how to set up a pension?

mrslawrence2003

i have some general questions regarding pensions that i hope someone can help me with:

1/ do i need an IFA to set up my own pension fund or can i do it on my own?
2/ my work have advised that they will give me a lumpsum to put into my own pension fund, but there is no 'work-sponsored' pension scheme in place.

i know these are very general questions but i really have no idea how to go about this. if i need an IFA, can anyone recommend one for me?

jamesd

You don't need an IFA to do it. It can be cheaper to buy via an IFA sometimes, more expensive other times, depending on just what you want.

For example, one IFA here who uses the NMA (New Model Adviser) charging approach mentioned that the charge for a Scottish Widows personal pension without advice (execution only) would be about 100 but that this would come with a 0.4% reduction in the annual charges, so that would be cheaper than buying direct within a few years, less for larger contribution levels. Exactly the same pension could be bought direct from Scottish Widows but without the 0.4% reduction in the annual charge and without the initial fee.

You do need to decide how much interest you have in managing the money. The key part of pensions isn't the pension plan, it's the funds held in it and someone needs to select them and review the choices at least once a year. A major part of this is deciding how sensitive you are to short term variations in the total value of the funds - your risk tolerance. Higher risk tolerance implies the potential for greater growth in value but isn't worth accepting if it means you lose sleep worrying about it.

The "lifestyle" options from pensions like that of Scottish Widows can be helpful for those who do not want to make investment choices but they won't produce anything close to the best value growth.

EdInvestor

mrslawrence2003 wrote:

1/ do i need an IFA to set up my own pension fund or can i do it on my own?

You can do it on your own.But if you decide on an insurance company product, always go through a discount broker who will rebate the charges, otherwise the insurance company will charge you the advisors commission but pocket the money themselves.

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

are a couple of dicount brokers.

2/ my work have advised that they will give me a lumpsum to put into my own pension fund, but there is no 'work-sponsored' pension scheme in place.

How kind of them You could consider a SIPP then. This type of pension fund gives access to all the best funds and the low cost online ones are really easy to manage yourself.

eg

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

Choice depends on what you want to invest the money in really.

jamesd

Note that if buying from Cavendish Online, they sell the cut-down version of the Scottish Widows pension without full external fund choices.

mrslawrence2003

jamesd wrote:

You don't need an IFA to do it. It can be cheaper to buy via an IFA sometimes, more expensive other times, depending on just what you want.

For example, one IFA here who uses the NMA (New Model Adviser) charging approach mentioned that the charge for a Scottish Widows personal pension without advice (execution only) would be about 100 but that this would come with a 0.4% reduction in the annual charges, so that would be cheaper than buying direct within a few years, less for larger contribution levels. Exactly the same pension could be bought direct from Scottish Widows but without the 0.4% reduction in the annual charge and without the initial fee.

You do need to decide how much interest you have in managing the money. The key part of pensions isn't the pension plan, it's the funds held in it and someone needs to select them and review the choices at least once a year. A major part of this is deciding how sensitive you are to short term variations in the total value of the funds - your risk tolerance. Higher risk tolerance implies the potential for greater growth in value but isn't worth accepting if it means you lose sleep worrying about it.

The "lifestyle" options from pensions like that of Scottish Widows can be helpful for those who do not want to make investment choices but they won't produce anything close to the best value growth.

thank you for your reply.

i would like to go with high risk for at least the first two years - i am young enough that if something went drastically wrong and at the end of 2 years i had sweet fa left, then i would have plenty of time to recoup the losses and end up with enough to retire on way down the line.

scottish widows have 'adventurous', 'high risk' and 'specialist' but they do not do any funds in 'specialist' and very few in the high risk so not sure if that;s the best way for me to go. also they said they would not allow me to chose what markets etc i wanted to invest in with my pension.

dunstonh

they do not do any funds in 'specialist' and very few in the high risk so not sure if that;s the best way for me to go.

They do on the full retail product. I assume the limitation only applies to the cut down version you are looking at.

It is normal for different distribution channels to offer cut down versions of the full retail IFA product.