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

dunstonh

I have an appointment with an IFA next week who has got advice for my new pension but I've now discovered my company has a stakeholder pension set up and I'm eligible to join this scheme.

1. Should I inform my IFA of the stakeholder pension and if so, would I still need his advice?

You should let the IFA know about the scheme and how much the employer pays into it. If there is no contribution then its probably a hollow scheme that just exists on paper. In which case the scheme quality is likely to be quite weak.

2. Do I go with the IFA's advice or do I go with the stakeholder pension?

Go with the IFA's advice. It will automatically be join the works scheme if there is free money from the employer or utilise your own scheme if not.

3. Does a stakeholder pension mean I have to go with the company pension Investments or Do I still have the choice to pick my own pension and the company just contribute towards mine

A group stakeholder will have a very limited range of funds for you to pick from. That will be your choice. Your own scheme can have almost unlimited options and that is where your IFA will guide and make a recommendation.

4. Can cash in on this investment if I got a long term illness, because it seems silly if I invest all this money to be told I might not live to retirement....

Depends on how ill you are. There can be benefits of not being able to touch the pension. However, the chances of you being ill before retirement are far less than not being ill. So, you shouldnt handicap your retirement planning on that off chance. You should cover yourself for sickness by other means.

skd_2

yes, less than two years in the scheme

I am in late 40s, expect to work either 15 years or 20 years more, depending on how well things go!

While we're not loaded, being debt free and with two incomes allows for a fair amount to be invested, so the strategy I seek is also around how much to pensions, to cash, to property...

I appreciate the wisdom around diversity, makes perfect sense of course

as for the sipp, doesn't the self-investing part mean it is self-administered - while far from unawares as to how business and the city work, i am not sure i have enough knowledge to safely make, unadvised, decisions with such consequences

EdInvestor

skd wrote: »

as for the sipp, doesn't the self-investing part mean it is self-administered - while far from unawares as to how business and the city work, i am not sure i have enough knowledge to safely make, unadvised, decisions with such consequences

No the pensions admin is done by the provider. You manage the investment, but you have to do this in all pensions.It involves picking which funds to put your money in.With a SIPP you can also choose to put the money into cash, gilts, shares etc directly, that's the difference from an ordinary pension which is funds only.So a SIPP can be quite a bit cheaper, depending on what investment strategy you follow.

For instance if you just left the money in cash at a provider like https://www.sippdeal.co.uk with no annual fee, you would pay nothing - the provider would take a slice off the top of the interest rate you get but that's it.If you put a chunk into a gilt portfolio, you pay transaction charges only. Once bought, holding the investment is free. Same with shares. This can cut costs dramatically.

dunstonh

So a SIPP can be quite a bit cheaper, depending on what investment strategy you follow.

To provide some balance to that, it can be more expensive as well depending on the types of investment you use within the SIPP. So, you need to decide what types of investment you will be using to decide if a SIPP is cost effective or not.

Direct investment will mean that you will have to take on the reviews yourself. That includes rebalancing and making sure you go diverse enough to not get caught out by a polly peck, marconi or Northern rock etc. That diversity and rebalancing against your risk profile could make it inefficient for smaller amounts but more efficient for larger amounts.

EdInvestor

dunstonh wrote: »

That diversity and rebalancing against your risk profile could make it inefficient for smaller amounts but more efficient for larger amounts.

Diversity is certainly a good thing to reduce risk - if directly investing in shares, a portfolio of at least 15 big solic companies and preferably 20 or more for large amounts is recommended, across a variety of sectors.

As for "rebalancing", although an annual tweak may be a good idea if any share has got wildly out of line with the rest,thus posing a risk, much of this buying and selling is probably unnecessary - just a way for the industry to charge transaction fees.Keeping trading to a minimum is more important IMHO.

jamesd

No need to pay transaction fees to rebalance. You can just adjust where the new money is going until it reaches the target. Does require that the new money is coming in at a fast enough rate to make this viable.

dunstonh

much of this buying and selling is probably unnecessary - just a way for the industry to charge transaction fees.

Rebalancing is to keep the portfolio within the risk profile of the individual. An unmanaged portfolio can go very out of sync with the risk profile and cause grief later.

Ronnie4ds

Hi all,

I'm a 35 male who needs to get his pension back on track...

I'm about to sign up for a new pension fund on monday 8th sept with a transfer of £5500 from an existing pension that I'd not paid for 5 years.

My IFA has chosen Clerical Medical for me with a charge of £440 coming from clerical medical which he says will not be out of my account. Yet I beg to differ on this & am already feeling skeptical about the whole deal.

I thought the pension would cover me for critical illness but he says modern pensions dont do that now & suggest i take up income protection as well.
My concern for critcal illness was so that if worse come to the worse then I would be able to spend my money before I die and not let it dissappear to some fat cat pension guy...

I was under the impression you can cash in on your pension if you were given 12 months to live or something along them lines..

Am I being ripped off and are there better pension deals out there?


Thanks,
Ronnie.

dunstonh

My IFA has chosen Clerical Medical for me with a charge of £440 coming from clerical medical which he says will not be out of my account. Yet I beg to differ on this & am already feeling skeptical about the whole deal.

Clerical medical have multiple ways to cover the remuneration. One of which does involve an explicit charge coming from your investment but it is usually the cheapest way of doing it. Especially if you are in your 30s. It would end up cheaper than a stakeholder pension on nil commission. Alternatively they still do it the old commission way where it does not come directly from your pension.

thought the pension would cover me for critical illness but he says modern pensions dont do that now & suggest i take up income protection as well.
My concern for critcal illness was so that if worse come to the worse then I would be able to spend my money before I die and not let it dissappear to some fat cat pension guy...

Critical illness cover has never been available on pensions. You are possibly referring to waiver of premium but that isnt CI. The money does not get paid to some "fat cat" unless that is the nickname of your spouse or beneficiary.

I was under the impression you can cash in on your pension if you were given 12 months to live or something along them lines..

That is terminal illness. Not critical illness.

Am I being ripped off and are there better pension deals out there?

You have told us nothing about the contract. CM are a good provider. The fund range isnt great but the PPP is good enough for small amounts like yours. Your age certainly fits with the factory gate priced version of their pension and is one of the cheapest pensions out potentially.

The transaction is one of fact. The facts are pretty clear in the illustration and key features document. The method of remuneration is pretty obvious as it says it on the illustration. If you have questions then ask the IFA. Nothing you have said so far suggests any issues at all.

liam_2-2

I am 45 soon.(Ah the Summer of 76) Married with three school children .I have an amber alert on a 1997 endowment due to expire in 2022. 68k down to 49k (5% estimate).Cant sell it via Aap as not the right kind of endowment.

Estimated value at the moment is £12,000. I pay £125 per month.

Luckily managed to pay off the mortgage in March this year ! Have seen the dark side when had to scrape by between 2005 and 2007 after rupturing a disc in lower back. That’s another story, but if anyone suffering, keep the faith and try to be patient,..The pain lessens.

Question. Where best to put my £125 a month because it seems pointless to retain it (Scotish Life)
Pension ?
Note I recently opened Ice Save ISA accounts for me and my wife but due to wife not earning we have had very little opportunity to put any money in pension. Except £10 a month for the past 18 years (big WHOOP ) My basic salary is basic as I am commission based and doing very little at present.
Any advice welcomed.