Over the past two years there has been a significant move away from retaining final salary or defined benefit (DB) pension schemes in favour of a more flexible alternative, usually by transferring the proceeds of the scheme into a Self-Invested Personal Pension (SIPP).

There are several reasons for this, including generous transfer values being calculated due to the low interest rate environment and gilt yields.

Furthermore, companies are incentivising the transfer values as they no longer wish to carry the unknown long-term risk of offering a guaranteed pension income, due to increases in the longevity of the scheme members.

Whilst the decision to transfer out of a DB scheme is in itself a huge decision, having taken that step, the decision on where to invest the transfer proceeds is arguably just as important.

There are many factors to consider within this process and at LMS Partners we look very carefully at two important aspects, the overall cost of the investments and the diversification they offer.

There are numerous investment options available to anyone looking at a SIPP, for example Open Ended Investment Companies (OEICs) and Investment Trusts which can be accessed via an investment platform, Investment Bonds, Discretionary Managed Portfolios and Structured Products.

Although very clichéd, we always follow the golden rule ’never put all your eggs in one basket’.

No matter how strong the past performance of a fund or investment manager, anyone can have a bad day at the office.

Would you want your entire investment suffering from that bad day?

It could be a very expensive mistake. LMS Partners prefer to consider a combination of different investment strategies using platforms to access OEICs and Investment Trusts alongside Investment Bonds and maybe a risk targeted Discretionary Managed investment to achieve this diversification.

Having a wider choice of funds and investment managers and taking a global, multi-asset approach, ensures that the ’bad day’, if it happens, will only affect a reduced portion of your overall investment.

There may be a concern that creating all this diversification will come at a cost, but this need not be the case. At LMS Partners we research the markets to ensure we find the most cost-effective solutions for our clients. In utilising a mix of different investments, often three or four different strategies, we aim to keep the Overall Cost of Funds (OCF) below 1% per annum.

This includes all platform costs, fund manager fees, administration costs and dealing charges.

It ensures that consistently high charges do not erode the long term real value of your precious retirement planning, whilst the provision of regular client reviews ensure your goals remain on track.