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  • FIRST POST
    • Devenish
    • By Devenish 9th Feb 18, 5:17 PM
    • 11Posts
    • 1Thanks
    Devenish
    SIPP vs Stakeholder
    • #1
    • 9th Feb 18, 5:17 PM
    SIPP vs Stakeholder 9th Feb 18 at 5:17 PM
    Hello,

    My wife is 57 and has no form of personal pension. She wants to start one now investing in ethical funds and our research thus far has pointed to either starting a Stakeholder pension with a provider such as the Pru (0.75% fees) with a choice of 1 fund or a SIPP with, say Fidelity (c1.5% fees), and a choice of 31 ethical funds. Neither us of us has experience in fund choice but are reasonably intelligent (although I say it myself) and have time for research. Which way do you think we should lean?
    Thanks in advance.
Page 1
    • Devenish
    • By Devenish 9th Feb 18, 5:26 PM
    • 11 Posts
    • 1 Thanks
    Devenish
    • #2
    • 9th Feb 18, 5:26 PM
    • #2
    • 9th Feb 18, 5:26 PM
    By the way, she plans on working until she drops and currently is a higher tax earner.
    • TARDIS
    • By TARDIS 9th Feb 18, 6:02 PM
    • 95 Posts
    • 68 Thanks
    TARDIS
    • #3
    • 9th Feb 18, 6:02 PM
    • #3
    • 9th Feb 18, 6:02 PM
    What do you mean by "ethical"?
    What specific sectors are you trying to avoid for example?
    • dunstonh
    • By dunstonh 9th Feb 18, 6:07 PM
    • 91,121 Posts
    • 58,137 Thanks
    dunstonh
    • #4
    • 9th Feb 18, 6:07 PM
    • #4
    • 9th Feb 18, 6:07 PM
    Stakeholder is at one end. SIPP is at the other and PPP is in between.

    Stakeholder pensions have 100% FSCS protection with no upper limit and use funds with due diligence carried out by the provider. SIPPs (should have) whole of market access. Very little due diligence carried out and FSCS protection only on regulated investments to 50k.

    She wants to start one now investing in ethical fund
    Stakeholder pensions are unlikely to carry any more than 1 generic ethical fund. So, they are not really suited to ethical investing. SIPPs will have access to the full range of ethical funds allowing you to run through your ethical filtering to get fund(s) that match your exact ethics.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Devenish
    • By Devenish 9th Feb 18, 7:48 PM
    • 11 Posts
    • 1 Thanks
    Devenish
    • #5
    • 9th Feb 18, 7:48 PM
    Ethical?
    • #5
    • 9th Feb 18, 7:48 PM
    Hi Tardis,
    We haven't as yet discussed the meaning of ethical for her but I suspect we will deal with this in an iterative way - looking at funds and asking how much she values their ethical stance.I take dunstonh's point that this is best accomplished on a SIPP platform.
    • Devenish
    • By Devenish 11th Feb 18, 10:35 PM
    • 11 Posts
    • 1 Thanks
    Devenish
    • #6
    • 11th Feb 18, 10:35 PM
    Thanks, anything else?
    • #6
    • 11th Feb 18, 10:35 PM
    Many thanks for your thoughts so far. Are there any other differences between Stakeholder pensions and SIPPs you think we should consider?
    • Prism
    • By Prism 12th Feb 18, 1:15 PM
    • 185 Posts
    • 129 Thanks
    Prism
    • #7
    • 12th Feb 18, 1:15 PM
    • #7
    • 12th Feb 18, 1:15 PM
    Stakeholder is at one end. SIPP is at the other and PPP is in between.
    Originally posted by dunstonh
    It is odd I think that traditional personal pensions get little press nowadays. Most of the comparisons seems to be between the limited choice stakeholders and full access SIPP options. I have the bulk of my pension with Aviva which has a 'limited' selection of 2000 funds, is simple to use and has reasonable fees. I'm not even sure what category of pension that is
    • dunstonh
    • By dunstonh 12th Feb 18, 1:30 PM
    • 91,121 Posts
    • 58,137 Thanks
    dunstonh
    • #8
    • 12th Feb 18, 1:30 PM
    • #8
    • 12th Feb 18, 1:30 PM
    It is odd I think that traditional personal pensions get little press nowadays. Most of the comparisons seems to be between the limited choice stakeholders and full access SIPP options.
    PPPs still get plenty of coverage in the advice market. The DIY market is different though as there are virtually no PPPs targetted at the DIY market. And the few SHPs left are only there for legacy reasons.

    SIPPs have the lowest costs to operate as a provider. Fewer solvency requirements, due diligence etc. So, it was natural for DIY providers to go with the cheapest option for them to target a market that is notoriously cost conscious. Often putting cost before quality.

    The DIY market is growing but it still smaller than the advice market. The largest provider of drawdown in the UK uses a personal pension and not a SIPP.

    I have the bulk of my pension with Aviva which has a 'limited' selection of 2000 funds, is simple to use and has reasonable fees. I'm not even sure what category of pension that is
    If its the Aviva plaform/wrap then its a SIPP. Their PPP had around 300 funds and wasnt platform based. The Aviva platform has just moved from fund supermarket to wrap platform. So, it is logical that it is a SIPP. However, they do provide the insured funds (noted by a series number) for those that want higher FSCS protection.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Prism
    • By Prism 12th Feb 18, 2:26 PM
    • 185 Posts
    • 129 Thanks
    Prism
    • #9
    • 12th Feb 18, 2:26 PM
    • #9
    • 12th Feb 18, 2:26 PM
    If its the Aviva plaform/wrap then its a SIPP. Their PPP had around 300 funds and wasnt platform based. The Aviva platform has just moved from fund supermarket to wrap platform. So, it is logical that it is a SIPP. However, they do provide the insured funds (noted by a series number) for those that want higher FSCS protection.
    Originally posted by dunstonh
    That makes sense. I have two pensions, one with a choice of about 2000 funds and the other about 300 funds like you say. I have kept the PPP one mainly because a couple of the funds seem to have lower costs than their equivalent SIPP versions.

    So to the OP I guess I would suggest a SIPP, however not all SIPPS are equal. My Aviva one feels high quality and simple to use but is more expensive and has less choice than my YouInvest SIPP. Saying that, 2000 funds is still plenty of choice.

    One way of looking at this would be to fund an ethical fund first that you like and then search for which platforms hold it
    • Devenish
    • By Devenish 12th Feb 18, 4:49 PM
    • 11 Posts
    • 1 Thanks
    Devenish
    [One way of looking at this would be to fund an ethical fund first that you like and then search for which platforms hold it]

    Thanks Prism - is there an efficient way of doing this?
    • Devenish
    • By Devenish 12th Feb 18, 4:54 PM
    • 11 Posts
    • 1 Thanks
    Devenish
    Hi dunstonh, Some of your comments imply we should also consider PPPs. If so, what are the advantages over Stakeholder/SIPPs? Also, where's the best place to find and explore ethical ones?
    • xylophone
    • By xylophone 12th Feb 18, 5:14 PM
    • 24,533 Posts
    • 14,380 Thanks
    xylophone
    https://moneyfacts.co.uk/guides/retirement/pensions-glossary/

    She can choose a stakeholder, a personal pension, a SIPP or indeed all three!

    https://protected.fscs.org.uk/banking/ethical-pensions/ may be of interest.
    • Prism
    • By Prism 12th Feb 18, 6:22 PM
    • 185 Posts
    • 129 Thanks
    Prism
    Thanks Prism - is there an efficient way of doing this?
    Originally posted by Devenish
    You will need to decide what you want from an ethical fund. There are lots of interpretations. For example if you follow the US Dow Jones guidelines here http://www.robecosam.com/ you would discover that companies that participate in tobacco, gambling, arms, oil, mining etc are often included as sustainable or ethical companies. Maybe you are ok with that. You would need to read the documentation for each fund to discover what their ethos was and if it matched yours. Just picking a fund with ethical or sustainable in the name doesnt tell the whole picture.

    I would follow xylophone's link. You could also read the documentation about Fundsmith's ethical fund for a point of view https://www.fundsmith.co.uk/global/sef/documents. Its an interesting perspective even if you don't chose that fund.
    • Devenish
    • By Devenish 12th Feb 18, 9:04 PM
    • 11 Posts
    • 1 Thanks
    Devenish
    One way of looking at this would be to fund an ethical fund first that you like and then search for which platforms hold it
    Originally posted by Prism
    Thanks Prism - is there an efficient way of doing this?
    • Devenish
    • By Devenish 12th Feb 18, 9:52 PM
    • 11 Posts
    • 1 Thanks
    Devenish
    Thanks xylophone. Within the info you suggested, I found the NEST ethical fund which has the following two-part charges:
    - a contribution charge of 1.8 percent on each new contribution into a member's retirement pot
    - an annual management charge (AMC) of 0.3 percent on the total value of a member's fund each year.
    This seems very attractive on the face of it. What is your evaluation of NEST?
    Last edited by Devenish; 12-02-2018 at 9:53 PM. Reason: some wrong characters included from a paste
    • dunstonh
    • By dunstonh 13th Feb 18, 12:03 AM
    • 91,121 Posts
    • 58,137 Thanks
    dunstonh
    The key is to deciding where to invest first and then pick the fund and provider that offers that fund next.

    I cant help you on research on the DIY side as I use software filtering. Not sure if any DIY provider offers that. i.e. fill out the ethical investor questionnaire, then input that into software and it tells you what funds meet your criteria.

    - a contribution charge of 1.8 percent on each new contribution into a member's retirement pot
    Nest is virtually unique now. The rest have no initial charges.

    - an annual management charge (AMC) of 0.3 percent on the total value of a member's fund each year.
    Its low but not that low. Both advised and DIY options can get close.

    What is your evaluation of NEST?
    Fine if you employer offers it but not much cop as an individual plan.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Devenish
    • By Devenish 13th Feb 18, 4:00 PM
    • 11 Posts
    • 1 Thanks
    Devenish
    Thanks dunstonh, Why do you say NEST is not much cop as an individual plan? In my ignorance on these matters, I must be missing something!
    • Devenish
    • By Devenish 14th Feb 18, 6:58 PM
    • 11 Posts
    • 1 Thanks
    Devenish
    Actually, I think I get it now why NEST is relatively unattractive as an individual plan. It is the 1.8% charge on all added money. I have an ethical Stakeholder pension with Aviva which has an AMC of 0.4%. It would take 18(?) years for the charges at Aviva to overtake NEST's. In the meantime, the money in Aviva would have grown substantially more than in NEST.
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