Inexperienced - SIPP, stakeholder (or other) pension?

Not_Me_Officer

I have recently gone with a SIPP for a few reasons (probably all wrong). At 34 i know i needed to do something, i knew something was better than nothing even though i was lacking in knowledge & confidence. I started at 28 with a S&S ISA paying in a small monthly amount. My employer will only ever pay in the bare minimum to the company pension so i put in the minimum to obtain that. I see SIPP mentioned throughout the forum, i read a number of posts and bought a couple books which gave me the confidence to just have a go. VLS100 and V-Emerging Markets. While that's ticking over for 5 years i've got time to keep reading & keep trying to learn. I stayed away from the Stakeholder Pension as anything i read about these was that they were old news, limited, dated, so i assumed not so great.

Only as i've kept reading i've realised they may not be so bad & that there may be other options out there that i'm not aware of that may be even better.

On to the reason i'm making this thread - a couple relatives of mine who both want to start paying in to a pension.
The male (25 next month) has been paying a varying amount in (recently £150-£200 pm) with HL in a S&S ISA since i told him to get started at 19 years old & not make the same do-it-later mistake that i made. His pot is £11,500.
The female (26) has been paying only £50pm pretty much throughout due to part time work. Thankfully this is changing to full time next month so she will increase this. She started at 20, also with HL in a S&S ISA & her value is £4,200.

As said they both want to come away from the S&S ISA and go in to the pension wrapper, however they both know less about investing than even I do. It was recently suggested to me about them going in to a stakeholder pension rather than SIPP due to its simplicity, low set up fee (Cavendish Online > Aviva @ £35).

As said, i thought Stakeholder pensions were not supposed to be that good - often a lack of choice is given, but then i guess too much choice can be just as bad if you don't know what to do with it. If someone wants a simple smartphone with basic simple menus then you don't give them an Android, you give them an iPhone. If they just want to call and text then you don't give them a smartphone at all, it's overkill & they can wind up lost.


So given the bit of background for the pair of them would you think a stakeholder pension would be a good idea? Is there any reason you would go for a SIPP (in their situation) over it? Is there something else out there that would be better than both?


Just for the record - company pensions and salary sacrifices are non options. Both work for companies who have grumbled about setting up so they only pay in the minimum and salary sacrifice has been said to be not available. Both are basic rate tax payers too.

dunstonh

I stayed away from the Stakeholder Pension as anything i read about these was that they were old news, limited, dated, so i assumed not so great.

They are more niche nowadays. Mainly small values/small premiums and ideal for people that really dont know what to do. Child pensions etc.

once you get above £20k then you find that personal pensions tend to come in cheaper than stakeholder.

However, the DIY market has shunned stakeholder and personal pensions because DIY providers generally focus on low cost and stakeholder/PPP are more expensive to offer to consumers than SIPPs because of the lower regulatory standards and requirements that SIPPs have.

As a novice investor (especially one with really no interest in finding out things) you can make a right pigs ear of things with a SIPP. There is far less you can do wrong with a stakeholder. The worst thing you can probably do is pick a deposit fund for the next 30 years.

Both work for companies who have grumbled about setting up so they only pay in the minimum and salary sacrifice has been said to be not available.

Most of these types will allow overpayments but the employee and not grumble about it at all. Most AE schemes are structured similarly to stakeholder but often cheaper still and just as simple.

Not_Me_Officer

dunstonh wrote: »

They are more niche nowadays. Mainly small values/small premiums and ideal for people that really dont know what to do. Child pensions etc.

once you get above £20k then you find that personal pensions tend to come in cheaper than stakeholder.

However, the DIY market has shunned stakeholder and personal pensions because DIY providers generally focus on low cost and stakeholder/PPP are more expensive to offer to consumers than SIPPs because of the lower regulatory standards and requirements that SIPPs have.

As a novice investor (especially one with really no interest in finding out things) you can make a right pigs ear of things with a SIPP. There is far less you can do wrong with a stakeholder. The worst thing you can probably do is pick a deposit fund for the next 30 years.


Most of these types will allow overpayments but the employee and not grumble about it at all. Most AE schemes are structured similarly to stakeholder but often cheaper still and just as simple.

I get the impression then that you're basically saying that if someone is thinking of going with a stakeholder then they'd be just as well going with their company pension (even if their employer only pays in the minimum %).

Is that correct? For the record we'd be talking about Nest & Now here at this moment in time & both do allow additional payments. Now seem to allow you to alter this online to be percentage based whereas Nest seem to allow you to pay in extra money amounts, but nothing percentage based.


"you can make a right pigs ear with a SIPP" - currently they're both investing in the VLS range. They both understand that they have 40-50 years of work left in them so they will see a number of ups and downs & they both want an invest it and leave it approach. How they react when the market drops well we'll see then if they still understand that they're on a long term rollercoaster ride but for the time being while they may not be investing in the 'best' things, they wouldn't be making a pigs ear of it with this approach?