Help - How to Pick the Best Stakeholder Pension

PasturesNew

Hello

It's difficult to know what is relevant, but I'll try a precis.

dob 1960
single, always have been, expect to always be
no kids

Income has always been variable, always a basic rate taxpayer. I've been laid off from just about every job I've ever done within 15 months of starting (often 6 months). Nothing I've done, they've just always closed, downsized, moved, been bought out, gone under etc...

In 1988/1989 I had a job for about 10 months (so many jobs it's difficult to remember what dates offhand), during which time I started a personal pension (Prudential) and the little man told me to sign a SERPS opt out form. When that job ceased I couldn't afford to keep up the payments (£15/month) and by the time I was in regular enough work to do so it was too late and I'd have had to repay every missed payment, so they shut it off.

I have this week applied for a pensions forecast.

While I have mainly worked for about 30 years, this has been mostly employed, with some self-employed bits.

I have never been offered an employer pension, so have nothing in a pot anywhere.

I bought and sold a house, so I have an STR cash fund at the moment.

At the moment I have the interest on my savings coming in and I am declaring myself as self-employed as I do generate an income working from home.

While I am looking for work, at my age and in a recession, I don't see that I will manage to find a good employer for the next 20 years. I expect things to probably continue as they have been: working for small inadequate companies with no pension provision and being in/out of work.

I am now looking at stakeholder pensions. I went to the FSA site and they have something where you can select a stakeholder pension from, but it's based on charges, so you can pick the one with the least charges. But there seems no information on which might be the best end results.

In March 2008 I paid into my first cash ISA. I didn't invest in a shares ISA because I really don't understand it, or how to compare, and am petrified by salesmen who are probably just doing me over for the commission.

I guess the questions are:

1] What would be the best performing/best/least charges stakeholder for somebody like me who expects to have a stop/start need for saving/investing for the next 15-20 years?

2] I am interested in buying shares (I use the term loosely as I have no understanding of the different terminologies), how would I pick the best way to invest in these?

I really have always been lost in everything, and still am. Confused, lost and scared. I've never expected to have more than the old age pension when I retire - and to be honest a current OAP+Pension Credit is more income than I've usually been used to getting, so it's not that scarey a thought if that's all I can achieve.

There just seems this massive leap from getting the basic Govt handouts to having wasted your time saving because all you achieve on your own is £1 more than if you'd just blown your income on takeaways and beer. Current single pension credit is £136, which is about £56 on top of the basic pension, and so I think at my age I'd have to be guaranteeing to save £200 a month EVERY month for the next 15-20 years to beat that, which on a single low income isn't sustainable. Obviously I'd hope I could get a high salary (£25-30k) soon and maintain it for 15-20 years, but who knows what's round the corner. I've only managed to earn that much from 1997-2001, so doing it again isn't impossible, but it is unlikely.

Thanking you in anticipation.

dunstonh

1] What would be the best performing/best/least charges stakeholder for somebody like me who expects to have a stop/start need for saving/investing for the next 15-20 years?

It doesnt exist. Pensions are a tax wrapper. They dont make or lose money. The investment funds within them do that. Stakeholder is a defined way of charging. It isnt necessarily the cheapest (for example a 30 year old paying £100 on a personal pension that pays a £2000 fee to the adviser has lower charges than a stakeholder arranged on nil commission).

It really depends on how you want to invest, how you think you will pay in future, what servicing options and features you want etc. There is no one size fits all solution

2] I am interested in buying shares (I use the term loosely as I have no understanding of the different terminologies), how would I pick the best way to invest in these?

Is this within the pension or an ISA or unwrapped?

EdInvestor

PasturesNew wrote: »

Income has always been variable, always a basic rate taxpayer.

Generally, pensions are not the best tax wrapper for people who do not have access to a company scheme with free money and who pay basic rate tax. They are especially unsuitable for anyone who might need to draw on savings for current spending, because of their inflexibility (once the money goes in, you can effectively never get most of it out.)

I have this week applied for a pensions forecast.

Good.I suggest you also chase up the Pru pension and get an update as to its value, where its invested etc.It sounds as though the pension may have been receiving NI contracted out rebates over the years where payable ( ie whenever you were employed), so it may be worth more than you think.

While I have mainly worked for about 30 years, this has been mostly employed, with some self-employed bits.

Your state pension forecast is thus likely to include 10 years of entitlement to the State second pension (SERPS/S2P).The equivalent for later years will be in the Pru pension, it would appear.Let us know the figures when you get them.

I expect things to probably continue as they have been: working for small inadequate companies with no pension provision and being in/out of work.

As of 2012, even these types of companies will be required to offer a company "personal account" pension with an employer contribution and it would likely be better to wait for this than bother with a stakeholder now.

I am interested in buying shares (I use the term loosely as I have no understanding of the different terminologies), how would I pick the best way to invest in these?

For these you need an account with an online broker such as Halifax Sharebuilder, (very cheap dealing fees, ideal for beginners).Most people put their share portfolios in a self select stocks and shares ISA, though it's not strictly necessary as your gains should be tax-free anyway.

You can also invest a pension in shares but you would have to move your Pru pension to a SIPP to do this.

Current single pension credit is £136

124 pounds a week, in fact. The value of pension credit is not so much the extra cash but the "passport" benefits such as housing benefit and free council tax.

I'd have thought it's quite likely however that your retirement income will already be beyond the pension credit level. Pension income is taxable, BTW - the tax relief you get upfront has to be paid back later - except for 25% which you can take out in cash.

jem16

EdInvestor wrote: »

Generally, pensions are not the best tax wrapper for people who do not have access to a company scheme with free money and who pay basic rate tax. They are especially unsuitable for anyone who might need to draw on savings for current spending, because of their inflexibility (once the money goes in, you can effectively never get most of it out.)

The whole point of a pension is to provide an income in retirement. If it's too easy to get your hands on for current spending you may well find yourself in retirement with not enough income to live off.

PasturesNew

Thanks for the replies. Some of it went right over my head. I think I am now clutching onto the bits that say "don't do anything/it's not worth it".



We're always told that we're bad for not saving towards a retirement, but really it's not easy to actually do it, nor does there often seem to be a good reason to. Fair enough, for higher earning couples, etc, but for little me it's just not really probably worth the worry/effort is it.

I can't decide what to do until this whole housing/recession thing blows over - and I get a job because I have no idea where one of those could be, could be anywhere within a 200 mile radius. Maybe I should buy some woodland and a field and go completely off the grid. Buy up sovereigns when they're cheaper in about 10 years' time and bury them ... then dig one up every couple of weeks and flog it to a coin dealer for cash to buy essentials with

Dithering_Dad

Hi PN.

I also have a job that's temporary in nature and where the income is variable. When I was looking for a pension I needed it to have the following attributes:

1. Low maintenance charges.
2. Easy (and penalty free) to stop and start payments as my income fluctated.
3. Penalty free to transfer to another pension if/when I learned a bit more about pensions and found a better one more suited to my needs.
4. Hard to access - this is a retirement plan to fund my retirement, not an emergency fund to 'dip in and out of' when times were hard.
5. Non means tested - This is a retirement plan to fund my retirment, not an emergency fund for the government to 'dip in and out of' when times were hard.
6. Tax free so that the small amounts I paid in were increased by the government by 20%.

I therefore decided to get a stakeholder pension as it meets all of the above requirements. I went to Cavendish Online, as recommended by MSE - they get you a much reduced annual management charge (i.e. 0.2% rather than 1% or 1.5%).

The Cavendish web site is: http://www.cavendishonline.co.uk/pensions/stakeholder.php

I chose the Standard Life one for my missus with the pension invested in the Stakeholder Managed Fund.

I'd suggest you did something similar while you build up your pension pot and your investment knowledge. Once you have done both, you might look at some different pension offerings with a bit more knowledge than you have currently.

As you are starting your pension so late in life and will not be able to invest a huge amount, it's unlikely that your combined state pensions and stakeholder pension will be more than the £10k tax free allowance you receive at retirement age. This means that your stakeholder pension will receive a valuable 20% tax rebate each time you invest your money, but will be tax free when you receive your payout. So for every £8 you put into your pension, the goverment will add a further £2. Quite a good incentive.

dunstonh

You have to remember that those that know what they are doing tend to look for the best way of doing it and that starts complicating things as it typically means using multiple products and multiple tax wrappers.

If you dont know what you are doing and still going DIY then you run the risk of doing things wrong or not to best.

We're always told that we're bad for not saving towards a retirement, but really it's not easy to actually do it, nor does there often seem to be a good reason to. Fair enough, for higher earning couples, etc, but for little me it's just not really probably worth the worry/effort is it.

The basic state pension is just £4700 a year. Even with pension credit you are only looking at around £6900. So, whether you decide to save for your retirement will depend on how much you fancy living on £7k a year.

Maybe I should buy some woodland and a field and go completely off the grid. Buy up sovereigns when they're cheaper in about 10 years' time and bury them ... then dig one up every couple of weeks and flog it to a coin dealer for cash to buy essentials with

And along comes Time Team who find them on a dig

EdInvestor

You need to obtain the basic information - the forecasts and valuations for the state and existing private pension before coming to any view on whether further pension contributions are worth making.

Many women have an underlying suspicion about pensions, possibly due to the loss of control over the money and the disgraceful way many of them have been treated in the past vis a vis the state pension, so scepticism can be well founded.

But it's a good idea to inform one's opinion with a few facts and figures.

jem16

EdInvestor wrote: »

Many women have an underlying suspicion about pensions, possibly due to the loss of control over the money and the disgraceful way many of them have been treated in the past vis a vis the state pension, so scepticism can be well founded.

Most women today won't actually have a clue as to what you are on about Ed. With the abolition of the married woman's stamp in 1978, followed by HRP in the 80s and now the reduction in NI contributions to 30 years, only women over 50 years old are likely still to be affected.

For funding a retirement, pensions are still the best way to go about it and fuelling distrust of them will only lead to more unfounded scepticism. I deally you should have a mixture of pension and ISA provision but we don't live in an ideal world.

EdInvestor

jem16 wrote: »

Most women today won't actually have a clue as to what you are on about Ed. With the abolition of the married woman's stamp in 1978, followed by HRP in the 80s and now the reduction in NI contributions to 30 years, only women over 50 years old are likely still to be affected.

I suspect you'll find that the vast army of women who are already retired may actually be well aware of what I mean, as well as those over 50. Of course most people know every little about the state pension until they get close to the age where they are going to claim it.

That's why the Government so easily gets away with changes that reduce the amount you will get.If more people paid attention, they wouldn't be able to do it - note the effect on Govt behaviour of the recent outcry over the abolition of the 10p tax band, which forced a rapid about turn.

As far as the image of pensions is concerned, I'm afraid it's about to get another battering due to the penalties being put on WP pensions. Allowing PR money into SIPPs will probably cause quite a few more people to wake up too, especially when the see what will happen to the personal pensions they were all sold in the late 80s/early 90s, which also have swingeing exit penalties.

Dithering_Dad

All valid points EdInvestor, but that was then and this is now.

The OP has provided details of her age (she is 48). She has no children and has worked most of her adult life, though with some gaps. She will therefore qualify for full state pension and will have some S2P provision (as she only contracted out for a very short amount of time). She has a limited income and so will not have a huge amount of money to invest. Her current state provision will probably add up to £6k or £7k, leaving £3k left of her age related tax free allowance.

In light of these facts, and addressing the OP's issues rather than getting on a soapbox, would you say that the OP is better off getting a pension or using ISAs?