any tips for choosing a pension provider? discount broker vs IFA etc.

adrian_bond

Thanks EdInvestor,

i will look into buying from Hargreaves-landsdown as i have heard lots of good about them from previous posts and martins intial articles. a few more details though that i forgot to include which may or may not alter your reccommendation;

i am already a home owner
(me and the missus are over a year into our 25 year mortgage and are very comfortable at present (4 years left on very good fixed rate!)) with no complaints or struggles.

once ive used my savings to settle my car bill i will have another £200 a month of spare cash. If i were to stay in, and not spend anything outside my normal budgeted allowances for food, fuel, bills etc then i have a disposable income of £700 a month (already including the extra £200 that will be freed up by next month). Hence i am keen to save for my future (earlier pension savings the better yes?), a possible house move hopefully sometime within the next year (without overstretching), and general rainy day cash if anything ever goes bad!

if any of this alters your recommendation then please let me know. thanks again.

EdInvestor

IMHO you would need to replace your rainy day fund at least before locking money away into a pension.You can do this via the ISA, but once money goes into a pension you can't get it out.I assume you aware of this..

The current state of the economy and the financial world indicates that you should keep all your options open at present - actually I would not use savings to pay down debt at present.What if you lost your job?What if your mortgage suddenly got much more expensive?

You need to build up an accessible cushion to cover any unexpected nasties over the next couple of years.

Remember you are already saving for 2 state pensions via your NI conts. You may wish to get a forecast as to what you and your wife have built up already.

www.thepensionservice.gov.uk

dunstonh

i will look into buying from Hargreaves-landsdown as i have heard lots of good about them from previous posts and martins intial articles. a few more details though that i forgot to include which may or may not alter your reccommendation;

You need to be aware that HL is an experienced investor option and also quite expensive for fund purchase. At your age the cheapest option of the lot is a personal pension. Stakeholders can be disregarded as they are not the cheapest option.

Normally personal pensions are the middle option for cost and fund range with stakeholders cheapest and smallest fund range and SIPPs most expensive but largest fund choice. However, when you are aged under 40, a number of personal pensions offer terms which bring the cost lower than stkakeholder and allow you to use a larger fund range.

at the end of my initial free meeting i was given a copy of "key facts" which is nessesary to conform with FSA rules i think. it makes interesting reading. one area which im finding daunting is the costs;

Are you aware that the document in question there shows the typical maximum commissions as well as the averages. It does not necessarily reflect the charges of that particular adviser. For example, even if that adviser took say 1% commission only on a transaction, they still need to include those pages. You never measure the charges of an IFA by looking at that page (the FSA are removing this in the next print due to it being a total failure).

this is unclear as i wont know this until i confirm i want to meet with him again and go through the costs. he said the normal gumf about rebated commision and no fees so i can see him whenever i want and stuff but im still sceptical as with any commision based product you pay more overall in the long-run.

You need to be aware that you do not pay the commission. The provider pays the commission. You pay the product charges. It is possible at your age for an IFA to take £2500 commission on a personal pension and still come in with lower charges than a stakeholder pension arranged on nil commission. HL also take a commission as well so nothing is free.

i asked the question "do you offer products form the whole of the market" to which he replied yes; he isnt tied to any products, services, or companies so he can offer the best buy for my situation. this then begs the question why do you then work for norwich and peterborough? hmmm.

A few of the banks have introduced whole of market advisers. However, you cannot be truely independent if you work for a bank because your employer has rules which will prevent you doing certain things. My experience of banks (and especially N&P) is that they work more to a panel than true whole of market and the advice is still simplistic as it is a salesforce. Banks are the training ground nowadays. They are good on the training front as they get you qualified, you build up clients and after a few years of putting up with sales managers, sales targets, incentives and pressues that come with that you can move on to freedom. It is like doing time. An independent IFA should be able to beat a bank adviser every time.

where can i look to get an acurate and up-to-date comparison of pensions and thier value to me.

You cant. All tables of comparisons assume maximum commission taken and arranged on a mono-charged basis. As most IFAs discount to some degree (varies on size of transaction) and as multi-charge versions are cheaper at your age, any data would be pointless.

adrian_bond

Thanks DunstonH,

That information is really useful and will help me to make my decision. I have been "umming and arrhhing" whether or not to actually take up Norwich and Peterborough on their plans as I wasn’t sure if it is wise to implement a pension with a financial planner instead of an IFA. Thanks for confirming that for me.

I understand a little better now about commission and charges and can see how they are unavoidable yet can still be minimized with the maximum benefit to myself and the IFA who will setup the pension plan and manage the investments.

regarding IFA`s, could you make any recommendations as to any in my area that would be suitable to see. I see you are also from Norfolk and was wondering if you are a practicing IFA and available for a meeting? hopefully this doesn’t break any forum rules etc but you seem to have nothing but intelligent and informed information to share plus some 9700 thanks from other people across the forum! If that’s not a guarantee of good advice then I don’t know what is!


i think i will still pay off my car loan with the savings i have allocated to it becuase my disposable income for the foreseeable future will allow me to top up my ISA at leisure, and then once that is full, i will look at transferring it to the HL ISA so i can learn the ropes with the stock exchange and spread my investments.

Thanks again!

EdInvestor

Charges and commission are extremely difficult to understand and compare, on purpose ,one suspects.

There is some info here on stakeholders and PPs: http://www.fsa.gov.uk/tables

One of the good things about SIPPs can be that at least the fees and charges are more transparent. Depending on your investment strategy they can also be low.

It's worth remembering that a 1% annual charge will clip 25% off the value of your pension fund over the long haul.You lose half if the fees (both revealed and hidden ones) rise to 2%. This is not negligible.

dunstonh

There is some info here on stakeholders and PPs: http://www.fsa.gov.uk/tables

These assume maximum commission basis and on mono charge basis.

One of the good things about SIPPs can be that at least the fees and charges are more transparent.

That is complete crap. There is no difference apart from the fact the SIPP providers often make no commission disclosure.

It's worth remembering that a 1% annual charge will clip 25% off the value of your pension fund over the long haul.You lose half if the fees (both revealed and hidden ones) rise to 2%. This is not negligible.

Its worth remembering that to get 8% after charges is better than getting 4% with no disclosed charges.