SIPP as well as stakeholder

mantisgb

Hi there,

I posted recently about some advice I received from the brokers that look after the stakeholder pension for our company. I have some money to invest and was persuaded to split my money into both a pension and ISA. Having started a stocks ISA at H-L, I'm now wondering if I really want to put a lump sum into the stakeholder pension at all. The alternative I'm considering is to start a SIPP, also with H-L, so that I have more control. I will get lower fees that way and have access to all the same funds that the stakeholder pension will and it wouldn't be tied into my company in any way.

Does anyone have any arguments as to why it might be better to stick with the Stakeholder pension?

thanks, K

EdInvestor

Does the company make a contribution to the stakeholder?Has it negotiated lower charges than you could get in the SIPP?

dunstonh

The alternative I'm considering is to start a SIPP, also with H-L, so that I have more control.

Do you need that control?

I will get lower fees that way

No. The SIPP is more expensive than a stakeholder. Anything between 2 to 4 times more expensive than the stakeholder.

The HL SIPP is not cheap. Its a common misconception due to words like "low cost" being used to describe it. When they say low cost, they mean low cost in SIPP terms. Not low cost compared to stakeholder and personal pensions.

Does anyone have any arguments as to why it might be better to stick with the Stakeholder pension?

Lower charges is going to be the main one.

jamesd

Hargreaves Lansdown charges full annual commission in their SIPP, so no chance that it can be cheaper than the stakeholder's 1% for most investments. There are a few exceptions with AMC's below 1% where it might be.

mantisgb

Our stakeholder pension is being invested in active managed funds (e.g. Invesco Perp High Income) and the AMC is higher than I would get from equivelant funds through H-L. That could just mean that we have an uncompetitive stakeholder pension. Actually now I think about it I believe that we had to sign an agreement to accept that it wasn't a strict 'stakeholder' pension because to get the AMC down to the required level of charges would "limit" us to tracker type funds.

The reason I mention control (dunstonh) is that I feel I'm paying for both the funds that are chosen for my pension as well as the fund's own AMC in commission and I'm not sure I'm getting best value.

Are there other SIPP providers that have lower charges than H-L?

dunstonh

Our stakeholder pension is being invested in active managed funds (e.g. Invesco Perp High Income) and the AMC is higher than I would get from equivelant funds through H-L.

I'm sorry but that is not possible.

Stakeholder pensions have a cap on the annual management charge of 1% (except first 10 years but not many stakeholders charge extra in first 10). The Inv Perp high income fund in unit trust form has an annual management charge of 1.5%

Actually now I think about it I believe that we had to sign an agreement to accept that it wasn't a strict 'stakeholder' pension because to get the AMC down to the required level of charges would "limit" us to tracker type funds.

I would suggest that its not a stakeholder at all but a personal pension.

The reason I mention control (dunstonh) is that I feel I'm paying for both the funds that are chosen for my pension as well as the fund's own AMC in commission and I'm not sure I'm getting best value.

You are still paying commission to HL. Ironically, HL are getting more in commission in a SIPP than is possible in a stakeholder and most personal pensions.

If the employer will only pay into their own scheme then you take the "free money". If they will pay into your own individual scheme then that is usually the better option. If there is no free money then again, go with your own scheme.

If you have to set up your own scheme and intend to go DIY (and not use an IFA), then stakeholders can be set up with a third of the cost of a SIPP investing in funds and a personal pension can still beat the SIPP even with the use of external funds.

jamesd

OK, so it's not a stakeholder pension at all. Just a regular or group personal pension without the cap that is required for it to be stakeholder.

For a personal pension the pension reseller (IFA of whoever is handling it for your work) can adjust the commission level they take via the annual charge on the investments. Some IFA's will charge more, some less.

A personal pension via a competitive reseller can be cheaper than HL for some investments, including Invesco Perpetual Income (I've checked myself...) while others can be more expensive for the same investments. It just depends on how good the deal you are offered is.

Since you find that you get a poor deal if you use the personal pension set up at work, your options include:

1. Asking the work reseller whether they have a more competitive deal for extra money.
2. Asking another IFA (see unbiased.co.uk) for a better deal on a personal pension (or SIPP, for that matter, I've seen a SIPP that costs less for Invesco Perpetual Income than Hargreaves Lansdown charges).
3. Using Hargreaves Lansdown.

Personally I still use a mixture of very low cost trackers in a work pension (0.1 to 0.25% AMC) and a SIPP at Hargreaves Lansdown for other investments. That may change later as my pension pot size grows.

If your lump sum is over 50k you should be able to get a cheaper deal than HL. If it's under 10k HL is a decent place to start if you want a good range of investments and easy online dealing. Just be aware that you're paying more than you need to and can move later to get a better deal when the fund size grows.

HL's SIPP does offer some investment opportunities like covered warrants (perhaps for exchange rate risk reduction) and non-fund investments that some competitive personal pensions or SIPPs don't offer so it might be better for money you want to use for those.

From the look of it other fund-heavy pension providers are still really mostly in the stage of gearing up on the online dealing side so competition might improve later for those who want that and the most competitive prices possible.

For a fair sized pension pot a competitive reseller like dunsonth's firm should have no trouble at all finding you a cheaper deal than HL.