Which pension for low income temp employment

liftmyspirits

I'm the only employee with a small organisation that has now agreed to make employer's pension contributions @ 6% of my gross salary, backdated to 1st April 08. So I quickly need to set up a pension that will accept monthly contributions from me and my employer from now, plus an initial lump sum from me and my employer to cover the period since 1st April 08. I might only stay with this employer for a few months. My salary is ~£20,000 and I would make a personal contribution of 6% of gross salary too.

Given that I don't know what my future employment & any future employer's pension arrangements will be, what sort of pension is it best to set-up for what might end-up being a small initial commitment (say £3,200 immediately then £190 per month for potentially just a few more months)? I.e. contributions might soon be temporarily or permanently stopped on the plan I set-up.

I'm considering something like a Friends Provident or Scottish Widows PP or Stakeholder through Cavendish Online.

Any advice gratefully received.

dunstonh

Probably a stakeholder or a mono charged personal pension (like a stakeholder but wider investment choice)

Which provider and what type will depend on the investment choice you want and what features you are looking for that the provider may or may not supply.

EdInvestor

Low cost online SIPP is another possibility.

https://www.sippdeal.co.uk
https://www.h-l.co.uk

liftmyspirits

dunstonh wrote: »

Probably a stakeholder or a mono charged personal pension (like a stakeholder but wider investment choice)

Which provider and what type will depend on the investment choice you want and what features you are looking for that the provider may or may not supply.

Thanks dunstonh. Leaving aside questions about fund choice, fund switching, fund performance and % AMC's (which I know are important), is it sensible to start-up a personal pension that's only likely to be contributed to for a couple of years and involve just a few thousand pounds (as opposed to tens or hundreds of thousands)? Do there tend to be other charges that are relatively more punitive for people who only invest small amounts for brief periods?

Whilst it appears to be a no brainer to invest in a pension because of the tax benefit and the fact that the employer will make a contribution, do you think those benefits ever outweighed by disproportionately large charges on small pension pots?

liftmyspirits

EdInvestor wrote: »

Low cost online SIPP is another possibility.

sippdeal.co.uk
h-l.co.uk

Thanks Ed. I've just taken a peek at sippdeal and I'm fascinated. There's a difference between being risk averse and being averse to dabbling in dealing because one doesn't understand the mechanisms required to do it. I saw an IFA recently and it was obvious, and somewhat outrageous, that she simply intended to do some gambling with my money. I suspect that like many people whilst I'm happy to choose the 'horses', I just need the system for doing so to be made a bit clearer. These low cost online SIPPS seem to be moving in a more helpful direction for punters who don't involve themselves in dealing day-in-day-out, and therefore struggle to be au fait with how to do it.

Whilst it looks like there's lots of fun to be had using sippdeal's efficient, online facilities to select and move investments between funds oneself, I have the same question as before ... does it make sense to enter into this sort of arrangement if you're only going to put in ~£5,000 over a couple of years and then stop?

dunstonh

Do there tend to be other charges that are relatively more punitive for people who only invest small amounts for brief periods?

No, the mono charged pensions (meaning only an annual management charge) are based on fund value. The charge is the same in percentage terms regardless of value (although some do have fund based discounts but none have small fund penalties).

Whilst it appears to be a no brainer to invest in a pension because of the tax benefit and the fact that the employer will make a contribution, do you think those benefits ever outweighed by disproportionately large charges on small pension pots?

Nothing beats a pension for income provision in retirement. Free money from employer makes that even more so. Charges on pensions are very low. They are actually lower than savings accounts. The only difference is one is declared and the other isnt.

I saw an IFA recently and it was obvious, and somewhat outrageous, that she simply intended to do some gambling with my money.

An IFA has a requirement to recommend a suitable portfolio. One that is suitable for your timescale, risk profile and understanding. What you may class as gambling, others class as sensible investing. Everyone has different views on risk and it should be right for you. What was she proposing?

Remember that in your 20s, just 2% a year difference in performance can more or less double your pension pot. A controlled investment to a defined strategy could perform a lot more than a random selection or jack of all trades default fund.

These low cost online SIPPS seem to be moving in a more helpful direction for punters who don't involve themselves in dealing day-in-day-out, and therefore struggle to be au fait with how to do it.

Actually, SIPPs are designed for the more experienced investor who transacts more and wants access to a wider range of investments than just investment funds.

liftmyspirits

dunstonh wrote: »

An IFA has a requirement to recommend a suitable portfolio. One that is suitable for your timescale, risk profile and understanding. What you may class as gambling, others class as sensible investing. Everyone has different views on risk and it should be right for you. What was she proposing?

Thank you again dunstonh. You always give such clear and considered answers.

Yes, my understanding is that an IFA should recommend a suitable portfolio based partly on the inverstor's attitude to risk. In this particular case the IFA was suggesting a SIPP and further suggesting that she would select and controll all of the specific funds for me. That's fine up to a point, but some of the examples she then gave were rather alarming. Perhaps if I check her credentials I'll find she's not a real IFA! Certainly not a 'salesperson' to inspire confidence.

jem16

liftmyspirits wrote: »

That's fine up to a point, but some of the examples she then gave were rather alarming.

So what were they?

liftmyspirits

jem16 wrote: »

So what were they?

I can't remember all the specifics - it was a couple of months ago. But things like property developments overseas, which on closer scrutiny were areas of political instability and also prone to earthquakes. Maybe that's a good idea - I dunno? Suppose it depends on your knowledge of plate techtonics.

dunstonh

liftmyspirits wrote: »

I can't remember all the specifics - it was several months ago. But things like property developments overseas, which on closer scrutiny were areas of political instability and also prone to earthquakes. Maybe that's a good idea - I dunno? Suppose it depends on your knowledge of plate techtonics.

Doesnt sound like an IFA. Although some firms have fingers in unconventional pots.