Pension MoneySaving: Buy a different way to boost returns Article Discussion Area

Craig_W_2

OK, the good news is that both my employers will match any contributions I make to their schemes.

The next question is: should I stop putting £600/mth into savings and put it into these pension schemes instead (ie by taking salary sacrifices equivalent to that amount and using the £600 I would otherwise have put into ISA's to substitute what I will lose in pension contributions from my earnings)? In other words, is it worth leveraging to the max my employers' willingness to match my pension contributions?

dunstonh

OK, the good news is that both my employers will match any contributions I make to their schemes.

Free money. That will make up for poor past planning.

The next question is: should I stop putting £600/mth into savings and put it into these pension schemes instead (ie by taking salary sacrifices equivalent to that amount and using the £600 I would otherwise have put into ISA's to substitute what I will lose in pension contributions from my earnings)? In other words, is it worth leveraging to the max my employers' willingness to match my pension contributions?

£600pm into savings would equate to £1350pm going into the pension (ignoring NI savings which push that £1350 higher). So, do you think that £600pm would make more money for you than £1350pm?

Craig_W_2

OK. I get the message! :rotfl:

Thanks, dunstonh.

davidlo

Only slightly disappointed in the article assumption is the worst thing? Fees/commission don't have to be taken in full and if the IFA is fee based the client can see up front whats to pay. The advise is the important thing hear. Get the best for the individual and on going as pensions seen in one light on one day will not always be the best for any one. Their is nothing wrong with getting good value but where is the value and how to know its good is the difficult part. Research and independent advise is the way to go remember you don't have to take it!!
If this article is to inform it does that but only takes into account cost is that right with such a subject I know its monrysaving but I think you have to look at more than one aspect of pension or investing.

The client interests should always come first and I think this article just misses that mark "sorry"

man_with_a_plan

I registered in order to post on this topic. Thanks for the article. My story: I had decided to go with a Standard Life Stakeholder pension. I was happy self selecting my funds within this scheme. By buying through a discount broker (as recommended by MSE) I am paying 0.7% annual management fees instead of the 1.0% I would have paid going through either an IFA or directly through Standard Life. I am very pleased with this result. Thank you MSE.

dunstonh

I am paying 0.7% annual management fees instead of the 1.0% I would have paid going through either an IFA or directly through Standard Life.

Sorry to disapoint you but IFAs regulary set up pensions with lower AMCs than that. It is quite common to see 0.2-0.5% nowadays. Going commission free doesn't make it cheaper.
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man_with_a_plan

dunstonh wrote: »

Sorry to disapoint you but IFAs regulary set up pensions with lower AMCs than that. It is quite common to see 0.2-0.5% nowadays. Going commission free doesn't make it cheaper.
.

True, but are you saying that you or another IFA could beat the AMC on the specific plan that I wanted? In other words the stakeholder pension plan that SL still offers at 1.0% (that Cavendish offers at 0.7% by discounting its entire commission). I can only see how that is possible if the IFA in question has a higher commission offered by SL that they are willing to forego in its entirety. If you mean a different product with different features, then of course a lower AMC is possible.

dunstonh

True, but are you saying that you or another IFA could beat the AMC on the specific plan that I wanted? In other words the stakeholder pension plan that SL still offers at 1.0% (that Cavendish offers at 0.7% by discounting its entire commission).

No. The best an IFA can do is match that with the Std Life stakeholder. To be honest, you wouldnt find many IFAs recommending such a plan nowadays with cheaper and better options available. Given the choice of internal Std Life funds at 0.7% or trackers on a personal pension at 0.2% then its an easy decision to not use it.

Even if you wanted Standard Life for some reason, then their active money personal pension offers the internal std life fund range at lower AMCs even with fees taken from it (0.5% without for example). Even if an IFA was to take 5% of the transfer value in a fee on the std life PPP, they can still beat the Std life stakeholder on nil commission for most people

man_with_a_plan

dunstonh wrote: »

No. The best an IFA can do is match that with the Std Life stakeholder. To be honest, you wouldnt find many IFAs recommending such a plan nowadays with cheaper and better options available. Given the choice of internal Std Life funds at 0.7% or trackers on a personal pension at 0.2% then its an easy decision to not use it.

These are the figures that SL publish on their web site for the three standard pension products that they offer:

Active Money Personal Pension
Charges are variable according to investment selection, but if we consider the 5 investment options pre-selected by SL in their literature:
Total Charges = 1.30% to 1.59% (discounts apply for funds > £50k)

Stakeholder Pension
Total Charges = 1.00% (discounts apply for funds > £50k)

SIPP
Charges are variable according to investment selection and may attract annual management charges, but if we consider the two case studies that are presented in the SL literature:
Case Study 1 (£270k fund), Total Charges = 1.51%
Case Study 2 (£200k fund), Total Charges = 1.60%

On this basis it would seem that SL are not promoting any product that would beat the discounted rate of 0.7% that I am currently paying (which will reduce as my fund value passes the £50k valuation point). I can see that it might be possible to come close but only if you have a fund of >£50k and you are willing to restrict your investment choices to trackers, say. It would therefore appear that the MSE discount broker suggestion remains good advice (subject to the caveats that are advanced in the article).

dunstonh

On this basis it would seem that SL are not promoting any product that would beat the discounted rate of 0.7% that I am currently paying

Not surprising. You would expect Std Life to retail more expensively than an IFA. They are showing the commission version rather than the fee version.

The fact is that the Std Life Active money PPP can offer funds at 0.5% via an IFA . You can also get funds with other providers at 0.2% using other providers via an IFA.

It would therefore appear that the MSE discount broker suggestion remains good advice (subject to the caveats that are advanced in the article).

Or use an IFA.