Standard Life Active Money Personal Pension

vaporate

Hi,

I'm new to pensions, know very little.

Basically I want to pay in £200 into a pension per month from age 25 to age 65 (will give me £811 per month when I retire, plus state pension giving me a total of £1200 monthly assuming nothing changes and how well my pension does).

I need pro advice but thought I'd post here first.

What do you think of Standard Life Active Money Personal Pension?

I want a low risk. I like the idea of lowering the payments should I become unemployed in the future.

That's all I want from a pension. Cautious risk, pay 200 a month to reach my target. How 'safe' are pensions seeing as it fluctuates?

As you can tell I'm clueless so please educate me.

Source: http://www.standardlife.co.uk/1/site/uk/pensions

Annisele

I think the biggest problem with your plan is that you seem to assume you can make a decision once (i.e. to pay £200 per month into pension X) and then stick with that decision for 40 years until retirement. Pensions are things that need to be reviewed!

The other big problem I can see is your suggestion that you won't change your contribution of £200 per month. That is currently a reasonably decent contribution for a 25 year old (though possibly on the low side, depending on how much you're earning). It won't be a decent contribution in 20 years - there are people retiring now who are very disappointed with their pensions, having contributed £20 per month for years. That £20 was decent years ago, but no longer.

Also, you won't be getting your state pension at 65 if you're 25 now.

Finally - don't know anywhere near enough about you to even begin to guess whether the SL product is reasonable for you. Does your employer have a pension scheme?

vaporate

Annisele wrote: »

I think the biggest problem with your plan is that you seem to assume you can make a decision once (i.e. to pay £200 per month into pension X) and then stick with that decision for 40 years until retirement. Pensions are things that need to be reviewed!

The other big problem I can see is your suggestion that you won't change your contribution of £200 per month. That is currently a reasonably decent contribution for a 25 year old (though possibly on the low side, depending on how much you're earning). It won't be a decent contribution in 20 years - there are people retiring now who are very disappointed with their pensions, having contributed £20 per month for years. That £20 was decent years ago, but no longer.

Also, you won't be getting your state pension at 65 if you're 25 now.

Finally - don't know anywhere near enough about you to even begin to guess whether the SL product is reasonable for you. Does your employer have a pension scheme?

Many thanks for replying.

State pension will be 68 for me by the time I retire. If not maybe even later.

This pension states that a minimum monthly amount of £80 needs to be paid. My employer does not have a pension scheme which is why I am looking into a private personal pension. Income per annum is 18k at the moment, live at home.

If I paid £200 a month, the taxman adds £50 on top per month. £250 a month is my ideal target sum. I can lower this to £80 per month should money becomes tight which will be topped up to £100 a month by taxman.

Look forward to replies.

dunstonh

What do you think of Standard Life Active Money Personal Pension?

For most people its typically a mid table pension on charges. There are a few niche occasions I have seen it come out quite high (typically small fund values only). I just looked at a pension I did earlier in the week looking at a non-servicing investment and Std Life active money came 19th on cost on a list that has already had a number of providers filtered out for not meeting criteria. Not that impressive.

How 'safe' are pensions seeing as it fluctuates?

Pensions have no investment risk. The investments you use inside of the pension carry the investment risk. You choose the investments.

Be wary that time dilutes risk and the risk of using cautious or cash based funds over the long term can actually increase the risk by replacing investment risk as the primary danger with inflation risk and shortfall risk. Whilst an equity fund may or MAY NOT hit 7% p.a. (as an example), a cash based fund WILL NOT hit 7% p.a. So, you wont have to worry invesmtent risk with that but you will have to worry about inflation and not hitting your goals which means you end up having to pay more in to cover that shortfall.

edit: to give a few more cases, I looked at the last 5 pension transfers on non-servicing basis, basic fund choice and in those cases Std Life were all in the 25-40 range for cost on a like for like basis.

jamesd

vaporate wrote: »

What do you think of Standard Life Active Money Personal Pension?

It looks fairly expensive considering what they are offering in the way of investment options. I suggest you consider something like Skandia purchased via an IFA for a fixed initial charge and no ongoining charge. Or if you want ongoing investment management advice you could add some cost for that service. This will minimise the ongoing cost of the investments, so more of your money is let in the pension to grow.

vaporate wrote: »

I want a low risk.

What does low risk mean to you?

Within almost all modern pension tax wrappers you can select from a range of investments that have varying levels of up and down movement so you can build a combination with whatever target you want for maximum reasonably possible drop level. The drop level is typically called risk but it's only a possible loss if you withdraw the money or move it to another investment during one of the down times, without waiting for a recovery.

There's minimal risk of losing all of the money in any modern pension but you can suffer big drops through poor investment choices.

vaporate wrote: »

I like the idea of lowering the payments should I become unemployed in the future.

This is routinely available in modern pensions.

vaporate wrote: »

How 'safe' are pensions seeing as it fluctuates?

Entirely up to you, since you pick the investments.

Your employer will have a pension scheme of some sort within a few years, because the law will require them to offer one and enroll you in it unless you opt out. It will probably be one with a less good deal than you could get outside work, particularly if you see it's one using NEST for the investments.

Loughton_Monkey

I cannot comment on the provider. Standard Life are 'respectable' but so are many others. You should look to find (through an IFA for a fee if necessary - rather than annual fund % charge) access to decent active managed funds at lower than normal 1.5% annual charges.

The success of your pension will then be a function of the funds you choose (and not the provider). I strongly question the wisdom of choosing 'cautious' at your time of life. I would fear you will simply not get the growth. Virtually all funds are volatile, but ultimately, the 'adventurous' equity funds in growth markets must give a good return. Sadly, 'cautious' these days still often means funds largely in UK equities, with a bit of fixed interest and bonds thrown in. Personally, I generally avoid UK, Europe, and USA since economically, we are all in the 'departure lounge' of wealth - where we can only dream on how rich we were, where it all went, and why are the Asians doing so well.....

Lastly, keep abreast of your contributions. Make them proportional to your earnings and you should have no trouble.