Which personal pension?

Wibble

Ok - I've been looking at getting a SIPP with Hargreaves Lansdown as I'd had it recommended as a good, flexible way to start a pension.

However, in a previous thread I've read how the charges can be more than personal pensions if you just want to invest in funds. Particularly as PPs can offer no spread when buying and reduced annual management charges on the funds. So I think I really ought to look into personal pensions before I commit to a SIPP.

However, I don't really know where to start. So I'd be grateful if you could help with the following questions. Keep in mind, though, that I'd not be looking for a stakeholder pension as I'm looking to invest around 40k or so this year.


1) Can you give me some suggestions of personal pensions that you consider good that I can look at? Just some sites of popular personal pensions where I can go and read up on what they offer and check out their charges and available funds. What I want are a combination of low fees and flexibility to choose from a wide range of funds to invest in. So which companies offer a wide range of external funds at low cost?

2) If I was to go for a personal pension what's the best way to do it? Direct to the company or via an IFA? Would I get discounts from an IFA that I'd not get going direct? And if they are likely to offer discounts, what kind of level could I expect?


Thanks!

EdInvestor

Hello again wibble

Pensions involve two things - the wrapper (its charges, flexibility and the level of customer service provided) and the investment options (quality,range, price, also flexibility).

IMHO it is best to start by deciding first what you want to invest in,as the eventual outcome for your retirement income depends mainly on the performance of the investment and only secondly on the charges, and thirdly on administrative matters .

Then decide how you want to make the investments ( eg single premium, transfer in, regular conts, mixture)

Only then seek the pension wrapper which meets the other two requirements best and most cheaply - which might be a SIPP or a PP.

If the latter it will probably most optimally be provided by a discount IFA such as Cavendish. You will be charged exactly the same going through an ordinary IFA as direct to the company.Some ordinary IFAs now do rebates and discounts like Cavendish. Sipps like HL are also discount providers.

So, what do you want to invest the money in?

You said funds. Which funds?

You may find this thread helpful.Although the tax wrapper is different the investment issues and timeframe are much the same.

Once you've decided on the funds, the next step is to find providers that offer them and compare charges, admin and customer service standards, whether online or not, and whatever other services you need.

whiteflag_3

Some ordinary IFAs now do rebates and discounts like Cavendish.

Can someone clarify this from the previous poster!

Can you explain what an ordinary IFA is ?

When did these IFAs start to do rebates and discounts?. I wasnt aware there was an official start date . Can you give the date these changes came into force for "ordinary" IFAs

Being an IFA myself I am wondering whether I qualify to be called "ordinary" and I am concerned that I may have been offering "deals" to my clients before I was allowed.

I was also wondering anyone knows if the "ordinary" IFAs offer better service
than Cavendish, in as much as they do all the paperwork, carry the liability for advice, on going servicing and portfolio planning advice if required.

dunstonh

Ok - I've been looking at getting a SIPP with Hargreaves Lansdown as I'd had it recommended as a good, flexible way to start a pension.

However, in a previous thread I've read how the charges can be more than personal pensions if you just want to invest in funds.

You are right about that. Indeed I was at a meeting yesterday and compliance issues were discussed and the two pension issues that the FSA has on its current watch list (i.e. potential high risk areas) are SIPPs and drawdown on funds less than 100k. Regarding SIPPs, it is concerned that people will be directed into SIPPs when a stakeholder or personal pension would be better for them. Now, their concern is aimed at advisors but seeing as how the media thinks SIPPs are fashionable as well, its easy to get carried away with it. Remember the media thought endowments and tech stocks were good once upon a time.

1) Can you give me some suggestions of personal pensions that you consider good that I can look at? Just some sites of popular personal pensions where I can go and read up on what they offer and check out their charges and available funds. What I want are a combination of low fees and flexibility to choose from a wide range of funds to invest in. So which companies offer a wide range of external funds at low cost?

There are a number which are very much the same but just have a difference on the charges on the funds. There are also some that have higher charges up front but lower annual charges making them cheaper than stakeholder over the term. I cannot give any one recommendation as it varies depending on what you are looking for. For example, if a low risk portfolio was required, there would be a certain provider I would use for that who I wouldnt use for someone wanting a higher risk porfolio.

However, I don't really know where to start. So I'd be grateful if you could help with the following questions. Keep in mind, though, that I'd not be looking for a stakeholder pension as I'm looking to invest around 40k or so this year.

Probably a good call as many of the providers are linking their SIPPs, SASSs, PPPs and GPPPs under a single wrap allowing switching between the products at no cost when required. The stakeholder is tending to be left outside of that. Although there is no transfer costs with a stakeholder but you would be out of the market during the transfer.

2) If I was to go for a personal pension what's the best way to do it? Direct to the company or via an IFA? Would I get discounts from an IFA that I'd not get going direct? And if they are likely to offer discounts, what kind of level could I expect?

Most providers offer very little discount when going direct and a few have a cut down version of the fund range. The FSA averages show that you would expect to get a better discount when going through an IFA (averages mean that some will charge more, some will charge less).

Cheapest way to do it is to pick your provider and funds and go execution only.

Another option is to wait for the hybrid SIPP which is due in April. This works exactly the same as an ISA through a funds supermarket (it is the fund supermarkets that will be offering the hybrid sipp). It will be cheaper than a SIPP as there are no charges on the wrapper. However, the funds will still incur their unit trust pricing. Again, a PPP could beat them under certain circumstances.

As Ed says, it really comes down to where you want to invest. A SIPP may very well be the best product. However, if you are not utilising the benefits of the SIPP and the same funds can be purchased on a personal pension, then that may will be the better way to go.

Wibble

Thanks for the replies - they're very helpful!

I agree that I need to decide what I want to invest in and then I need to compare the costs and feasibility of that with various personal pension and SIPP providers.

However, at this stage I don't have specific funds I'm interested in. What I am interested in is ensuring that the pension I go for has access to a good selection of funds across all the areas I want to invest in. E.g. I want a pension that has funds covering the UK, Europe, Japan, US, Emerging markets, etc. I will want a provider that allows me to choose from several good funds for each area.

This is so that I can choose from good funds initially rather than just the pension company's fund, and also so that if I find one isn't performing so well anymore I can swap to another good fund in the same area.

I have initially been thinking of a SIPP as my understanding was that personal pension providers tend to only allow you access to a limited number of funds. So while the charges are less, so is the likely growth as while they may have a good fund in Japan they might have an average one in Europe for instance. So a slightly higher charge for a SIPP could be offset by being able to choose one of the better performing funds in each area I want to invest in.

However, personal pensions do seem to charge less so I thought I ought to see if any do actually provide access to a large number of funds. I understand that some do allow access to some external funds, though usually at an extra charge.

I've had a quick look at the Cavendish site and they seem to list several pension companies but they don't seem to have many funds available to choose from. I probably don't need the thousands that a SIPP would give me access to (it'll just make it harder to choose!) but I would think that I'd need more than the 20 or so that some of those providers seem to have available.

I'll have more of a look, though, to see if in addition you get access to external funds and at what charge.

Thanks again!