Help with Stakeholder pension

cowboymum

Hi there. I wonder whether you guys might be able to give me a bit of advice about stakeholder pensions. I am self employed and 37 years. I have only just started working again after a 7 year gap and really need to get a pension started. I have a small pension from my previous work in the NHS.

I am planning on investing about £100 per month, with possibly a small lump sum to start (only £500). However, being self employed, income is quite different month to month, so need to be able to change monthly amount if necessary. I want to retire at the same time as my husband who is 5 years older, so I have 25 years to build up my pension.

I am planning on getting a stakeholder pension through Cavendish, and have almost decided to go with Friends Life. This is due to them accepting a low monthly amount and lump sums - I don't know a huge amount about the company.

I am trying not to use an IFA if possible just to keep costs down (I only work part time and want as much money as possible to go into the pension rather than to anyone else!)

I know you can't give me advice on indiviudal funds, but I figure that I need to go for those with slightly more risk. Do I just take a spread of funds? I am looking at some with a highish risk(H-) and some at lower risk (M+) - should I also take any of lower risk? In my opinion, over time, shares generally go up and I am quite old to be starting a pension, so I've got to take a bit of a risk.

I would rather start a pension than an ISA as we get tax credits at the moment. I know that for income purposes, the money you put into pensions is taken off of your total income, therefore you are entitled to a bit more tax credits.

Sorry - this is a bit long! All a new subject for me but I'm willing to learn from those with more experience!
Thanks for your help!

dunstonh

I know you can't give me advice on indiviudal funds, but I figure that I need to go for those with slightly more risk. Do I just take a spread of funds? I am looking at some with a highish risk(H-) and some at lower risk (M+) - should I also take any of lower risk? In my opinion, over time, shares generally go up and I am quite old to be starting a pension, so I've got to take a bit of a risk.

In reality, it doesnt really make much difference until you get to around 8-10 years on your contribution. Lets say you get 2% difference in return over 12 months on £5000. That is just £100. It will take you 4 years to get there. The important thing at this stage is to be paying in.

BLB53

There was a good article on www.monevator.com a couple of days back on stakeholder pensions (scroll down page) which should give a few pointers.

You are a bit limited in choice of funds with a stakeholder so maybe consider openning a sipp with e.g. sippdeal or hargreaves lansdown.

The main advice is to make sure you don't pay too much in charges, therefore passive trackers at less than 0.5% TER will probably be better.

Do not fall into the trap of thinking you have to take more risks to 'catch up'. OK you've missed a few years but 25 years is still plenty of time to build a decent pension 'pot'.

Good luck with everything

BLB

dunstonh

The main advice is to make sure you don't pay too much in charges, therefore passive trackers at less than 0.5% TER will probably be better.

Stakeholder funds all have the same charge typically.

BLB53

Stakeholder funds all have the same charge typically

.

Which is what percentage typically?

dunstonh

BLB53 wrote: »

.

Which is what percentage typically?

0.6% typically. Personal pensions are usually cheaper with internal funds as they tend to get bigger fund based discounts which can bring you down to 0.3%

xylophone

http://www.direct.gov.uk/en/Pensionsandretirementplanning/Companyandpersonalpensions/PersonalPensions/DG_4017567
http://www.cavendishonline.co.uk/pensions/stakeholder-pensions/

Thorpe

As mentioned you explained your income varies, have you considered placing a small monthly and then adding single contributions on an add-hoc basis so you can ensure that all the money you want to goes into it.

funds are exceptionally hard to advise on and does depend on a number of factors.

Something i would say if they have a 'lifestyling' option which during the last 5 years of the plan moves it into lower risk funds to ensure you have 'locked in' then its something you should look at.

sleepless_saver

BLB53 wrote: »

You are a bit limited in choice of funds with a stakeholder so maybe consider openning a sipp with e.g. sippdeal or hargreaves lansdown.

Why a Sipp rather than a personal pension?

BLB53

Why a Sipp rather than a personal pension?

As I say, it gives you much more flexibility and options - individual shares, OEICS, etf, investment trusts, gilts, corporate bonds - with stakeholder and personal pensions you are limited to a fairly restricted number of choices offered by the pension provider.

dunstonh

BLB53 wrote: »

As I say, it gives you much more flexibility and options - individual shares, OEICS, etf, investment trusts, gilts, corporate bonds - with stakeholder and personal pensions you are limited to a fairly restricted number of choices offered by the pension provider.

If you use the SIPP features and options then its all good. If you dont then you could end up paying for a white elephant.

Stakeholders typically have 1-40 funds. PPPs have 100-2000. SIPPs are as whole of market as you can get.