Pension for a baby

Murphy_The_Cat

dunstonh wrote: »

Legal and General dont lower their charges for online applications. They are identical to the full advice charges. They just keep the commission for themselves.

However, as stakeholders go, they are a good choice.

fair comment - I was happier paying the 0.9% AMC that L&G would charge me, rather than the 1.5% that they could have charged me (do many providers charge the full 1.5% ?), plus, I looked at Scottish Widows, who had an offer of 0.2% off the AMC for online applications, but, because MTK2 was under 16, they would only accept an application by post, which meant that they would have charged me the full going rate !

I'm glad that you consider L&G to be a 'good' choice for a Stakeholder pension -- it was quite hard to get a recommendation on t'net for a Stakeholder Pension Provider who people considered to be 'good' or 'very good', without getting a quite techie answer off folk.


However, if you have an alternative 'very good' Stakeholder Pension provider to suggest to me, I'm still within the cooling off period to cancel the L&G one.:beer: & I'd be grateful to take your opinion/advice.

dunstonh

I was happier paying the 0.9% AMC that L&G would charge me, rather than the 1.5% that they could have charged me (do many providers charge the full 1.5% ?),

Some but not all. Some allow the distribution channel to decide if they want it added or not. L&G do just that and you can pick up versions with and without the extra depending on where you buy.

I'm glad that you consider L&G to be a 'good' choice for a Stakeholder pension -- it was quite hard to get a recommendation on t'net for a Stakeholder Pension Provider who people considered to be 'good' or 'very good', without getting a quite techie answer off folk.

Its a difficult one as I would never put my money in a stakeholder pension as I think they are an awful product. However, your contribution is likely to be small as its for a child which will eliminate most personal pensions as they have a £50-£100pm contribution. So, you are really stuck with stakeholder as the main choice. I mentioned on another thread that comparing stakeholder pensions is like comparing apples with apples and seeing which one most tastes like an apple and looks like an apple. There isnt really a lot of difference although you avoid the "bad" apples, like the supermarket versions and Virgin.

However, if you have an alternative 'very good' Stakeholder Pension provider to suggest to me, I'm still within the cooling off period to cancel the L&G one

No, I think you are fine with that "apple"

Murphy_The_Cat

dunstonh wrote: »

No, I think you are fine with that "apple"

thanks for that :beer:

Just out of curiousity, why do you consider Stakeholders to be an 'awful product' ?

The monthly contribution that I was looking to put in is around the £50 mark, but the providers that I was looking at were looking at £100-£200 per month before they would offer a non-stakeholder product -- which sent me back down the Stakeholder route.

dunstonh

Just out of curiousity, why do you consider Stakeholders to be an 'awful product' ?

You are contributing to an investment. So, the priority should be where and how the money is invested. Stakeholder pensions are very limited on what investments are available. Insurance companies historically are quite good on low risk investments but quite poor on medium risk and have little or no offering in high risk. So, you end up with a product with poor quality investment options and when you consider how long the money is going to be in there for, having a return that could be handicapped by around 2-3% a year on average would at least halve the final value.

The monthly contribution that I was looking to put in is around the £50 mark, but the providers that I was looking at were looking at £100-£200 per month before they would offer a non-stakeholder product -- which sent me back down the Stakeholder route.

Most are at a £100pm minimum nowadays. A few will go as low as £50pm gross. It is the dilemma with smaller contributions.

Murphy_The_Cat

dunstonh wrote: »

You are contributing to an investment. So, the priority should be where and how the money is invested. Stakeholder pensions are very limited on what investments are available. Insurance companies historically are quite good on low risk investments but quite poor on medium risk and have little or no offering in high risk. So, you end up with a product with poor quality investment options and when you consider how long the money is going to be in there for, having a return that could be handicapped by around 2-3% a year on average would at least halve the final value.

Most are at a £100pm minimum nowadays. A few will go as low as £50pm gross. It is the dilemma with smaller contributions.

Thank you for that - reading between the lines, you don't seem to rate pensions very highly as a long term investment. Doesn't the tax advantages of a pension go some way (a long way ?) to offsetting that ?

dunstonh

Thank you for that - reading between the lines, you don't seem to rate pensions very highly as a long term investment.

I'm not a big fan. There are too few advantages and too much to lose out on. As far as I am concerned, they are good for using up the personal allowance but after that, dont bother (unless their is employer money involved or higher rate relief for someone who will be basic rate in retirement).

Doesn't the tax advantages of a pension go some way (a long way ?) to offsetting that ?

There isnt much of a tax advantage. If you assume equity funds, then the taxation is little different to a unit trust apart from having to periodically be concerned with capital gains tax. However, the annual gains allowance can take care of that.

Murphy_The_Cat

dunstonh wrote: »

I'm not a big fan. There are too few advantages and too much to lose out on. As far as I am concerned, they are good for using up the personal allowance but after that, dont bother (unless their is employer money involved or higher rate relief for someone who will be basic rate in retirement).

There isnt much of a tax advantage. If you assume equity funds, then the taxation is little different to a unit trust apart from having to periodically be concerned with capital gains tax. However, the annual gains allowance can take care of that.

TBH, I was thinking more on the lines of the invest £50 and the tax getting added back on makes it £64.10 sort of tax advantage - or am I completely barking up the wrong stick on galloping horseback ?

Hypothetical question (ish) - what would you have done if you were in my shoes ? (I'm not looking for a freebie, just a general idea would be good !)

dunstonh

TBH, I was thinking more on the lines of the invest £50 and the tax getting added back on makes it £64.10 sort of tax advantage - or am I completely barking up the wrong stick on galloping horseback ?

Apart from the personal allowance in retirement, the income will be taxable which takes that tax relief back again.

Hypothetical question (ish) - what would you have done if you were in my shoes ? (I'm not looking for a freebie, just a general idea would be good !)

I am in your shoes as I have two young children. I do a regular contribution unit trust for both of them. The capital may prove to be of better use in their early 20s in for property purchase rather than in their retirement years. At least, that is how I see it.

Murphy_The_Cat

dunstonh wrote: »

Apart from the personal allowance in retirement, the income will be taxable which takes that tax relief back again.

I am in your shoes as I have two young children. I do a regular contribution unit trust for both of them. The capital may prove to be of better use in their early 20s in for property purchase rather than in their retirement years. At least, that is how I see it.

I've done that one as well !!! So hopefully (if I don't make a pigs ear of where I've invested their money), they'll both have a goodly wedge to go towards a house purchase, their Uni fees will be covered or for whatever other purpose I deem fit --- naturally, I won;t be telling them about either investment for a very, very, very long time (mabye the day before their 25th Birthday).

My idea was to give them a financial kickstart to full adulthood that I never had, and a secure pension to look forward to.

Dithering_Dad

Murphy_The_Cat wrote: »

I've set up a Stakeholder Pension with Legal & General for MTK2 and I've spread the monthly investment over 4 funds.

Hi Murph, I have been reading this thread with interest as I was thinking of setting up a stakeholder for my youngest. She has a learning disorder and I want to make sure that from cradle to grave she is financially secure. I've done the cradle bit, but I won't be around forever so need to make sure she's OK from probably her 40's onward.

Just out of interest, which L&G funds did you go with in the end? How are you getting on with them?