what is the difference going to be or is between

building

a stakeholder pension and a SIPP . sorry for ignorance. also if we both have a private pension and want to invest in our own funds (even if we do decide to get some financial advice) what do we do with our current existing personal pensions. one is with zurich the other with scottish life. thanks in advance.

dunstonh

You have three mainstream products.

1 - stakeholder pension
2 - personal pension
3 - SIPP

There is going to be a launch of hybrid SIPPs amongst the fund supermarkets after A day. They could be very desirable and initial information suggests they would be a cracking little product. However, they are not launched for another 3 weeks.

All pension products have the same rules as to contributions and are basically the same in how they work (at least at the level we are looking at here).

Stakeholder pensions have a defined charging structure with a cap on it. Personal pensions allow a different charging structure which may or may not be cheaper than a stakeholder pension (usually personal pensions can be better when you have more than 20 years to go until retirement). SIPPS have no defined charging structure and you can face charges at every transaction level. That being said, you have the greatest investment options available. SIPPs are usually the most expensive option, even if done on a low cost basis.

Stakeholders have a limited range of funds. The 1% long term charge cap sees to that. Personal pensions can use the stakeholder funds (so you could have a personal pension with only stakeholder funds in it) and they have a larger range of the most popular unit trust funds available. SIPPs allow you to invest in shares, unit trusts and many other assets.

SIPPs are fashionable. However, the FSA has recently warned advisors not to get carried away with the media push on SIPPs and only use them where SIPP features are going to be used. Otherwise, you end up in a more expensive contract than you could get with a personal pension or stakeholder. For example, if you wanted schroder mid 250 fund, in a personal pension you can get that (with Scottish Life) with no initial charges and 1% amc (which gets cheaper with higher fund values and even on full advice cost basis, it can come down to 0.6%). Buy that fund with a SIPP and you have a 5.25% initial charge and 1.50% annual management charge. Even if you do it on execution only or get an IFA to place it with no initial charge, you are still looking at 1.50% annual management charge compared to 1.00 (with potential for discounts). Also, with a SIPP, you would be looking at a charge around £20 every time you buy units. This can make it very expensive for smaller contributions.

SIPPs do have many advantages although if you are looking at sticking with investment funds, then the hybrid SIPP would be a cheaper option. Although if the same funds are available in a personal pension, then a personal pension could be the cheapest option.

Zurich, if ex dunbar, often had heavy up front charges but the ongoing charges were relatively low. Lower than stakeholder at times. Scottish Life have a good current product range and flexibility to move around that product range.

We cannot tell you what to do because we dont know enough about what you want, how you want to invest, how much you are willing to pay, how closely you will monitor things and overall what your personal situation is.

EdInvestor

SIPPs are usually the most expensive option, even if done on a low cost basis.

Not so. The cost of running a Sipp depends on your investment approach.If you're investing a lump sum in mainly shares and don't trade much (as is normal with pensions) a low cost online Sipp can cost virtually nothing.

A low cost online Sipp will not normally be competitive for someone starting from scratch with small regular contributions and investing in conventional funds.If you want to invest in funds you may be able to do it more cheaply with one of these new hybrids than in a low cost Sipp, though at present I believe Hargreaves Lansdown's Sipp offering is competitive for funds. (No personal experience).We'll have to see what the hybrid Sipps charge.

Sipp stands for "Self invested personal pension". You won't get the best out of a Sipp if you choose investments run by other people - such as ordinary funds, which are designed for conventional pensions.

So if you have a Sipp look and see what else you can put in it. Investment trusts for instance are cheaper than funds, and only available in Sipps,not conventional pensions. Ditto shares local and foreign, on the main boards, and AIM. Exchange traded funds are cheaper than trackers - and are only available in Sipps. If you want to buy gilts, you can do that in a Sipp - but not in an ordinary pensions.Just a few examples.

A Sipp is also indispensible when it comes to taking your pension at retirement via income drawdown, and makes this process extremely simple, low cost and trouble-free

[Deleted User]

I like the transparency of a sipp. OP have a look at sippdeal and click on the available funds. They have hundreds of funds with heavily discounted initial charges and also 400 funds with no initial charge

dunstonh

The funds may be there on personal pensions without the SIPP wrapper costs and cheaper than providers like Sippdeal. Plus you can benefit from pound cost averaging on personal pensions but to a lesser effect on SIPPs. The hybrid SIPPs should be the answer to those only looking at funds but wanting a massive range. How massive do you want though? 400-800 funds sounds impressive but you will only be in around 10 of them.