Stakeholder vs Personal pension - Please help

csrivats999

Hello all

I am 34 years old and have not thought of pension until now.

My company does not have a pension plan either so I am now keen to start a plan.

I am been doing a lot of research on the net and wanted to know the main difference between the "stakeholder pension " vs "personal pension".

The only thing I came up with is the there are a certain set of regulations that the stakeholder pension needs to adhere to and also the minimum contribution on the stakeholder pension is lower (min of £20) than the personal pension.

Is there more than this?
Does it matter which one I choose?

Thanks for your time

jem16

csrivats999 wrote: »

Is there more than this?

At your age the multi-charge personal pension is likely to be cheaper in the long run than the mono-charge stakeholder.

Does it matter which one I choose?

It matter greatly. The stakeholder usually only offers around 20 internal funds. The personal pension will offer around 100 (sometimes more) and will include both external and internal funds so you will be able to build a better quality and more diversified portfolio for your pension.

dunstonh

Stakeholder is a defined structure for charging. It is a personal pension that follows stakeholder rules and that is why its called stakeholder. Stakeholders are expensive to the providers so they tend to offer limited options. Low numbers of funds is the most common one. Think of it as your basic product.

Personal pensions allow providers to have different charging methods. Some of these will be more expensive, some will be cheaper than stakeholder. Jem menions the multi-charge PPs which are geared in price for the younger person. These are typically your cheapest pension. You also have mono charged PPs (mono =1 meaning only charge is annual management charge). These are the more common type. They will offer the stakeholder pension funds at stakeholder cost but will also offer a larger range of funds from different fund houses which are usually a bit more expensive but give you far more choice.

Stakeholder pensions are designed for the low knowledge investor with small amounts involved. The minimum monthly is £20pm. However, that minimum is long overdue for an increase as anyone paying just £20pm could be doing more damage than good.

personal pensions are for those who want access to a greater fund range but dont want to go the full hog into a SIPP (which is the most expensive option for funds). Typically the minimum premium on these ranges from £50pm to £300pm. The exception is the multi charge pensions which are being used to get the cheapest pension rather than anything else.

What is best for you depends on how much you are paying, how much you understand things and where and how you will be buying the pension.

csrivats999

Thanks a lot..Thats v useful info.
I think I ll go with personal pensions and i am quite keen to learn about how the whole thing works.
I am looking to invest about £100 to £150 per month
Any idea who are the best providers out there for personal pensions so that I can have a look around?

jem16

csrivats999 wrote: »

Any idea who are the best providers out there for personal pensions so that I can have a look around?

The pension is only a container. What matters is the investments that you put inside the container so you are looking for a provider that will allow access to a good range of funds.

Scottish Widows does offer a good range of funds in its personal pensions. However that is not to say it's best for you.

dunstonh

Remember that buying direct is also not usually the best or cheapest way to buy. Some providers retail at full cost with no discounting (making the same or more expensive than using an IFA). Other providers cut their options down to simplify the product.

What is available to you and how much it costs will depend on where you buy it from.

csrivats999

Ok all this is making sense now - so you think its worthwhile speaking to an financial advisor.
I ll located a few in my area and tried calling them but guess they dont work at weekends.
Is that a good way to search for an advisor?
Also what are their typical charges if I go for "fee" advisor?

waltzer

Hi there
I see you're 34. My thruppence worth (from the other side of 50) is that you're definitely doing the right thing by addressing this now. My view (and that of most of my friends) is that you only begin to really take retirement seriously around 50. Although I started some provision years ago, I couldn't keep it up to the levels it should have been kept to and I've been seriously addressing this shortfall for the last few years. My point is that I think we tend to have a different psychology to pension provision in our 20s and 30s and tend to view retirement as being a long, long way off. Believe me, time races by and your 40s will fly by and before you know it you're suddenly saying to yourself "I wish I had taken this more seriously way back then". Use experts because that's what they're there for but don't be put off from doing your own research. You'll be amazed at how much you can learn if you're willing to be baffled and mystified from time to time. I'm sure even IFAs get baffled at times...With the 20/20 vision that comes with hindsight I'd say that people should view pensions in the same light as mortgages...essential for a good quality of life, a necessary expenditure that should be factored in and not defaulted on (except in desperate circumstances). I've found this site to be an invaluable starting point towards a greater understanding and the contributors are excellent, patient and generous with their input. Don't be afraid to ask questions no matter how dumb they might seem. I wish you all the best.

csrivats999

Thanks a lot waltzer

The_Fiddler_2

dunstonh wrote: »

personal pensions are for those who want access to a greater fund range but dont want to go the full hog into a SIPP (which is the most expensive option for funds). Typically the minimum premium on these ranges from £50pm to £300pm. The exception is the multi charge pensions which are being used to get the cheapest pension rather than anything else.

You say a SIPP is the most expensive option - what about H-L where most initial charges are removed and some AMC are discounted?

What else can you put into a SIPP?

dunstonh

You say a SIPP is the most expensive option - what about H-L where most initial charges are removed and some AMC are discounted?

I'm afraid that is a myth HL have built up about their SIPP. They do not discount AMCs on their SIPP. You pay the full retail AMC. If you buy a mono charged PPP on execution only basis you get no initial charges and the AMCs for the funds are cheaper than HL. You may not get the fund range but for most people that isnt required.

What else can you put into a SIPP?

SIPPs were designed to hold direct investments and not funds. Since A day though its estimatd that around 90% of SIPP sales have been exclusively in funds. That is why the FSA has issued warnings for a couple of years and is now investigating SIPP sales from all distribution channels. SIPPs got good media. Mostly driven on promotional articles in the media using phrases like "low cost" to fool people into thinking that they are low cost compared to stakeholder and personal pension when they are not.