Personal vs Stakeholder Pension

evets

Hi,

I'm 24 and just about to start a pension. I'm thinking of doing it through an execution only service (Cavendish) and am in the process of deciding whether to get a personal or stakeholder pension. I'm looking at Standard Life, purely because a few people I know are with them and they have the lowest AMC on Cavendish (plus a bug fund selection - although I don't really want to have to pick funds myself?).

The question is, should I go with a personal or stakeholder? There doesn't seem to be much in it, but a stakeholder pension seems more flexible concerning payments - i.e. if I wanted a career break in a few years time?

What would be the argument for getting a personal pension over a stakeholder? My contributions will probably be in the £300-£400 a month region.

Thanks,

Steve

dunstonh

I'm looking at Standard Life, purely because a few people I know are with them and they have the lowest AMC on Cavendish

Are you sure Std life is the cheapest?

The question is, should I go with a personal or stakeholder?

at your age and contribution the lowest charged personal pensions should be cheaper than stakeholder.

but a stakeholder pension seems more flexible concerning payments - i.e. if I wanted a career break in a few years time?

If you went with a multi-charge personal pension then that would be a potential issue. However, if you went with a mono charge personal pension (which is effectively the same as a stakeholder with regards to charges) then there is no difference.

What would be the argument for getting a personal pension over a stakeholder?

cheaper and better fund range are the two primary reasons.

My contributions will probably be in the £300-£400 a month region.

Its a good contribution and deserves a bit of interest in fund selection. Who is going to be picking your funds if you are not?

evets

I thought Std Life was the cheapest from looking at the Personal Pensions page on Cavendish Online (I can't post a link but cavendishonline.co.uk) - have I misunderstood?

Are there any good online comparisons of personal pensions I can refer to?

I was hoping there would be some sort of "default" fund selection?

dunstonh

I thought Std Life was the cheapest from looking at the Personal Pensions page on Cavendish Online (I can't post a link but cavendishonline.co.uk) - have I misunderstood?

Cavendish only offer a limited panel. So, I wouldnt expect the full range but I would have thought those with fund based discounts come in cheaper than one that doesnt.

Are there any good online comparisons of personal pensions I can refer to?

Unlikely as not all products are available through the different distribution channels.

I was hoping there would be some sort of "default" fund selection?

I believe Std Life default fund is the With Profits fund which is truely awful. Although they may have changed it to the managed fund now. Although I wouldnt want to be in that either. Its fine if you are using a small amount or dont care about the investments but seeing as you want to focus on saving 0.4% p.a. in charges, it seems a shame to throw away 2-5% a year because you didnt care about the investment side.

evets

I hadn't realised the choice of funds could have such a serious impact on growth - are there no default fund patterns available (i.e. do the pension companies not suggest what someone aged 20-30 might like to invest in based on their appetite for risk?).

Would you therefore suggest that the commission paid to an IFA would be smaller than the potential missed growth of a pension invested purely in the default managed fund?

Dithering_Dad

Hi Dunstonh, can you remind me who you have your pension with?

You mentioned it a bit back and I was going to have a shufty at them, but then forgto all about it.

Ta. DD

dunstonh

I hadn't realised the choice of funds could have such a serious impact on growth

It is the most important thing. At your age, just 2% a year difference in the return will double your pot.

are there no default fund patterns available (i.e. do the pension companies not suggest what someone aged 20-30 might like to invest in based on their appetite for risk?).

They have a default fund but the quality is rarely any good. It is not the job of pension companies to recommend funds. Its the job of IFAs to do that. You need advice authorisation to make the recommendations.

Hi Dunstonh, can you remind me who you have your pension with?

Mine is with Skandia using the Selestia fund supermarket. No good for DIY unless you get an IFA to discount the annual management charge.