FOOL'S EYE VIEW
Switching from Standard Life to an e-SIPP

By Maynard Paton (TMFMayn)
April 24, 2001

Carburton Street, London -- If you think all the Motley Fool staff writers have their personal finances in perfect Foolish order, think again. Although I have the majority of my savings tucked away in self-select PEPs and ISAs, I have to admit to owning two Wise products -- a personal pension and an endowment-based mortgage. However, I'm determined to (eventually) become truly Foolish.

While I've yet to grasp the nettle with my endowment, I have made progress on the personal pension front. I'm now the proud owner of an e-SIPP, a wonderful product that:

* is far more transparent than my original pension plan, and;
* allows me to have full investment control of my pension contributions.

Pension palaver

Here's my pension story.

I took out a personal pension with Standard Life in December 1992. Over the subsequent two-and-a-half-years, I ploughed nearly £2,000 into the plan, a figure that includes the tax relief that goes with any personal pension contribution.  The contributions were split equally between a managed fund and a with-profits fund. As at December 2000, the value of my own contributions was £4,600, a figure that includes a £1,200 redress payment relating to the mis-sale of the pension.

Overall, I reckon my contributions have roughly compounded at an average rate of around 10%. Comparing the unit prices at the time of my initial purchase to their current prices also gives a similar 10% annual figure. What's more, the general stock market has risen by around 10% per annum since December 1992 too. As these things go, I don't think I've done too badly.

But then again, I'm not exactly sure how I've done. That's because my annual pension statement just tells me the current value of my fund and the number of units I hold. There are no performance percentages or benchmark comparisons included. Not even on the company's website can I find the past performance of its managed and with profit funds. To gauge Standard Life's investment performance, I have to wade through my old statements and do all the unit price calculations myself.

e-SIPP

Now, I could have easily left my contributions with Standard Life. However, there's no guarantee that Standard's managed fund would match the stock market in the future. Or I could remain invested in a with-profits fund, a very Wise-sounding type of investment vehicle I confess to knowing little about.

However, the advent of the low cost e-SIPP (an online Self Invested Personal Pension) has rescued me from the opaque Standard Life. While my contributions have to remain in a pension plan of some sort, at least now I can choose from a full-range of investments by going down the e-SIPP route.

After a comparison with the products offered by my ISA providers, DLJ Direct and Charles Schwab, I decided to go for a new name for my e-SIPP -- Sippdeal. While all had £200 initial costs, Sippdeal came out marginally ahead charge-wise due to its zero annual management levy.

The transfer process to Sippdeal was relatively painless. From online application to cash in the account took about two weeks. The only niggle in the process was the absence of any transfer confirmation from Sippdeal. Only a letter from Standard Life reporting they'd transferred the pension gave me the nod.

At the moment, Sippdeal's e-SIPP only allows dealing in ordinary shares. While the restriction suits me, it may not be for everybody. However, from the end of this month, dealing in unit trusts, open ended investment companies and exchange traded funds should be made available, a move that will open investors to a wide range of index tracker opportunities.

Relief

Of course, everybody has their own personal financial circumstances. A transfer to a low cost e-SIPP may not be suitable for each individual. But having made my first share investment through the e-SIPP, it's now quite a relief to do away with the uncertainty of managed funds and the complexity of a with-profit investment.

Admittedly, over the short-term, I have lost out a little financially. There were the e-SIPP set-up costs to consider, plus certain "transfer fees" imposed by Standard Life. However, over the next twenty years or so, I would like to think I could more than make up the £325, or 7%, hit I've just taken. And knowing my e-SIPP will not be a major contributor to my old age anyway, the switch decision is a bit of a no-brainer for me.

So, for now, the only thing for me to worry about now is my own investing skills. If my stock picking talents don't come up to scratch, I could be worse off by going down the e-SIPP route. But at least I'll know any underperformance was my own Foolish fault. And I'll have a much clearer idea as to how much I've undershot the stock market too!

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