SIPP or a stakeholder?

mutley74 · 30 September 2004 at 4:30PM

Considering pensions (if you have one) are one of the largest investments you will make in your life (maybe after your house), its essential to get your pension correct, for whats best for you.

We/most all spend ages looking for discount codes, coupons etc, but yet the biggest savings and gains after debts and savings can be made in a pension plan. This could have massive effect when we all come to retirement.

I am suprised to find people using this pension board with little favouring of SIPPs. I think a SIPP is an excellent idea, and wish i heard of it many years ago. But that depends on your employment/salary/risks etc.

Maybe Martin, will consider a best buy/guide to pension plans (unless theres already one- i have not seen it), and options people should consider. Not advice, but a starting guide, at least (within the FSA guidelines)

hope this thread starts some positive discussions! 8)

Pal · 30 September 2004 at 4:37PM

OK, lets have a definitive discussion to replace the various discussions we have had in the past on this subject. Depending on how it pans out I will add it to the FAQ at the start. (Just to warn you, this might take a while as my internet access is limited at the moment.)

Perhaps you could start by explaining why you think they are such a great idea and what advantages you think they have over normal personal pension policies (including stakeholders)?

mutley74 · 30 September 2004 at 4:58PM

here we go Pal. Some of my reasons. Please note, i am trying to stimulate a +v discussion to help al users of the site, not to tread on an IFAs feet.

Advantages of SIPP:
-no restriction to any service provider ie. You don’t have to just say buy L&G funds within your pension.
-flexibility to buy UT/OEICS, shares, gilts, bonds and hold cash. One can interchange between all these investments as they see appropriate, subject to the SIPP provider’s limitations.
-low cost (e.g. Hl don’t charge any admin fees if you hold UT/OEICS that pay them renewal commission)
-ability to hold commercial property and property funds
-I can sell/buy whenever I wish, and invest more/less each month as required.

Disadvantages of SIPP:
-I have to spend my own time and efforts to keep it up to date with my expectations.
Cannot think of any more.
==========================================
Advantages of Stakeholder:
-Managed by Investment Company
- no hassle in looking for investment funds, shares etc

Disadvantages of Stakeholder:
-restricted to investment company funds
-may have an annual charge, although this is capped at 1%
-can only be purchased via an IFA or Investment Company direct.

Disclaimer: These are my reasons, and may not cover all (I have left out the tax reasons, as I believe the fundamentals will be same for each). So please don’t just base any decisions you do on my list above, do you own research, and speak to an IFA is needed. I am ‘self-employed’ do not have any company pension plan as such.
I may be wrong, so please correct me if I am!!

dunstonh · 30 September 2004 at 7:52PM

Advantages of SIPP:
-no restriction to any service provider ie. You don’t have to just say buy L&G funds within your pension.
-flexibility to buy UT/OEICS, shares, gilts, bonds and hold cash. One can interchange between all these investments as they see appropriate, subject to the SIPP provider’s limitations.
-low cost (e.g. Hl don’t charge any admin fees if you hold UT/OEICS that pay them renewal commission)
-ability to hold commercial property and property funds
-I can sell/buy whenever I wish, and invest more/less each month as required.

1 - A number of personal pensions have external funds and some stakeholders do too.
2 - Yes, there is greater flexibility but a number of personal pensions have linked to Unit Trust/OEIC funds.
3 - low cost? You cannot compare a low cost provider against a normal charging product. Dont kid yourself on how much these renewals will work out to either on SIPPS.
4 - you can hold commercial property funds in stakeholders and personal pensions
5 - you can switch as often as you like and on many "modern" personal pensions, there is no charge no matter how often and some offer online switching. Flexibility of contributions is the same.

A quick check for some SIPP providers show many have very high minimum contribution levels. There are set up fees, annual fees on the SIPP and then you may have further underlying charges on investment funds that are inside the SIPP.

This perhaps is more suitable for another thread but there seems to be an awful lot of business going through execution only companies which would not be placed when getting advice because the justification for it just doesnt stack up. However, if you want to save £290 (average set up cost for SIPP) and have no consumer protection then its up to you.

mutley74 · 30 September 2004 at 11:40PM

DD, thanks for the update. Different info which i never knew, when imade my decision to take out a SIPP. Thansk for the updating (!).

Not sure what you mean by th equote below, with reference to consumer protection?

However, if you want to save £290 (average set up cost for SIPP) and have no consumer protection then its up to you.

dunstonh · 1 October 2004 at 12:29AM

Not sure what you mean by th equote below, with reference to consumer protection?

on Today at 4:52pm, DD wrote:
However, if you want to save £290 (average set up cost for SIPP) and have no consumer protection then its up to you.

When you buy from a discount broker that is providing no advice but acting execution only and refunding the initial commission, you are taking the responsibility for purchasing that product. If it turns out that the product was incorrect for you or an error happened (perhaps in fund selection, which happens quite often), then it is your own fault. You cannot complain and get financial redress.

The cost of providing advice is quite high. Execution only is much cheaper and thats why you get the discounts. Most IFAs will discount on execution only.

The figure of £290 was mentioned as that was a common initial setup fee for the SIPP. I am making the assumption (rightly or wrongly) that the execution only broker is not making that charge (either built in as a fee or commission).

Debt_Free_Chick · 1 October 2004 at 6:36AM

Advantages of SIPP

no restriction to any service provider ie. You don’t have to just say buy L&G funds within your pension

If you simply want to spread your pension across different providers, then you just take out a separate stakeholder with each of them. Remember, you are not committed to regular payments. So year 1 L&G, year 2 Standard Life etc.

Or better ... choose those who have expertise in particular sectors/geographical areas etc. No different to equity ISAs.

Disadvantages of SIPP:
-I have to spend my own time and efforts to keep it up to date with my expectations.

And feel confident that I can choose better investments than the professionals, guess the market and time my investments to my advantage.

Stakeholder disadvantage -

may have an annual charge, although this is capped at 1%

There's no such thing as a charge-free investment. If you have a SIPP and buy shares, you have dealing costs. If you buy managers' funds, there's an Annual Management Charge (not to mention the dilution of the unit price to reflect the fund manager's dealing costs).

Stakeholder disadvantage -

can only be purchased via an IFA or Investment Company direct

As for a SIPP

I have neither a SIPP nor a Stakeholder, but a handful of deferred pensions from occupational pension schemes (final salary). Am now self employed, so starting to think about my options. No strong view or bias either way*, so hope my comments are taken as intended, which is a simple statement of "fact", as opposed to preference.

*currently, just accumulating capital in Egg, ING & A&L whilst I consider my options.

mutley74 · 1 October 2004 at 2:22PM

Debt_Free_Chick

And feel confident that I can choose better investments than the professionals, guess the market and time my investments to my advantage

managing one own investments in terms of shares/UTs etc is not for the faint hearted at times, especially in the volatile markets we are experiencing.
I currently manage my family and parents share and UT/Oiecs, worth a considerable amount. I feel confident of my job, although it can take nerves of steel at time. But i prefer to see my money invested how i wish and where and take a regular review, sometimes daily with my pension on assets i hold.

cheers..best of luck with whatever route you take.

SIPP or a stakeholder?

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