Newcomer starting a pension!

Simon8

Hi

If anyone has 5 mins to give me a little advice it would be greatly appreciated.

I am 35 years old and only now starting a pension, my company does not have a pension scheme so I am having to do a personal one. I do however have a fair bit of spare cash so am looking to put away around £600 per month (i am sure thats not a lot for some).

My question is really what is the best thing to do, I understand the basics of pensions.

I have been to my bank HSBC who have talked to me about their Dynamic fund (funds of funds) I like the concept but I do not like the 2% annual fee that it involves.

I have been thinking about setting up a SIPP and doing it myself but I am a little cocerned ye the amount of knowledge you need, I am no expect and though I have a brain I do not see myself having to much time to do this

Any advice on what you think of the HSBC deal, SIPP on anything else would be excellent

Cheers

Simon

Amanita_2

I would suggest you avoid the banks and find yourself a local IFA. A DIY SIPP is fine if you have the knowledge and/or time to devote to it. Otherwise you need it professionally managed.

You are planning to make quite substantial contributions - you need to make the most of them.

Aegis

You're right about the HSBC pension. The up front fees and the ongoing management charges just aren't in any way justified by how it performs compared to its peers or benchmark (largely because it only has performance figures since January. However, in that time, during one of the best periods for investment returns we've seen in many years, the fund managed a return of 17.8% compared to a sector average for the Balanced Managed fund sector (I believe this corresponds roughly in terms of risk) of 20.6%. Those charges certainly won't be helping with these figures, but even accounting for the higher AMC this is still a significant underperformance of the sector average. Given that this is their dynamic fund, the one designed to get the highest returns, it seem you'd be better off just going with a decent balanced fund than this option.

A decent pension portfolio with some risky assets (i.e. good for long term capital appreciation at the cost of short term volatility) could comfortably have generated 30%+ in the same timescale while avoiding the suicidally high risk funds (in this case I just picked one of my favourite global equity funds and rounded down to a nice round number).

With at least 20 years to retirement, you will probably have a much different investment attitude than someone looking for high return funds outside a pension. These one-size-fits-all products fail to take that into account, and even the most dynamic of these three offerings from HSBC is ill-suited to those seeking higher returns over the 5-10 years scale, let alone the retirement planning time frame.

Aegis

Oh, my own rule for my pension and ISA contributions is to put £50 into different funds. £600 for me would therefore be going in up to 12 funds (my own contributions are currently at £300 p/m, so I only have to pick 6; some doubling up might be necessary if I still wanted to stick to my favourites). You should therefore aim for a minimum of 6 funds from different sectors if you're looking to DIY, and you should tailor these investments so that they represent your risk attitude. If you're quite cautious, you'll want some fixed interest exposure, some (significantly smaller than the other two) property and some equity. As you get more adventurous you'll be trading the fixed interest for more equities and will venture outside the UK into more global concerns, possibly with some specialist areas like BRIC or natural resource funds thrown in for good measure.

If you'd prefer to get someone to help you, an IFA is probably the safest bet for pension planning. Find a few near to where you live, do a little research and make sure you visit/speak to at least two of them so that you can weigh the ideas up against each other.

EdInvestor

no initial charges and a big array of fund choice in the HL Sipp.

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

Take some time to read the investment info on the site.A little time spent at the start checking out fund diversification can pay off quickly.

Simon8

Thank you all for your help. Meeting three IFA's next week