Is Stakeholder Pension best option for a 37 year-old?

pob100

Advice needed please...

I'm 37 and think I've left it a little late regards starting a pension, but I had big debts to pay off first.

I opted out of Serps about 18 years ago, and set up an pension for the refunds to go into. However, I never made any additional contributions. A few years ago the pension provider opted me back into Serps/S2P and converted the pension into a Stakeholder Pension, which currently has around 15k in.

Should I

a) simply start paying money into my Stakeholder pension?

or

b) are there better options available and do I need help from an IFA?

Any advice much appreciated...

dunstonh

a) simply start paying money into my Stakeholder pension?

or

b) are there better options available and do I need help from an IFA?

a) possibly
b) probably.

You dont need to use an IFA. Obviously, if you dont know the subject and not in a position to understand (or dont want to understand) then using an IFA is the best option.

The main options at this point would be

Investment ISA
stakeholder pension
personal pension
SIPP.

Each has it's pros and cons.

pob100

Thanks dunstonh

If I went with a Stakeholder Pension, would I be better off adding to what I have (with HSBC), or start a new one with whoever is deemed to be the market leader. (Can you have two, or can you transfer funds?)

EdInvestor

If you're a basic rate taxpayer and have no employer contribution you would be better to make additional retirement savings in an investment ISA ( up to 7k a year), not a pension.

Don't forget you are already up for the 2 state pensions as well as your stakeholder.Get a forecast of how much you'll get from the state pensions at https://www.thepensionservice.gov.uk

It's best to limit taxable pension income to around 10k and get the rest of your retirment money in a tax free ISA if you can.The investment arrangments for an ISA are the same as a pension.

This site has a lot of information about ISAs and which funds you might put in one, depending on your risk profile. Have a look around.

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

jamesd

You can have two or twenty. You can transfer funds but there may be some penalty, ask the provider what the transfer value is. There can't be a penalty for a stakeholder pension, so it should be easy enough to transfer that. There's no great reason to have more than one personal pension plan but there may be reasons for having a personal pension plan and a SIPP, if you want more fund choice or need to hold protected rights (contracted out) money that a normal SIPP can't yet hold. A hybrid SIPP can hold protected rights money.

Your key task is to identify good funds to invest your money in. A stakeholder pension usually is cheaper but doesn't have a good enough range, so a personal pension with lots of external funds is the next option to consider. Or a hybrid SIPP. Or wait until the end of April when it is possible that a full SIPP may be able to hold protected rights money.

For a basic rate tax payer the first stop for retirement finance is really a stocks and shares ISA. That gives you much more flexibility in when and how you can take the money out and completely and certainly eliminates the requirement to buy an annuity.

Regardless of the tax wrapper (stakeholder, personal or SIPP pension or ISA) the key thing to look after is your fund choices. They are what determines how well your money grows. You should also read about asset allocation. With 15000 you should ideally have 15 different funds in 15 different parts of the world or markets, or possibly some just with different managers.

Getting out of debt before doing pension things was a good idea.

Do you have an employer who will match your pension contributions? If you do, this is the one great reason why a basic rate tax payer would want to make pension contributions: to get the free money from their employer.

dunstonh

HSBC stakeholder is poor quality. I wouldnt add to it and I wouldnt keep what I have their either. Fund choice is limited and if stakeholder is want you really want rather then there are many better options.

James mentions it above. A stakeholder pension is a defined charging process. It was brought in by the Govt in 2001 and did serve the purpose of introducing low cost contracts. However, the pension providers have since gone on and brought the charges down across the range and you can now get personal pensions which are cheaper than stakeholder and/or allow access to the stakeholder funds (at stakeholder cost) as well as a larger range of external funds which usually cost only a little more but can offer much greater potential for growth. This has turned many stakeholder pensions into a waste of time.