We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

Stakeholder - compared to SIPP

Hello I like to take control of my finances and have a number of pensions and investments including ISA, Cash, SIPP and closed Employees final salary pension etc.

My wife is self employed and not at all interested in the finer details of investments, any recommendations from myself are treated with suspicion, and rightly so since I moved our mortgage ISA we had in all-share ITs into Killik right at the top of the tech bubble and lost 90% very quickly with their very 'strong buy' recommendations.

In January 2003 she started a Standard Life Stakeholder pension paying in £234 per month (£300 after tax benefit). The investment strategy is;
  • 25% into Stakeholder with Profits Fund
  • 75% into Stakeholder Managed Fund

January 2007 valuation was £19,050
Payments in are 48 times £300 = £14,400
I calculate that as an average 13.22% per annum growth.

The FTSE all-share has grown from 1722 to 3253 (according to Yahoo with adjustments for dividends and splits). I calculate that as an average 16% growth per annum.

Assuming my calculations are correct, the Stakeholder is doing okay but not matching the ftse all-share.

Questions.

1. Will this slight underperfomance continue if the market situation changes, i.e. if the market falls say 10% to January 2008, will those two Stakeholder funds fall at all and if so by more or less than the all-share?

2. Should I consider recommending that my wife changes this vehicle to a SIPP where I think the fund choice is greater/limitless in the case of a supermarket?

3. Should I put this is drawer and forget about it until 2020 or whenever?

4. Assuming ISAs are maxed out, maybe she should stop the pension contribution and just invest in funds outside a wrapper for future flexibility?
If it takes a man a week to walk to walk a fortnight how long does it take a fly with tackity boots on to walk through a barrel of treacle?

Comments

  • dunstonh
    dunstonh Posts: 118,544 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Assuming my calculations are correct, the Stakeholder is doing okay but not matching the ftse all-share.

    With the funds chosen, they never will in periods of growth as they have downside protection. In the last crash when the FTSE dropped 40%, those two funds would not have dropped anywhere near as much as that (in real terms in the case of the managed or behind the scenes as far as the WP is concerned).
    2. Should I consider recommending that my wife changes this vehicle to a SIPP where I think the fund choice is greater/limitless in the case of a supermarket?

    If you are going to utilise the more expensive funds then it certainly is an option.
    3. Should I put this is drawer and forget about it until 2020 or whenever?

    No invesmtent should be treated like that. However, many people do and if you intend to invest and forget, then you shouldnt really look at a SIPP and may as well stick with the budget stakeholder option.
    4. Assuming ISAs are maxed out, maybe she should stop the pension contribution and just invest in funds outside a wrapper for future flexibility?

    It's an option. Depends on what she wants from the money at the end of the day. She is only going to get the basic state pension as she is self employed so she has around £6000 tax free income allowance per year from age 65 to use up and the pension will do that better than anything else.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • LOST
    LOST Posts: 292 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    looking at her 2 funds alone:

    the managed fund has grown 21.1% in the past year, 63.4% in the past 3 years and 56.8% in the past 5 years - this is decent performance

    with-profits funds on the other hand have done really poorly - most insurance companies bonus rates have been well under the rates that would be given if you had gone for holding the money as a cash deposit.

    Assuming you stick with the stakeholder arrangement - I would consider utilising a better performing fund than the with profits.

    There is no point in opting for a SIPP arrangements unless you are to take an active stance on monitoring the performance via utilising the extensive funds available - the charges are quite high..
    {Signature removed by Forum Team - if you are not sure why we have removed your signature please contact the Forum Team}
  • Browntrout_2
    Browntrout_2 Posts: 295 Forumite
    LOST wrote: »
    looking at her 2 funds alone:

    the managed fund has grown 21.1% in the past year, 63.4% in the past 3 years and 56.8% in the past 5 years - this is decent performance

    with-profits funds on the other hand have done really poorly - most insurance companies bonus rates have been well under the rates that would be given if you had gone for holding the money as a cash deposit.

    Thanks for those replies donstonh and LOST.

    The replies have made me look at the two individual Funds a bit closer.

    25% in With Profits is £4,400 = 9.57% annual growth (is that CAGR)
    75% in Managed is £14,655 = 14.37% annual growth

    So happy with The Managed fund, looking at With Profts further, units are mysteriously priced, and further clouded by the de-mutualisation in 2006.

    Plans commencing pre-10th July 2006 are now in Heritage WP Funds. There are 6 pdf documents on the subject;

    http://uk.standardlife.com/content/policy/withprofits/understandingwithprofits.html

    I am thinking this £75 a month would be better off in the UK Opportunities fund or even in the Managed Fund.
    If it takes a man a week to walk to walk a fortnight how long does it take a fly with tackity boots on to walk through a barrel of treacle?
  • LOST
    LOST Posts: 292 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    One thing to mention is that a market value reduction will probably apply to the with profits fund if you decide to switch out - ie the value will go down!

    but this maybe acceptable particularly if you know it is doing absolutely sh*te and you're better off in a different fund
    {Signature removed by Forum Team - if you are not sure why we have removed your signature please contact the Forum Team}
  • Browntrout_2
    Browntrout_2 Posts: 295 Forumite
    I switched the With Profits online, there was no MVA or 'bonus' applied presumably as this was in a Stakeholder Pension.

    I split the 25% accrued in WP into two funds - Ethical and Overseas Stakeholder Funds. The UK Opportunity fund was not available in this pension.
    If it takes a man a week to walk to walk a fortnight how long does it take a fly with tackity boots on to walk through a barrel of treacle?
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.2K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.3K Spending & Discounts
  • 240.7K Work, Benefits & Business
  • 617K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 253.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.