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

man_with_a_plan

dunstonh wrote: »

The fact is that the Std Life Active money PPP can offer funds at 0.5% via an IFA .

I have seen AMC's quoted for the Standard Life's Active Money PPP of "0.5% to 2.0%". These quoted figures come from a SL press release. The lower end of this spread seems to relate to that subset of funds that attract a basic 1.0% AMC which is then discounted by 0.5% for those investors who have more than £500,000 in their total pension fund. I would imagine that there are relatively few people who have a fund of this size. Personally, I have more modest pension investment possibilities. Given this fact, the MSE discount broker recommendation still seems the best value Standard Life pension scheme that was available to me. It may well be that IFAs can recommend alternative providers with lower AMCs, but that is not comparing apples with apples.

dunstonh

The lower end of this spread seems to relate to that subset of funds that attract a basic 1.0% AMC which is then discounted by 0.5% for those investors who have more than £500,000 in their total pension fund.

I have retailed this plan for small investors (under 20k) with 0.5% as the AMC.

man_with_a_plan

dunstonh wrote: »

I have retailed this plan for small investors (under 20k) with 0.5% as the AMC.

That is interesting dunstonh. That suggests that Standard Life's stakeholder pension may no longer be fully competitive with its AMPP sister product (0.7% is worse than 0.5% everything else being equal). I suppose that the difference in AMC partly reflects the fact that pension provision may have become more competitive. I started my stakeholder 4 years ago. At that time I don't think the AMPP product was available. It is also to be recognised that difference in AMC would at least be partly eroded by a fee based IFA's fee.

dunstonh

Stakeholder pensions were based on 2001 rules and largely built on legacy computer systems. More modern personal pensions have been built using more modern computer systems and allow a variety of charging methods and a greater choice of funds. So, in 2001, stakeholders ruled the roost. About 6 years ago, personal pensions started to come back and all the money has been going into those (and SIPPs) as far as development is concerned.

It is also to be recognised that difference in AMC would at least be partly eroded by a fee based IFA's fee.

Yes. However, the thing to remember is that say a £500 fee got rid of on day one and 0.2% going forward can be cheaper in no time compared to a no initial fee but 0.7% p.a. Small values and small contributions are still best placed with stakeholder until such time you can take advantage of the personal pensions (as PPPs tend to have higher minimum premiums compared to stakeholder.

fisher42uk

man_with_a_plan wrote: »

That is interesting dunstonh. That suggests that Standard Life's stakeholder pension may no longer be fully competitive with its AMPP sister product (0.7% is worse than 0.5% everything else being equal). I suppose that the difference in AMC partly reflects the fact that pension provision may have become more competitive. I started my stakeholder 4 years ago. At that time I don't think the AMPP product was available. It is also to be recognised that difference in AMC would at least be partly eroded by a fee based IFA's fee.

There are currently 6 funds available on the AMPP with 0.5% AMC which are all tracker funds. The AMPP is quite new having launched 01/02/10 replacing the Standard Life PPFlex. Its been available to buy online for a few months nows with an 0.2% service charge (0.7%) total yearly charge. The stakeholder plan can still beat it on some aspects however in certain scenarios the ampp is cheaper. Mimimums are £100 gross pm compared to the low contribution stakeholder

man_with_a_plan

fisher42uk wrote: »

There are currently 6 funds available on the AMPP ...... with an 0.2% service charge (0.7%) total yearly charge.

... which matches the total charge I incur on my SL Stakeholder pension bought through Cavendish.

As dunstonh indicates these may not be the lowest charges on the market. However I am comfortable that they are at least reasonably competitive within the Standard Life suite of pension products. As such I am not planning to change my pension planning just yet!

SlingShot

Hi guys,

I am 36 and self employed - since 2007. I worked full time in a company from 1998 until that point and there was no company pension scheme. I remember talk about the law changing to enforce one (?) but have a feeling that never happened.

As others have posted on here, I never really thought about a pension and it's only now that the potential future hardships have hit me.

I have no savings at all (although no debt either) and have been renting since I started working.

I obviously need to setup something very soon, but I wanted to post on here to find out how bad my situation is - considering that I'm setting up a pension now rather than 11 years ago.

Also, considering my starting point are there any key things I should be focusing on / researching?

I suppose I'm looking for some light at the end of the tunnel as the whole area of pensions and a depressing retirement are obviously pretty worrying, though I'm sure if I find the right path forward I can turn this around.

Thanks in advance for any advice / insight you can give me.

dunstonh

I remember talk about the law changing to enforce one (?) but have a feeling that never happened.

It has but is being phased in up to 2017.

I obviously need to setup something very soon, but I wanted to post on here to find out how bad my situation is - considering that I'm setting up a pension now rather than 11 years ago.

There is a rule of thumb that says you should aim to have £35k in a pension by age 35. You have nothing at age 36. So, you have some catching up to do.

Also, you are self employed, so currently that means you get less state pensions. Just the basic state pension (at £5000 a year).

So, when you look at how bad it is, you have to look at £5000 a year income and see how you think you could live on that.

At 36 it is not too late to make a difference but you need to realise that you are not going to be able to get away with contribution levels that a 20 year old can pay. You are now talking typically many hundreds of pounds a month depending on what you want back.

SlingShot

Thanks dunstonh - really appreciate the quick reply and honest advice.

I didn't realise that is the kind of figure I should really have in a pension by now. Certainly a wake up call.

I'm now seriously thinking of a decent contribution each month once I decide what type of pension to take and get my head around how it all works.

I remember when I was paying off my car loan. That was something like £250 a month and wasn't too bad. Suppose I need to start looking at the pension as a new car loan for the next 30 years right?

Down the line I may have a fair inheritance which I was thinking I could use to add to the pension, which I imagine will help.

So the bottom line is, I need to decide what pension to go for and then commit to a decent monthly amount that I will continue to pay for at least 30 years or so?

bilbo51

How much income do you think you would need in today's terms - ie if you were retiring now?