in a SIPP and ISA would grow at the same rate as neither are subject to income or capital gains tax. So taking taking from a SIPP and adding to an ISA just costs you additional trading charges, unless you can make the SIPP withdrawals within your personal allowance.

  • 64 Jonny December 5, 2019, 7:21 pm

    I realise I may be going off topic here, but with all this talk of taking advantage of lower fee caps when investing in ETFs (and ITs at HL and others), does no one else worry about the reduced level of protection that (many) ETFs have?

    i.e. from TA’s post here: https://monevator.com/investor-compensation-scheme/

    It says most ETFs are domiciled in Ireland, and as such are only covered by the Irish compensation scheme (max of 90% of 20K euros). This (perhaps irrationally) put the fear of God in me, and has left me insisting on investing in unit trust/funds, despite the higher charges to hold them (just to get that £50K/85K FCSC protection).

    Am I the only one?

  • 65 Haphazard December 5, 2019, 7:38 pm

    @naeclue – that sounds about right. I suppose I’m just a bit nervous about SIPPs since all the online guidance says they are for “experienced investors”!
    I’ve just found out my workplace pension, if I transfer in, lets me invest for a total fee (for running pension and funds I invest in) of 0.1%. Perhaps that is the best deal of all… if I can trust them. A lot of eggs in one basket.

  • 66 ermine December 5, 2019, 7:40 pm

    This (perhaps irrationally) put the fear of God in me, and has left me insisting on investing in unit trust/funds, despite the higher charges to hold them (just to get that £50K/85K FCSC protection).

    Presumably you don’t hold more than £50k in any one institution’s fund (eg across all Vanguard, and all Blackrock, etc), and you have no platform with more than that much in it?

    I had some of that thinking earlier on, but found life is just too short to gain security that way as your holdings creep up. Two platforms are manageable, three or more not so much IMO. So I took the line never have more than 50% of the total with any one fund/ETF issuing institution, although I am more chilled in imbalance across the two platforms I use. IMO more of the risk is with the investment fund/etf – more indirection and more moving parts.

    There’s nothing wrong in paying a little bit more for insurance/peace of mind, as long as you know the cost and find it acceptable.

  • 67 Sparschwein December 5, 2019, 9:18 pm

    @Jonny & ermine:
    FCSC limits really are too low, both for individual funds and platforms.

    Any of the big ETF providers (Vanguard, Blackrock, SPDR) going bust is a “guns and canned beans” scenario in my book. Highly unlikely and too expensive to protect against.
    But also consider securities lending that most funds do to varying degrees, which comes with counterparty risk. From all the funds providers I looked at, Vanguard has the strictest rules while others can lend out up to 80% or even 100% of their holdings.

    I think the platforms/brokers are the bigger risk. A friend had his broker go bust and although he managed to recover his money eventually, it was a drawn-out mess. Again Vanguard looks a pretty safe bet here.

  • 68 Jonny December 6, 2019, 12:10 pm

    @ermine No I’m (unfortunately!) not (yet) in the position to have holdings > £50K with any fund provider/platform.

    I realise it’s prob not necessary/to much hassle to completely remove risk, but say with £130K split across 2 fund providers/platforms, you’d only be risking an unprotected £15K with each.

    It just seems a lot more hassle trying to split across multiple ETFs, where a 50% split between two ETF providers would risk £40K.

  • 69 Naeclue December 6, 2019, 1:53 pm

    @Haphazard, your workplace pension sounds better to me. You might want to look at how your money is invested. One’s I have seen tend to be overcautious for younger investors and also hold too much in UK shares. When nieces and nephews have asked me I have advised shifting all into a passive global equities fund where available. Also, if affordable, to increase personal contributions in order to max out the employer contribution.

  • 70 Naeclue December 6, 2019, 2:16 pm

    I diversify across just 2 brokers. SIPPs at Hargreaves Lansdown, ISAs at iWeb, unsheltered investments shared between the 2. ETFs at HL are US listed Vanguard in both the SIPPs and normal broker accounts. iWeb are good for OEICs as there is no platform charge, and I hold a variety of trackers from Vanguard, Fidelity, HSBC and Blackrock, plus a few iShares ETFs.

    Big exposure to the 2 brokers and to Vanguard, but trying to diversify further will increase costs and complexity. In particular, the US listed ETFs in our SIPPs are no longer available for purchase and if I switch to European domiciled ETFs I will end up paying 15% US withholding tax on the dividends.

  • 71 The Accumulator December 7, 2019, 7:27 pm

    @ Haphazard – to compare stakeholder pension vs SIPP:

    Total charge of stakeholder pension


    SIPP = platform charge + fund OCF (+ any extra charges levied for SIPP and dealing charges for funds).

    If you held multiple funds then you’d work out the average OCF for your portfolio:

    Regardless, if your work pension really charges only 0.1% then that’s unbeatable assuming you don’t have massive holdings that would somehow be cheaper on a flat fee platform.

    Disregard generic advice like SIPPs are for experienced investors if you’re prepared to do a little research.

  • 72 The Accumulator December 7, 2019, 7:56 pm

    @ Haphazard again – colour me intrigued by your comment that your Aviva stakeholder pension is covered 100% in the event of Aviva going bust – in certain circumstances.

    I’ve only had a quick look but I’ve found a couple of things that back this up:

    Generally, FSCS can protect pensions that are provided by UK-regulated insurers, as long as they qualify as ‘contracts of long-term insurance’. A common example is an annuity, where you exchange the cash in your pension for a regular income from an insurance company.
    Where FSCS can pay compensation, we will cover the pension at 100% with no upper cap. We cannot confirm whether individual plans with specific providers would be classed as “contracts of long-term insurance’” or not – you would need to speak to your provider directly.

    Where an investment was held within a personal pension (e.g. a SIPP) or a Defined Contributions OPS, and the UK-regulated provider of the investment fails, FSCS may be able to pay compensation up to £85,000 per pension scheme member.
    Where the failed investment was held within a Defined Benefits OPS, the pension trustee(s) may be able to make a single claim for compensation of up to £85,000.



    A contract based pension is typically offered by an insurance company including personal pensions, stakeholder pensions and some auto-enrolment pensions. These schemes are a series of individual policies, owned by the employee, into which employer and employee pay. Each member has their own ring fenced policy. The value of the pension policy will depend solely on returns from the investments, which are not affected by the employer’s financial status.

    Given the ambiguity of their small print, I’d want it in writing from Aviva that I’m definitely covered 100% by their stakeholder, but if anyone likes the idea of 100% protection and can get to the bottom of this then the Aviva Stakeholder is available from Cavendish for an annual charge between 0.55% and 0.45%:


  • 73 The Accumulator December 7, 2019, 8:07 pm

    Has anyone read their NEST style pension T&Cs to see what kind of protection it offers?

  • 74 BillD December 8, 2019, 1:22 am

    It will be interesting to see how the Vanguard SIPP works in drawdown , how easy it is to use and what drawdown options are available (flexi-drawdown, phased flexi-drawdown, UPFLS or whatever etc etc) and how much paper form-filling and bureaucracy there is on top of what is required by HMRC to actually draw down funds.

    My current SIPP is with Hargreaves Lansdown and I am looking at how to “drive it” in drawdown stuck in some sort of analysis paralysis on the options. It is in ETFs and the charges are capped at £200. However, to do phased drawdown with HL I understand I have to crystalize a portion of the current SIPP into a new “drawdown” account which will then presumably attract additional charges before I draw down the portion that is not the tax-free part.

    So on the face of it my HL SIPP compares well with the VG SIPP proposal in that there are no drawdown charges and fees capped at £200 – but HL may turn out to be more expensive due to the requirement of the additional drawdown account with another 0.45% platform charge on ETFs up to the £200 cap (unless I just sell it all to cash in the crystalised part maybe). Or have I got this wrong?

  • 75 Al Cam December 8, 2019, 3:29 pm

    @TA re “Given the ambiguity of their small print, I’d want it in writing ….”

    Whilst in principle your suggestion is a good idea, please do not assume that this will ensure that the insurer will abide by what they have written!

  • 76 Naeclue December 9, 2019, 12:14 pm

    @BillD, I can confirm that with HL if you have phased drawdown you do pay 2 sets of charges, one for the drawdown account, one for the uncrystallised. You could avoid this using UFPLS payments. Unless you want more than 25% tax free cash in a withdrawal, you might as well do UFPLS. Once you get close to the LTA though, it is probably better to crystallise the remainder as you cannot get more than 25% of your remaining LTA when you crystallise.

  • 77 Tony December 9, 2019, 12:50 pm

    Is the following an option? Provider A is cheapest whilst paying into a pension. Provider B on drawdown. (Assume all other factors are satisfactory/equal). Neither is ideal for the full lifetime of the pension, on a costs basis. I choose A, transfer out prior to drawdown, reinvest into B’s funds and then drawdown. I ask this as my obstacle to date in switching was I found it easy to compare the charges whilst paying in but the differing charges also to take into account on drawdown complicated it. Is the above idea feasible? Is this what people do? I’m used to comparing fixed versus percentage fees for trading accounts but with pensions there’s the added drawdown question. As others have noted in the recent posts as well.

  • 78 Naeclue December 12, 2019, 9:55 am

    @Tony, you can change pension provider any time you like, even after you go into drawdown. A lot of pension providers still have exit charges though, so factor those in to your decisions. Some may only support cash transfers as well, so you may suffer trading friction.

  • 79 Jonny December 4, 2020, 12:27 am

    Just had an email from Vanguard. They’re now (finally) offering in-specie transfers into their SIPP:

    > Also known as an in-specie transfer, our new re-registering process allows you to transfer Vanguard funds you already own elsewhere directly into your Vanguard Personal Pension and not have to sell them first. By doing this, the number of fund units you hold and the profits you may have accumulated over time all remain the same. All that changes is that your Vanguard funds are moved to your Vanguard account

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