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Stakeholder Pension

I need advice on Stakeholder pensions. I've heard Standard Life and Legal & General are very good ones.

The problem is I don't have a clue about which funds within those would suit my circumstances.

I am 38, looking to invest between £20-50(all I can currently afford) a month.

Could someone in the know please give me some advice.
Hillbillies :beer:
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Comments

  • plonkee
    plonkee Posts: 86 Forumite
    Since you have a low sum to invest each month, I would first look into what the minimum payments are in the stakeholders you are investing in.

    Also, you need to consider your own risk profile. If you were invested in an index fund and it dropped in value by 40% what would you do? In my case, I'm young, I would have enough time to leave it to recover, having confidence in my original decisions.

    You should have some exposure to equities as they are most likely to give you good growth. You probably want to consider broad based fund(s) as you may be able to only contribute to one or two.

    As for picking funds, some people suggest going for managed funds and looking at the fund manager to determine whether a fund is likely to perform well, others use index funds hoping merely to generate average returns, I'm sure other people use methods.

    I don't know much about the provider's you have named, I'd suggest that the performance is down to fund selection and fees. You want to select good funds and then get the lowest fees for them. Most stakeholders charge 1% fees regardless and its easy to switch so if you make a sub-optimal decision you can change, its not all set in stone.
    thoughts on personal finance @ plonkee.com
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    landg wrote: »
    I need advice on Stakeholder pensions. I've heard Standard Life and Legal & General are very good ones.The problem is I don't have a clue about which funds within those would suit my circumstances.
    I am 38, looking to invest between £20-50(all I can currently afford) a month.


    If you have no company pension and pay basic rate tax,you should consider opening a stocks and shares ISA with your money rather than a stakeholder pension. If it is the tax relief that is attracting you, don't forget that although you get it going in, you pay tax on the pension coming out, so there's no real adevanatge other than the tax free cash. At the low levels you are talking about, you could find that the small pension simply means you aren;t eligible for benefits you would otherwise get.And the money is locked up forever.

    Whereas with an ISA, you can access both the capital and the income any time and both are tax free.There's no difference in the investment funds available between the two.
    Trying to keep it simple...;)
  • surfsister
    surfsister Posts: 7,527 Forumite
    I've been Money Tipped!
    In the which guide today it recommends either
    Friends Provident
    Standard Life
    or Scottish Widows

    as the top 3 all rounders eg low charges/fund choice/availability

    All I can do to help
  • dunstonh
    dunstonh Posts: 118,551 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    L&G has lower charges than those three and the fund choice of L&G is better than Scot Wid. FP has good low risk range of funds but higher risk range is weaker. Standard Life are fine as well.

    Any reason why Which? didn't include L&G?

    Fund choice is a bit of irrelevant point as we are talking stakeholders here and there aren't any stakeholders that give a decent fund choice for experienced investors or investment advisers.

    Comparing stakeholder pensions is often like comparing apples and asking which will taste most like an apple and look most like an apple.

    Scot Widows, Norwich Union, Std Life and Friends Prov personal pensions are all better than the stakeholder versions. NU's Personal Pension actually has lower charges than the stakeholder.

    With such a small amount of contribution, I wouldnt be inclined to use any pension. Holding back for the NPSS in 2012 would be a better bet as you cannot transfer pensions into the NPSS and employers will be forced to make contributions into the NPSS. In the meantime, a stocks and shares ISA or even a cash ISA would suit.
    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.
  • gmanNL
    gmanNL Posts: 11 Forumite
    Part of the Furniture Combo Breaker
    Dunstoh, your very poor inaccurate response to this fellows query has prompted me to join the forum and make my first contribution. Your advice ranges from decent, to inaccurate and many cases you havn't researched the facts before you put pen to paper. I am sorry to make these statements.

    Firstly, I opened my Scottish Widows Stakeholder plan online via the Hargreaves Lansdowne website this weekend. With a regular premium of £20 per month I was given a Nil commission Annual Charge of 0.53%. They have a good fund range - 22 funds and they also have a schroders managed fund which seems quite decent to me as well as ethical and environmental funds. Is L&G cheaper? I doubt it! BTW I have a personal pension from L&G and I am very dissappointed with their poor service standards and response times when answering letters and telephone enquiries. SW and FP, I can do it online and their telephone service is v good.

    I also opened a Friends Provident Stkaeholder plan £20 per month, online with a 0.8% annual management charge. You re right about that their medium risk profile funds are very strong.

    So I have two great stakeholders and I'm contributing a total of £40 per month. I'm happy with these two products.

    Your advice to wait until 2012 is wrong. Why? Because in the intervening 5 years, we can build up a decent pension fund through regular contributions into it.

    Potential to have £1300 saved over that time, instead of none. I know what I would choose.

    A stocks and shares ISA would also be a good idea but there is no tax relief. They key about pensions is that the funds are ringfenced for retirement. ISA funds can be used anytime!
  • jamesd
    jamesd Posts: 26,103 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    gmanNL, are there ISA funds that outperform the pension versions you have? That would be a reason to wait and use the ISA instead, using whichever route produces the best returns after costs.
  • dunstonh
    dunstonh Posts: 118,551 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Firstly, I opened my Scottish Widows Stakeholder plan online via the Hargreaves Landowner website this weekend. With a regular premium of £20 per month I was given a Nil commission Annual Charge of 0.53%. They have a good fund range - 22 funds and they also have a Schroeder's managed fund which seems quite decent to me as well as ethical and environmental funds. Is L&G cheaper? I doubt it!
    Scot widows have a flat 1% annual management charge. Legal and general start at 0.9% and have fund based discounts which kick in at various points which reduce it even further. What you have is a commission discount bringing the charge down further. A commission discount that would apply just as much to L&G as to Scot Wid. The discount will vary depending on the terms of the supplier you buy it from (different IFAs get different commission rates) but if you look at the starting point, the L&G stakeholder is cheaper than the Scot Widows stakeholder.
    Your advice to wait until 2012 is wrong. Why? Because in the intervening 5 years, we can build up a decent pension fund through regular contributions into it.
    Why is that wrong? You can build up an ISA fund in those interim 5 years. Pay it into the pension now and you cannot transfer it into the NPSS later. Pay it into an ISA now and you will be able to transfer it into the NPSS or a pension later or leave it with the ISA whichever turns out best. My option gives you choice at no cost. Your option commits the individual to one thing only which may or may not turn out to be the best thing.

    My option was to still put the money aside but not to commit to a stakeholder pension which will become obsolete in 2012 when the NPSS will take over as the budget option. Early indications are that the annual management charge will be around 0.3% on the NPSS. So, even with your discount, you are 0.23% a year worse off than the NPSS would be and you wont be able to put the money into the NPSS from the pension.
    A stocks and shares ISA would also be a good idea but there is no tax relief. They key about pensions is that the funds are ringfenced for retirement. ISA funds can be used anytime!
    Pension on commencement pays a taxable income so the tax relief you get at the start is largely wiped out by the tax you pay at the other end. ISAs don't get tax relief but you don't pay tax on the income at the other end. Plus, the ISA gives you choice. The pension commits you to a defined maturity process that may not be ideal. I suggest you read the ISA versus pension thread which discusses this in more detail showing the pros and cons of both options and when its best to use both of them.
    Dunstoh, your very poor inaccurate response to this fellows query has prompted me to join the forum and make my first contribution. Your advice ranges from decent, to inaccurate and many cases you haven't researched the facts before you put pen to paper. I am sorry to make these statements.

    I suggest you get your facts right next time before coming on here making accusations which clearly show you do not understand the subject as much as you think you do. Join in the debate and discuss the issues but to respond in the way you did was out of order.
    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.
  • Rich1976
    Rich1976 Posts: 617 Forumite
    Part of the Furniture 500 Posts Name Dropper Combo Breaker
    Hi

    Personally I wouldn't rate any of the Life assurance companies for Pensions. I've had pensions with L&G, Norwich Union and Clerical Medical in the past and the service from all of them has been hit and miss.

    L&G have a better range of funds, ie trackers as well as managed but had by far the worst Customer service of any company i've dealt with.

    They have too many departments and all too often paperwork went missing.

    These days I stick to Share ISA's. The service from my ISA Provider has always been 100% perfect.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    IMHO we need to be very cautious about suggesting that anyone who can only afford to save 20 -40 pounds a month use a non-company pension.If the person remains poorly paid all his life it's very likely that on retirement all that will happen is that his benefits are reduced by the amount of the pension income and he will have wasted his savings.

    Much better for that person to put the money in an investment ISA where he can take it out and use it if necessary and the income will be tax free.The pension rules now allow you to put large lump sums in right up to retirement, so if he wants to use the pension tax wrapper later, he can.Whereas if he doesn't use the ISA allowance every year, it's gone.
    Trying to keep it simple...;)
  • russetred
    russetred Posts: 1,334 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    hi, I'm trying to get my head round pensions, repensioning or ISAs.I'm a full time carer so obviously on a low income but I have a nationwide stakeholder pension which gets £21.22 a month and increases yearly by I think 3%.The AMC is 1%.I want to get the most from my investments and intend to try and put as much as I can towards my retirement but I'm not sure what is the best way.Most of the advice out there seems aimed at people putting hundreds in a month rather than my small amount.Any ideas hopefully in simple language.Thanks
    "Sometimes life sucks....but the alternative is unacceptable."
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