Stakeholder versus Private?

richdv

I currently have approx £30k in a Standard life Stakeholder pension which has dropped by about £4K in the last 18 months and need general advice on whether to switch or not....

I have seen an IFA and been advised to transfer to a private pension (With Skandia) however I'm unsure what to do as to do this would mean paying a one-off fee of 5% to the pension company (followed by an annual charge of 0.75%) meaning a loss of £1725 before I even start!

I'm reluctant to switch as I already lost £10k (drop in transfer value) switching from my original private pension (Pearl, with-profits) to the Standard life Stakeholder back in 2005, although at the time was advised by my IFA that this was best in the long-term.

My pension fund is now worth £4K less than it was back in 2001. It seems that the only people making money from my pension is the pension companies and IFA's!

Any suggestions??

rich010273

Personally, I try and keep any charges to an absolute minimum.

There are other posters on this board that will say that the greater choice of funds available in Private Pensions or SIPP's outweigh the Charges.

You may want to look at your investment choice rather than the Charges if you've lost 4K in the last few months.

dunstonh

I have seen an IFA and been advised to transfer to a private pension (With Skandia) however I'm unsure what to do as to do this would mean paying a one-off fee of 5% to the pension company (followed by an annual charge of 0.75%) meaning a loss of £1725 before I even start!

Is that the Skandia pension or the Skandia Selestia pension (first one is obsolete, second one is excellent contract and where I have my own pension).

I'm reluctant to switch as I already lost £10k (drop in transfer value) switching from my original private pension (Pearl, with-profits) to the Standard life Stakeholder back in 2005, although at the time was advised by my IFA that this was best in the long-term.

Excellent advice to get out of Pearl. Zero bonus on V1 plans (they dropped their terminal bonus by 10% in July this year as well. So you would have seen a drop in the Pearl value had you sat still).

My pension fund is now worth £4K less than it was back in 2001.

Pearl were asset stripped and destroyed. They used to be quite good before then but there you go. Sometimes you have to take a step back to take two forward and that is what you did and whilst the SL stakeholder isnt great its perfectly acceptable.

It seems that the only people making money from my pension is the pension companies and IFA's!

Only if you dont undestand the concept of investing and want to be cynical. That said, if it is the old Skandia contract then I would only do it if the charges beat stakeholder (and they could potentially as the old one pays a 1% bonus every 5 years from the end of year 4 and with a 0.75% charge that would be cheaper than standard life. If you have a long time to retirement (over 20 years) then that sould be cheaper than standard life.

The IFA has to justify the recommendation. You cannot just switch nilly willy. So, I would ask to see the research that shows the Skandia plan has lower charges than the Standard Life (it wont be able to unless they are using internal funds and if you are going to use internal funds then there are better options than the old Skandia plan). If its the Selestia plan then I have no problem with that but I dont think it is as 5% is not the initial charge. 4.5% is assuming the IFA is taking 4.5% commission (its a 1:1 charge).

There are other posters on this board that will say that the greater choice of funds available in Private Pensions or SIPP's outweigh the Charges.

Yes and No. Personal pensions can actually come in a lot cheaper than stakeholder using stakeholder funds. Indeed, a bit of mix and match with internal and external funds can still come in cheaper. I fear in this case though that wont be the case. Skandia used to be a good contract but its obsolete now and the Selestia version is going to take its place anyway so I dont see the point of using the old version. And before anyone says it, it wont be a commission bias either as Skandia pay less than you can get on say a Norwich Union Stakeholder or Clerical Medical stakeholder (and both of those are cheaper than standard life).