Which stakeholder pension to choose???

graeme81

Hi,
I'm 31 and want to start-up a stakeholder pension due to the fact I wont be able to join a company pension for about 4-5 years and don't want to leave it much longer (long story and don't want to bore you!).

Been looking on the internet and am tempted with Virgin's stakeholder pension because of the sheer ease of the set-up process but noticed they only invest in two funds where as others seem to invest in lots, lots more.

My question is would it be better to choose a pension which invest in lots of funds or is just two funds adequate? And should I possibly choose a slightly higher risk investment scheme as I've started a little late but also got at least 30yrs before retirement so I can try and claw back some growth on the years I've missed out on?

Graeme.

hugheskevi

I'm 31 and want to start-up a stakeholder pension

Why did you decide a Stakeholder was appropriate rather than a personal pension or a SIPP?

Been looking on the internet and am tempted with Virgin's stakeholder pension because of the sheer ease of the set-up process but noticed they only invest in two funds where as others seem to invest in lots, lots more.

Most pensions are easy to set up, I wouldn't have that high in my list of priorities when deciding provider.

Virgin take advantage of their strong brand to offer a poor product at a high price.

My question is would it be better to choose a pension which invest in lots of funds or is just two funds adequate?

Depends on your investment needs. However, usually you would be debating whether a choice of about 30 funds would be sufficient (eg Stakeholder, although they are unlikely to be the best choice unless you are contributing a very small amount), whether about 200 would be better (typical personal pension, although some personal pensions have much larger choice), or whether you would like to be able to choose pretty much everything out there (1000+ funds, eg SIPP).

And should I possibly choose a slightly higher risk investment scheme as I've started a little late but also got at least 30yrs before retirement so I can try and claw back some growth on the years I've missed out on?

You should invest according to your risk profile. Having 30 years to retirement would generally mean you can tolerate more risk than someone older but it is more complicated than that. How much loss in a single year are you happy to experience - nothing, 5%, 10%, 60% are all reasonable answers, but lead to very difference asset allocations. Or perhaps you don't care about single year losses as it is a pension and you only care about probable outcomes over 30 years, that again leads to different answers, it is a very individual thing.

Trying to make up for a late start isn't a good reason to influence asset allocation - firstly work out your risk tolerance, work out an appropriate asset allocation based on that, and then work out how much you need to contribute to meet your retirement goal based on that asset allocation and expected return along with your target retirement age.

When you have done that, choose the provider who offers the most suitable product for what you want.

You can do all that yourself (simple calculators/tools for all things are commonplace on the internet, as well as model portfolios and discussion of them but it will take a fair amount of time to get to place where you are confident in taking decisions) or use an IFA.

xylophone

http://www.unbiased.co.uk/find-an-adviser?gclid=CK--6ueznbgCFc3HtAod2VMAow You could try here.

jamesd

As long as you're planning to invest at least £50 a month you should forget about using Stakeholder pensions and pick a normal personal pension instead, or the SIPP type. The formerly competitive Stakeholder pricing is no longer competitive with the best of the normal pension market.

Age 31 is plenty of time to get things going and set yourself up for a financially sound retirement.

dunstonh

Been looking on the internet and am tempted with Virgin's stakeholder pension because of the sheer ease of the set-up process but noticed they only invest in two funds where as others seem to invest in lots, lots more.

Just about one of the worst stakeholder pensions on the market. Expensive and fund choice is poor (and actually inconsistent in risk with the average UK consumer)

My question is would it be better to choose a pension which invest in lots of funds or is just two funds adequate?

one fund may be adequate if it is the right fund. Problem is the virgin stakeholder has no such fund.

Why stakeholder and not personal pension?

GhIFA

hnagra wrote: »

We offer a full one2one bespoke tailored service in regards to your query, please contact me on [EMAIL="harminder@figfinancial.co.uk"]harminder@figfinancial.co.uk[/EMAIL].

You do realise that all your spam posts last week were removed don't you?

It's against forum rules to advertise. Also, on checking the website based on your domain name you don't give any indication that you're authorised to carry out such a service, and neither does the FCA register..........

FatherAbraham

graeme81 wrote: »

And should I possibly choose a slightly higher risk investment scheme as I've started a little late but also got at least 30yrs before retirement so I can try and claw back some growth on the years I've missed out on?

Just because one wants or needs a specific growth rate, it doesn't follow that the market will provide it. Furthermore, not all risk is rewarded for a specific investor.

The investment risk that one needs to worry about is of not having enough capital to buy/generate the reliable income one needs in retirement.

Another significant risk is that one won't be able to work (and therefore contribute) for as long as one had hoped (for example, employment statistics show that men over 55 who lose their jobs have a tough time finding new positions at all, let alone ones which pay as much as they were formerly earning). This gives rise to the notorious phenomenon of forced early retirement on subsistence funds. http://news.bbc.co.uk/panorama/hi/front_page/newsid_9443000/9443259.stm

Taking on higher investment risk is useless if one has not saved enough in the first place. This may require curtailing current spending habits or lifestyle (I speak from first-hand experience). Either one pays for retirement now, or one pays for it in retirement.

Where investment risk on individual asset classes can be diversified away, by holding a portfolio of different classes, a neutral investor should use this. As a crude example, an investment in a single enterprise has a long-term expected return about the same as that of the average enterprise (the entire equity market), but is much more volatile than holding shares in a mix of enterprises -- the additional risk of holding a single company is unrewarded.

One cannot guarantee that a long holding period will diversify away the risk of one's investments.

Stakeholders with a range of investment options similar to a basic employer-provided defined-contribution scheme can be had for about 0.5% p.a. if one goes via Cavendish Online (an MSE recommendation). Note that for some of these stakeholders, the low charges cap means that real-estate funds are excluded.

Personal pensions are also available there. They seem to have higher minimum limits on contributions (for example, stakeholders accept one-off payments from £20 gross; some of the PPs there require £500 or £1000).

Warmest regards,
FA

redbuzzard

Two very good points in FA's post worth underlining.

One, "low risk" funds are a high risk to a younger person's pension.

Two, don't assume that you will have the surplus income to contribute right up to planned retirement. I lost a well paid job at 59, 6 years before normal retirement age for my best pension. Another 3 or 4 years would have made a lot of difference to my retirement income, and certainly to the savings I can expect to have at 65.

Fortunately I never assumed that I would be able to keep earning at that level past 60 - the usual thing being to be shuffled out at 55-60, so I had a good run.