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  • FIRST POST
    • JustAnotherSaver
    • By JustAnotherSaver 8th Oct 17, 10:16 AM
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    JustAnotherSaver
    Cheap pension providers for smaller contributions?
    • #1
    • 8th Oct 17, 10:16 AM
    Cheap pension providers for smaller contributions? 8th Oct 17 at 10:16 AM
    * Just to kick start this thread with basic rate taxpayers and likely always will be. So now that we don't need to really consider higher rate tax relief....

    I thought i had a few pages bookmarked from when i looked into this for myself but i either didn't or i must've deleted them as i can't find the pages now.

    I personally went with Cavendish Online because they were the cheapest, they offered the funds i were looking at & importantly ... i could afford their minimum of £200 per month and i'm sure i'll be able to for the foreseeable.

    Just making this thread on behalf of 2 people, one of which certainly wont be able to hit Cavendish's £200pm requirement, the other maybe could but it'd be stretching and not worth it, plus there'll certainly be months where they can't & it's just better if they can comfortably meet any minimum requirement.



    Right now they're investing in the form of a S&S ISA into Vanguard funds. One has a pot of around £11k & the other around £4k. They're both unsure whether to bring those pots over to the pension & have their retirement plan all in the form of a pension or whether to leave that money where it is in the form of a S&S ISA but any future contributions would go in to a pension.

    Both are currently with Haregeaves Lansdown but i understand this is certainly not the cheapest and neither feel any loyalty towards HL (as in they'd be happy to move wherever is best for their money).

    From talking to them about it both are leaning towards sending their pots over into a pension & having the whole lot in pension format but if there's a good reason not to do that then please post your view.




    Regardless, whether they start a pension today from £0 or whether they start from their current pot size, both will be looking to contribute between the £100-£200pm bracket so where really should they be looking?

    Thanks.

Page 1
    • cloud_dog
    • By cloud_dog 8th Oct 17, 11:28 AM
    • 3,308 Posts
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    cloud_dog
    • #2
    • 8th Oct 17, 11:28 AM
    • #2
    • 8th Oct 17, 11:28 AM
    Just making this thread on behalf of 2 people, one of which certainly wont be able to hit Cavendish's £200pm requirement, the other maybe could but it'd be stretching and not worth it, plus there'll certainly be months where they can't & it's just better if they can comfortably meet any minimum requirement.

    Right now they're investing in the form of a S&S ISA into Vanguard funds. One has a pot of around £11k & the other around £4k. They're both unsure whether to bring those pots over to the pension & have their retirement plan all in the form of a pension or whether to leave that money where it is in the form of a S&S ISA but any future contributions would go in to a pension.

    Both are currently with Haregeaves Lansdown but i understand this is certainly not the cheapest and neither feel any loyalty towards HL (as in they'd be happy to move wherever is best for their money).

    From talking to them about it both are leaning towards sending their pots over into a pension & having the whole lot in pension format but if there's a good reason not to do that then please post
    Originally posted by JustAnotherSaver
    two things....

    1) The expensive aspect of HL is relative, insofar as, if you only have a small pot then the charges will be relatively small. If the pot increases in size to a 'tipping' point (individual's own consideration) then move from HL

    2) If they are of the mind that their current pot(s) are 'assigned' as pension provision/money, why not just transfer the capital amounts in to a cheap pension/SIPP.

    2.1) If the minimum monthly contribution rule is a problem then
    continue with their 'comfortable' regular investment option in to their ISA account(s) and periodically (once a year?) transfer the capital in to their pension/SIPP (ensure they don't fall foul of any ISA account rules).
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • xylophone
    • By xylophone 8th Oct 17, 11:55 AM
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    xylophone
    • #3
    • 8th Oct 17, 11:55 AM
    • #3
    • 8th Oct 17, 11:55 AM
    Cavendish still offer the stakeholder.

    https://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/aviva/

    But for modest pots, HL might still be an option.
    • TheShape
    • By TheShape 8th Oct 17, 1:03 PM
    • 1,141 Posts
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    TheShape
    • #4
    • 8th Oct 17, 1:03 PM
    • #4
    • 8th Oct 17, 1:03 PM
    I started my HL SIPP with a gross contribution of just £25 p/m, so just £20 p/m contribution from myself. Lump sums payments can be made from £100 gross (£80).

    The monthly contribution can be adjusted to suit at almost any time.
    • JustAnotherSaver
    • By JustAnotherSaver 8th Oct 17, 1:52 PM
    • 2,611 Posts
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    JustAnotherSaver
    • #5
    • 8th Oct 17, 1:52 PM
    • #5
    • 8th Oct 17, 1:52 PM

    1) The expensive aspect of HL is relative, insofar as, if you only have a small pot then the charges will be relatively small. If the pot increases in size to a 'tipping' point (individual's own consideration) then move from HL
    Originally posted by cloud_dog
    0.45% is 0.45% though. Whether it is of £1k, £10k or £100k.

    I appreciate that 0.45% of £1k isn't a great amount & even moreso when compared to 0.45% of 100k, but regardless, the percentage is still the percentage so why pay X for Y when you can still buy that exact same Y and only pay Z instead?

    Furthermore - they don't actually have pensions right now so it's not as though they'd be moving from one pension provider to another, they're in a way starting afresh.

    Also with the money being where it currently is in the form of a S&S ISA, £10k in is £10k. The point here is there is no tax relief to compound year on year which is just another reason they are leaning towards a pension over a S&S ISA.

    I understand there is the LISA which i guess brings the difference down a bit (25% for the LISA vs tax relief for the pension) but i've gone through the LISA with both of them as an option and they've opened one with the minimum opener in case circumstances and opinions change in future but neither of them at this moment in time want to really use the LISA.





    As a rough number cruncher, the one with £11k it has taken them around 5 years to get that far, maybe 6. So that's 5 or 6 years at 0.45% the charge. If somewhere is offering the exact same funds to invest in at say 0.25% charge or 0.30% charge then surely that's better?

    • xylophone
    • By xylophone 8th Oct 17, 2:05 PM
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    xylophone
    • #6
    • 8th Oct 17, 2:05 PM
    • #6
    • 8th Oct 17, 2:05 PM
    How much (current tax year) relevant earnings does each have?
    Are they in work related pension schemes?
    How old are they?
    Have they each obtained state pension statements?
    • JustAnotherSaver
    • By JustAnotherSaver 8th Oct 17, 2:18 PM
    • 2,611 Posts
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    JustAnotherSaver
    • #7
    • 8th Oct 17, 2:18 PM
    • #7
    • 8th Oct 17, 2:18 PM
    How much (current tax year) relevant earnings does each have?
    Originally posted by xylophone
    Their last years earnings (P60) he was about £27k with this year likely to be somewhere similar whereas she didn't earn enough to pay tax because she was working scattered days, however since September '17 she has been able to secure a full time (Monday-Friday) contract so that will change significantly to where instead of earning say £500net per month she'll be maybe £1000-£1100 net per month. We're waiting on the first payslip though.

    Are they in work related pension schemes?
    Yes for both but there are no employer benefits from extra contributions.
    He's with NOW Pensions, she's with NEST. Regardless of how much extra they pay in their employers will only ever pay in the minimum that they have to and salary sacrifice is not an option for either.

    Apologies if you're not going down that road i'm just throwing extra information out in case that's where you were thinking.
    How old are they?
    He's just turned 25, she'll be 27 early next year
    Have they each obtained state pension statements?
    Neither has.




    EDIT: In case we drift off to the land of house purchasing, it's all guessing. He's currently single & after the last episode he's probably traumatised for life. She's got a boyfriend of a year or so. They may buy at some point they may not. Currently they may more likely rent but it's all guesswork. He is paying the maximum per month into a HTB ISA (£200 with Halifax) whereas she's been paying in approx £50pm so far. They may use it to go towards a house purchase but may not as they may end up renting.

    Whereas I always knew i was going to buy & had saved just over £40k by the time i bought when i was 30 (on around £15k-£18k per year) they are not driven the same way i was.

    Again this is just assuming we may drift off topic to talk about house purchasing. Apologies if we weren't going to.
    Last edited by JustAnotherSaver; 08-10-2017 at 2:23 PM.

    • greatkingrat
    • By greatkingrat 8th Oct 17, 3:00 PM
    • 69 Posts
    • 74 Thanks
    greatkingrat
    • #8
    • 8th Oct 17, 3:00 PM
    • #8
    • 8th Oct 17, 3:00 PM
    I personally went with Cavendish Online because they were the cheapest, they offered the funds i were looking at & importantly ... i could afford their minimum of £200 per month and i'm sure i'll be able to for the foreseeable.

    Just making this thread on behalf of 2 people, one of which certainly wont be able to hit Cavendish's £200pm requirement, the other maybe could but it'd be stretching and not worth it, plus there'll certainly be months where they can't & it's just better if they can comfortably meet any minimum requirement.
    Originally posted by JustAnotherSaver
    Where did you get the £200pm minimum contribution from? According to their website, the minimum contribution is £50 gross (£40 net)

    https://www.cavendishonline.co.uk/pensions/charges
    • JustAnotherSaver
    • By JustAnotherSaver 8th Oct 17, 3:25 PM
    • 2,611 Posts
    • 414 Thanks
    JustAnotherSaver
    • #9
    • 8th Oct 17, 3:25 PM
    • #9
    • 8th Oct 17, 3:25 PM
    Where did you get the £200pm minimum contribution from? According to their website, the minimum contribution is £50 gross (£40 net)

    https://www.cavendishonline.co.uk/pensions/charges
    Originally posted by greatkingrat
    I saw it somewhere on their website when i was sorting out my own but i can't seem to find it. I don't find their website the easiest to navigate around.

    Now i'm sure to that there'll be plenty who'll say they have absolutely zero issue with their website & that's fine but i personally don't think it's the easiest.

    Anyway i went through old emails because i know i saw it somewhere on their website & found an email response from June this year...

    The minimum investment of £200 a month applies to the Fundsupermarket Pension (SIPP) for ISA investments the minimum investment is £50 a month.

    Full details of how to set up the ISA can be found on our website at https://www.cavendishonline.co.uk/investments/buy/
    So they're saying that there's a minimum of £200pm for a SIPP where the minimum for ISAs is £50pm.

    I just can't find where it says that on their website any more but i know i saw it in order for me to email them about it & for them to then respond on it.

    I do remember the minimum being £200pm for direct debit contributions or £1000 as lump sum contributions. I just can't remember whether this was for a SIPP or a S&S ISA or both.
    Last edited by JustAnotherSaver; 08-10-2017 at 3:32 PM.

    • JustAnotherSaver
    • By JustAnotherSaver 8th Oct 17, 8:46 PM
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    JustAnotherSaver
    I've spent a good bit of time today looking for that £200 requirement i mentioned which you said you can't find & i just cannot find it.

    The only thing i can think of is they've relaxed the requirements since i emailed them in June. They must surely have had it because i quoted their actual response to me - which clearly doesn't say anything on the lines of "we don't know what you're on about with that £200 you speak of", they actually acknowledge it.

    Does anyone know if/when they changed this? Has anyone been able to find it on the website?

    I may just get in touch with them to check because it's bugging me. I know for 100% sure i've seen £200 minimum mentioned on their site right before i signed up. What i'm not 100% on is whether that was for a SIPP or a S&S ISA (because i signed up with a SIPP and my wife a S&S ISA) but i know i certainly saw £200 minimum mentioned.

    • xylophone
    • By xylophone 8th Oct 17, 9:01 PM
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    xylophone
    Even without any extra employer contribution they will get tax relief on any additional contributions that they make.

    https://www.nestpensions.org.uk/schemeweb/NestWeb/public/memberhelpcentre/contents/how-can-i-make-additional-contributions.html

    https://www.nowpensions.com/help-centre/faqs/contributions/can-an-employee-pay-more-in-to-the-pension-pot-than-the-employer
    • JustAnotherSaver
    • By JustAnotherSaver 8th Oct 17, 10:14 PM
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    JustAnotherSaver
    I understand that but they would get the same tax relief in their own private pension, stakeholder or SIPP (or whatever else if there are other pension wrapper options).

    What would you do? Would you just lump all future money into the workplace pension? Ok you get a bit more choice with the NEST one than you do with the NOW one but only a bit.

    I had the same option available to me. I could've kept putting extra contributions into my workplace pension but instead i opened a SIPP with Cavendish & invested in a VLS fund to begin with as i felt this would generate better returns. That was just my feeling. I made my decision & i stick with it.

    But would you put into the workplace pension rather than a private one in this situation?

    • cloud_dog
    • By cloud_dog 9th Oct 17, 12:10 PM
    • 3,308 Posts
    • 1,864 Thanks
    cloud_dog
    Also with the money being where it currently is in the form of a S&S ISA, £10k in is £10k. The point here is there is no tax relief to compound year on year which is just another reason they are leaning towards a pension over a S&S ISA.
    Originally posted by JustAnotherSaver
    Hi

    I don't know if you misread what I said but, I agree. See point 2 (and 2.1). This was offered as a way of mitigating the possible issue around minimum monthly contribution of a SIPP whilst continuing to save and invest and subsequently switch in to the SIPP and obtain the tax relief (and repeat).
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • Alexland
    • By Alexland 9th Oct 17, 4:38 PM
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    Alexland
    Sorry at their age I am unsure why we are not talking about filling S&S LISAs? Did I miss something?

    If they are basic rate taxpayers with no salary sacrifice or additional employer contributions then the tax benefit of putting money in an additional pension might be low. If they invest and grow enough from their workplace pensions to use up their personal allowances when drawing income in retirement they will pay an effective tax rate of 15% (20% on the non tax free 75%) on the SIPP draw down.

    However with LISA saving you get the 25% bonus and there is no tax to pay at 60. Under current rules you can even cycle the LISA money into a pension between the age of 60 and 75 at 2880 per year if a non earner (or more if still earning) to get the marginal tax benefit of a pension?

    Alex
    Last edited by Alexland; 09-10-2017 at 4:58 PM.
    • JustAnotherSaver
    • By JustAnotherSaver 9th Oct 17, 9:40 PM
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    JustAnotherSaver
    Sorry at their age I am unsure why we are not talking about filling S&S LISAs? Did I miss something?

    If they are basic rate taxpayers with no salary sacrifice or additional employer contributions then the tax benefit of putting money in an additional pension might be low. If they invest and grow enough from their workplace pensions to use up their personal allowances when drawing income in retirement they will pay an effective tax rate of 15% (20% on the non tax free 75%) on the SIPP draw down.

    However with LISA saving you get the 25% bonus and there is no tax to pay at 60. Under current rules you can even cycle the LISA money into a pension between the age of 60 and 75 at 2880 per year if a non earner (or more if still earning) to get the marginal tax benefit of a pension?

    Alex
    Originally posted by Alexland
    A few reasons really.

    The biggest of which was benefits.

    Now we're not benefit bums, never have been & we'd all rather not end up on benefits because that would mean life is going well.

    But when i read that your ISAs (including S&S/LISAs) could be used against you when claiming benefits whereas pensions can't then this was a huge factor.

    To explain it further, our mother worked since she was 14. Was never out of work & sometimes carrying multiple jobs. She was not the type to sit on her backside & sponge, far from it.

    But then when she turned 40 things changed. I wont go into detail much because i'm not here to have the situation judged but she now has to claim IB & DLA. I know one or both of them has changed their names in recent times (is it ESA or something like that these days?). As far as i'm aware one of them is means tested and the other is not.

    The point is you never know what tomorrow is going to bring, so you make your decisions & stick by them.




    To be honest i didn't really understand the first half of what you said. Maybe it's because i'm really tired but i've a feeling i wont understand it tomorrow either.

    I get the distinct impression that the advice is coming my way that pensions in this case are a bad thing & tbh i don't understand why.

    • Alexland
    • By Alexland 10th Oct 17, 1:07 PM
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    Alexland
    Yes savings including LISAs can reduce your entitlement to benefits. As can income from a pension. Appreciate that you have recently seen this in your close family and you will have to judge if it is likely to affect any benefits they are realistically likely to claim.

    The core problem is that for a working basic rate taxpayer, once they have harvested the max employer contribution and if they have no way of saving national insurance, the tax benefits of saving into a parallel pension or making extra contributions can be limited.

    Sure it's great to see the 25% government bonus when contributing to a SIPP or the reduced tax on a payslip but you need to consider the tax paid on income when they become a pensioner.

    While pensioners get a tax free income allowance it is likely that it will be used up by the state pension and the income they receive from their workplace pension if they continue to be employed to state pension age.

    As such a second parallel pension would be taxed at 20% (unless they retire before state pension age) which would completely wipe out the 25% bonus they received on the contribution - if it wasn't for the chance to take 25% out tax free. So the effective tax rate is around 15% which means there is a small advantage provided the income tax rate doesn't go up or the tax free element is not reduced.

    However on a LISA the upfront bonus is the same 25% but it will not be taxed when it becomes accessible at 60. In addition if the LISA money is then put into a pension between the ages 60 to 75 you can still get the small tax advantage.

    Finally if they do really well for themselves in the future then the LISA could be released before 60 to help with house - while I understand this is not the objective the flexibility is there.

    Alex.
    Last edited by Alexland; 10-10-2017 at 10:34 PM.
    • JustAnotherSaver
    • By JustAnotherSaver 10th Oct 17, 8:07 PM
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    JustAnotherSaver
    I know what you're saying and i understand the benefits of the LISA but pretty much everything i have read has listed pensions as being the better option.

    The annoying thing is it seems you have to do a bit more digging to find anything about information & advice linked to a basic rate tax payer. It seems all these articles just assume everyone is a higher rate tax payer. I'm not sure why, i would imagine that there's more BR tax payers out there than HR tax payers? I could be wrong, i'm only guessing.

    • Alexland
    • By Alexland 10th Oct 17, 10:29 PM
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    Alexland
    Most of the press coverage has been where someone might crazily opt out of auto enrollment and give up the employer contributions. With salary sacrifice the returns of additional unmatched contributions are about the same as the LISA.

    Higher rate tax payers are more likely to read and write financial articles and get significantly more benefit from a pension than basic rate taxpayers.

    It's totally unfair and I say that as someone with a high enough income to benefit enormously from the status quo.

    I would prefer to see a reformed pension system where everyone benefits the same regardless of income or whether their employer offers salary sacrifice. Then the majority of people would have an incentive to put more away for retirement. Still too many vested interests with the decision makers to make that happen.

    Alex
    Last edited by Alexland; 10-10-2017 at 10:39 PM.
    • JustAnotherSaver
    • By JustAnotherSaver 10th Oct 17, 11:02 PM
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    JustAnotherSaver
    I agree with your opening. I've spent plenty of time searching for articles & find very little that matches me. By very little i'd say probably nothing.

    They've all at least got something my situation hasn't - it may be the option of salary sacrifice, it may be the higher rate, it may be contributions from the employer above the minimum or it may be a mixture. I haven't found anything that writes for the person on the bare minimum.

    Anyway, in my position, at 34 (& my wife at 35), we just need to get our pots built. We started at 28 & 29 although with buying the house we only really started putting more in this past year or so (so we're late really).

    Now since you can invest in the same things in both, i'm guessing by the time we hit 65 (let's just use that as a retirement age), the final balance would be the same in a pension (private) as it would be in a LISA, correct?

    Which would make the question i guess as how would we like to deal with that money after we retire? All available in 1 whack or 25% tax free & then paying yourself a wage in a way.

    • Alexland
    • By Alexland 11th Oct 17, 7:30 PM
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    Alexland
    Yes assuming no difference in fees and ignoring the slight difference in timing in recieving the government bonus for the first year then at 60 (or 65 or all the way through) you would have had the same 25% boost putting £4k into a personal SIPP or a LISA. The main difference is than when withdrawing the money the LISA is tax free whereas the pension may attract income tax.
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