A few questions about stakeholder pensions..

Jonno_Fox
Jonno_Fox Posts: 6 Forumite
in Pensions, annuities & retirement planning
Hi,

I'm thinking of starting a stakeholder pension. I'm 22 yrs old and thought it would be a good idea to start whilst I'm young. I'd be looking to pay in at least £100 per month. There's a few things I'm not to sure about so would be grateful for any help.

Firstly, as I understand it stakeholder pensions are supposed to be flexible in principle and I am allowed to move from one to another without penalty. However when I decide to retire am I allowed this same flexibility to 'shop around' for an annuity or do I have to buy from the company I'm with at retirement?

Also what happens if I decide I no longer wish to contribute to my stakeholder pension. Am I committed to paying in a minimum £20 per month till I retire?

And finally... most of the advice I've read so far on stakeholders say it doesn't really matter which company I go for as they're all pretty much the same due to their flexibility. However I also heard that its best to avoid banks/building societies. Why is this? I was speaking to someone in abbey recently (I don't intend to join their scheme) who claimed that abbey offerred a safer pension. He seemed to be suggesting that if pensions did go wrong abbey would be a better company to be with because it wouldn't cause them to collapse like it might do a specialist pension/insurance company.

Any advice would be appreciated.
No reliance should be placed on the above.

Comments

  • margaretclare
    margaretclare Posts: 10,789 Forumite
    Hi

    I have a stakeholder with Friends' Provident. I recently moved it from Norwich Union.

    When you get to retirement time, go to an IFA then and get her/him to search the companies that will give you the best deal re an annuity. You're allowed to take 25% of the pot as a tax-free lump sum, and buy an annuity with the remaining 75%. But over the next 40 years, who knows how legislation will change?

    You're looking to put in £100 a month - if you put in £78 a month the taxman will increase it to £100. As I understand it you can stop paying at any time if you need to - what you can't do is to draw it out. But even leaving it alone will allow it to grow.

    Sounds like you've got your head screwed on the right way - good luck!

    Margaret
    [FONT=Times New Roman, serif]Æ[/FONT]r ic wisdom funde, [FONT=Times New Roman, serif]æ[/FONT]r wear[FONT=Times New Roman, serif]ð[/FONT] ic eald.
    Before I found wisdom, I became old.
  • raeble
    raeble Posts: 911 Forumite
    My new employer has a scheme with friends provident, in the literature there is a statement to the effect that you may not get back as much as you put into the pension plan. Where exactly is the incentive to save in a pension plan, if you are likely to loose it all anyway?
  • dunstonh
    dunstonh Posts: 116,252 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    I have a stakeholder with Friends' Provident. I recently moved it from Norwich Union.

    Unusual way round. Its usually the other way as NU have lower charges than FP. What was your goal when moving it?
    My new employer has a scheme with friends provident, in the literature there is a statement to the effect that you may not get back as much as you put into the pension plan

    Legal requirement to say that.
    Where exactly is the incentive to save in a pension plan, if you are likely to loose it all anyway?

    Who said you are likely to loose it all?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Debt_Free_Chick
    Debt_Free_Chick Posts: 13,276 Forumite
    Combo Breaker First Post
    My new employer has a scheme with friends provident, in the literature there is a statement to the effect that you may not get back as much as you put into the pension plan. Where exactly is the incentive to save in a pension plan, if you are likely to loose it all anyway?

    The incentive is to avoid poverty in retirement.

    Whether or not you lose all or any of it depends on how you invest it .. you have a choice, from a range of funds.

    A pension is just a wrapper for an investment .. just that. Sure it has some tax features, but apart from that .. it's just an investment. And like very many investments, the value can go down ... or up ..

    Oh - and the tax breaks mean that there are some strings attached e.g. you must, err, use most of the investment proceeds at retirement to buy an annuity, which provides you with a regular income (a pension).

    HTH
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • margaretclare
    margaretclare Posts: 10,789 Forumite

    Unusual way round.  Its usually the other way as NU have lower charges than FP.   What was your goal when moving it?

    FP's ethical investment funds.

    Margaret
    [FONT=Times New Roman, serif]Æ[/FONT]r ic wisdom funde, [FONT=Times New Roman, serif]æ[/FONT]r wear[FONT=Times New Roman, serif]ð[/FONT] ic eald.
    Before I found wisdom, I became old.
  • dunstonh
    dunstonh Posts: 116,252 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    Good enough reason. Nice to see someone looking at the funds and not just the charges.

    Just interested that was all :)
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • margaretclare
    margaretclare Posts: 10,789 Forumite
    Good enough reason.  Nice to see someone looking at the funds and not just the charges.

    Just interested that was all  :)

    I've just checked up on FP's charges: 0.8%. Thought you said their charges were high?

    NB I did it all online.

    Margaret
    [FONT=Times New Roman, serif]Æ[/FONT]r ic wisdom funde, [FONT=Times New Roman, serif]æ[/FONT]r wear[FONT=Times New Roman, serif]ð[/FONT] ic eald.
    Before I found wisdom, I became old.
  • dunstonh
    dunstonh Posts: 116,252 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    Their standard is 1.0 but their online product is 0.8.

    It is possible to get 0.5 out of FP if you pay for an IFA to do it, rather than commission. Depending on the size of the fund, it may be cheaper to pay an IFA to stick it though on fee basis.

    Most of the other main providers come out between 0.5% and 0.6% on same basis.

    Scottish Life have a PPP where it can come out even lower (0.3%) and have BGI ethical funds available.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Special_Saver
    Special_Saver Posts: 4 Newbie
    It is possible to get 0.5 out of FP if you pay for an IFA to do it, rather than commission.  Depending on the size of the fund, it may be cheaper to pay an IFA to stick it though on fee basis.

    Most of the other main providers come out between 0.5% and 0.6% on same basis.

    Scottish Life have a PPP where it can come out even lower (0.3%) and have BGI ethical funds available.

    Where can you get an annual management charge that low? The lowest prices that I have found so far have been with Cavendish Online. They charge 0.6% on FP for a £25 fee. Like the above author, I am also interested in transferring an existing Stakeholder to a plan with a good ethical fund. Are there any cheaper discount IFAs?

    I have never heard of Scottish Life before. Are they popular?
  • dunstonh
    dunstonh Posts: 116,252 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    Where can you get an annual management charge that low? The lowest prices that I have found so far have been with Cavendish Online. They charge 0.6% on FP for a £25 fee. Like the above author, I am also interested in transferring an existing Stakeholder to a plan with a good ethical fund. Are there any cheaper discount IFAs?

    It depends on your fund value for starters. Many have tiered charging rates and reduce their charge by 0.1% when your value goes into the next band.

    Most pension providers reduce their annual management charges when there is no commission deducted.

    Cavendish are a bulk supplier. I'm not sure they are zero commission as I have been able to beat their offerings a number of times recently when comparing. Maybe it's zero initial commission but they take renewals. Either way, you are not going to find many, if any IFAs that are willing to do it for less than £25 on a zero commission basis. You could possibly get cheaper if you are willing to pay a higher fee.
    I have never heard of Scottish Life before. Are they popular?

    They are a big pensions provider and only distribute their products through IFAs. Part of the Royal London group. They own the legacy closed books of united friendly and refuge.

    I use them quite a lot because of their favourable charging structure and their service is very good.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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