Pension Query

jen_br

Hi, I am a newbie at pensions but im 30 years old now my DH is 40 and we really need to start thinking about our future we have one DS who is 2.

I have 2-3k to invest into a pension to begin with plus montly payments. I am a bit confused about what is out there I have read the article and am a bit overwhelmed about stakeholder vs others.

Cavendish seemed to produce the best results (is this still true?)

I am not from the UK originally so im a bit lost on the whole thing. I only moved here 7 years ago and I would really appreciate the advice of the wiser

Loughton_Monkey

I think you need to continue a bit more with some research and education before 'pressing buttons'. You have not given anything like enough information for in-depth recommendations. But I will kick it off with a few observations.

1. Mention of a 2-year old begs the question are you earning? If not, then you must understand that you cannot invest more than your salary into a pension. If you are not earning, however, you do have the right to put in only £2,880 a year (that's effectively £3,600 Gross).

2. At the ages you have mentioned, you are starting very late in life to think about pensions. Better late than never, though, but try to understand the 'scale' of what you might need to invest to give a pension of any sort of realistic amount.

3. Mention of Cavendish (or any other company for that matter) could be premature until you fully understand what a pension is. Cavendish (or any other company) can never be named as one to produce the "best results". By far the greatest impact on the size of your pension (apart from how much you put in it, of course) is the investments you choose to use. Normally this is 'funds' - but sophisticated pension contributors often use shares, and a few other investments.

4. So given that it is the funds that matter mostly, the next biggest impact on results will be the charges made by the funds. It is in this context that you may have heard of Cavendish. They offer quite a full range of funds, and rebate a lot of the 'up front' charge [all of it usually] and a proportion of the 'trail' charges as well. Another similar provider you may have heard of is Hargreaves Lansdown. But neither of these will give you 'advice' [unless you pay sperately for this]. Hence they are best used by people who 'know what they are doing' and are confident in choosing their own specfic funds.

5. You mention the word 'Stakeholder'. This term arises from a government initiative some years ago. Many pension schemes, at that time, certainly those available 'direct' to the public, were charged at more than 1% charges. A Stakeholder is limited to (I think) 1% and so they were offered by pension providers with a very limited range of funds - but within the maximum charges. Things have moved on, and pension schemes are now available for lower charges than this anyway. [Although quite a lot of the funds at Cavendish will come at 1.5% or so management charge.] It follows, therefore, that it can be better to buy a Stakeholder pension than to go to Cavendish (or similar) but only if you are 'happy' with the much reduced range of funds. An IFA can often find a non-Stakeholder scheme at lower than 1% charge and yet with a fairly full range of funds.

jen_br

Firstly thank you for your information, yes im nowhere NEAR ready to press the COMMIT button.

Loughton_Monkey wrote: »

1. Mention of a 2-year old begs the question are you earning? If not, then you must understand that you cannot invest more than your salary into a pension. If you are not earning, however, you do have the right to put in only £2,880 a year (that's effectively £3,600 Gross).I am self employed and I do earn -- again I need to know what legalities there are with rules on this my UK ignorance on what is kosher and not isn't very good... thanks for pointing this out to me!

2. At the ages you have mentioned, you are starting very late in life to think about pensions. Better late than never, though, but try to understand the 'scale' of what you might need to invest to give a pension of any sort of realistic amount.
Yes we are starting late thats the concern I have-- but we need to start sometime and we have NEVER been in the position before to start!

Still quite confused on stakeholder etc-- and will be looking for an IFA to explain all this to me (hopefully thats what they do)

dunstonh

Still quite confused on stakeholder etc-- and will be looking for an IFA to explain all this to me (hopefully thats what they do)

Stakeholders, personal pensions and SIPPs are all the same as far as legislation goes. Stakeholders are just a defined charging method. That method is good for those close to retirement (typically less than 5 years) or those with small contributions. However, for those with 10 years or more until retirement personal pensions can easily come in cheaper. Stakeholders are also a simple option. You typically only get own brand funds and a limited number and get very little in the way of features and options (although for many people, not all those features and options are required).

10 years ago, most pensions taken out were stakeholder pensions. Today they are nowhere near as popular. I rarely find the stakeholder pensions as the most suitable option nowadays (about 4 in the last 100 I have done).

I have read the article and am a bit overwhelmed about stakeholder vs others.

That article is woefully out of date. The Aviva stakeholder pension mentioned in it for example was withdrawn from business 3 years ago and replaced with a more expensive option. In that time the personal pensions have got cheaper and a fee paying personal pension can now work out cheaper than a nil commission stakeholder pension.

jem16

Loughton_Monkey wrote: »

If not, then you must understand that you cannot invest more than your salary into a pension. If you are not earning, however, you do have the right to put in only £2,880 a year (that's effectively £3,600 Gross).

You can put as much as you like into a pension scheme but you will only receive tax relief on £3600 gross is you are not earning.

http://www.moneymadeclear.org.uk/products/pensions/how/paying_into_your_pension.html

jen_br

Thanks, would meeting with a IFA do me good? Or are they led by certain products?

jem16

jen_br wrote: »

Thanks, would meeting with a IFA do me good? Or are they led by certain products?

An IFA is completely independent and will do what is best for you. Just make sure it is an IFA and not an FA.

jen_br

Ah right a FA works for a specific company right?

times like these I wish I was back in Canada I knew stuff there lol

jem16

jen_br wrote: »

Ah right a FA works for a specific company right?

Yes an FA would be tied to a particular company and would only be able to recommend their own products.

For an IFA search here;

https://www.unbiased.co.uk

Loughton_Monkey

jem16 wrote: »

You can put as much as you like into a pension scheme but you will only receive tax relief on £3600 gross is you are not earning.

OK. You are right.

In practice, however, without the tax relief if is not a particularly efficient thing to do unless we are talking about very big money where the lack of CGT is worthwhile against the withdrawal restrictions.

jem16

Loughton_Monkey wrote: »

OK. You are right.

In practice, however, without the tax relief if is not a particularly efficient thing to do unless we are talking about very big money where the lack of CGT is worthwhile against the withdrawal restrictions.

I agree it's probably not particularly efficient but just wanted to clarify the situation as you had mentioned it on a couple of threads.