Choosing a Personal Pension - charges, bid-offer spread; what to consider?

LimeyYank

I've just become self-employed an have setup muy own limited company. I'm 54 and would ideally like to retire at 60.

I've contributed to pension schemes throughout my employed life an, now I'm self-employed, want to continue to save for a pension.

None of my previous schemes will allow me to continue to contribute to them so I need to take out a new plan.

I believe the factors I need to consider , when choosing a provider, are:

• Performance - how do I get a view of this with nothing more than the internet (or do I just trust that a household name should at least be reasonable).
• Charges - what is reasonable?
• My level of risk appetite - certainly no more than meduium (whatever that may mean)
• Bid-offer spread - what is this? And what is a reasonable figure.

Anything else that is IMPORTANT to consider (I want to keep the number of considerations to a manageable number)?


Any particular plans folk think I should be looking at?



As I implied, I'm expecting to be contributing for about 6 years. And I think I could possibly contribute around £20,000 for each of those years.


Thanks in advance for any advice.


Andy

philwal_2

You can monitor fund performance via the Internet websites such as trustnet and morningstar will hold this information.

Charges will vary from provider to provider you should expect to pay in the region of 0.3% per annum for the product with fund charges on top again this will vary dependant on funds from 0.1% to 1% +.

A moderate investor would have a mixture of assets within their portfolio having a modest exposure to equity holdings along with property bonds etc

Bid/offer spread is the difference between the price you pay for the units within your plan and the price that you sell them and is typically in the region of 5%. This only tends to apply to older contracts and would not be something alot of newer contracts will have although some funds will still have bid./ offer spreads

Would you feel comfortable investing the monies yourself there are many do it yourself platforms if you are

An alternative would be to maybe speak to an ifa many will give you a free initial meeting to discuss your options.

greenglide

I've just become self-employed an have setup muy own limited company.

If you have formed a limited company you are not self employed, you are an employee of that company.

This means that your employer (the limited company) can make pension contributions on your behalf which can be set against tax by the employer.

What kind of business? Are you an IT contractor or similar?

LimeyYank

Thanks both.

Looks like I need not worry about bid/offer then; I want to keep this (very) straightforward - a reason I'll not be looking to manage my own investments.

Thanks for the heads up on trustnet and morningstar; I'll take a look.

One provider I've been considering has charges of 0.2% for the service and 1.23 - 1.40% for the fund (1.36% for the medium risk I'm considering) so the fund charge appears a little expensive from what you say.

I am an IT Contractor and am aware of the fact I can make the contributions via the company - though I understand that there are not significant benefits from doing in this.

Thanks again; very useful and helpful.

Andy

greenglide

I am an IT Contractor and am aware of the fact I can make the contributions via the company - though I understand that there are not significant benefits from doing in this.

Yes there are. The company can make payments into your pension scheme which reduces its profits, no income tax for you, no NI for you or them, no corporation tax for them.

Does IR35 still apply to IT contractors and if they are caught you can't pay yourself by dividends, employ you wife etc?

I remember the days when I did that:)

dunstonh

One provider I've been considering has charges of 0.2% for the service and 1.23 - 1.40% for the fund (1.36% for the medium risk I'm considering) so the fund charge appears a little expensive from what you say.

Thats very expensive for DIY using simple solutions. An adviser can get you under 1% reduction in yield [due to charges] very easily including the cost of advice. You can do that with DIY too

I am an IT Contractor and am aware of the fact I can make the contributions via the company - though I understand that there are not significant benefits from doing in this.

Yes there is.

LimeyYank

Just to be clear, those prices are NOT DIY.

I'm outside of IR35 and can pay myself (and my wife) dividends.

I thought the limited benefit of paying pensions through the company related to the fact that although you get the benefits mentioned, you don't get tax relief on your contribution - or something like that. The net result being a benefit but a small one.

Andy

dunstonh

I thought the limited benefit of paying pensions through the company related to the fact that although you get the benefits mentioned, you don't get tax relief on your contribution - or something like that. The net result being a benefit but a small one.

It allows you to get money out of the company without paying NI and reduces your corporation tax.

Just to be clear, those prices are NOT DIY.

if you pick the provider and the funds then that is DIY.

LimeyYank

OK. Thought by DIY you meant self management of funds - thanks.

Andy

dunstonh

LimeyYank wrote: »

OK. Thought by DIY you meant self management of funds - thanks.

Andy

If you dont use an IFA then it will be self management of funds. As in you need to pick the investment funds. The money itself will be managed within the funds but every fund has a different risk profile and strategy. You have to ensure that they are suitable for you (or use an adviser if you dont want to).

EdSwippet

LimeyYank? Are you a US citizen?