Newbie - Stakeholder vs SIPP

NStephanie83

Hello

I am unemployed and my situation is as detailed under forums.moneysavingexpert.com/showthread.php?t=5811451

I am confused between Stakeholder pension VS SIPP pension and not sure which pension scheme to join. My husband will be contributing the money and we are looking for 20% tax relief.

I am thinking between
- Aviva stakeholder pension
- AJ Bell SIPP
- Hargreaves Lansdown SIPP

I currently don't have any ISA.

Please can you help.

dunstonh

Stakeholder vs SIPP

Bicycle vs Ferrari.

Stakeholder pensions are the basic option. One of the best options in 2001 but in 2018 it is a niche option. Mainly aimed at smaller contributions and for people that really dont know what you are doing. You cant do much damage in a stakeholder pension.

Personal pensions are the middle ground but you have not included them.

SIPPs are the experienced investor option. Generically, they are the most expensive option but nowadays you can get some low-cost options. They are more complicated and you can invest in low cost and high-cost assets. Those assets will not have had any due diligence carried out on them bar a minimal amount (unlike stakeholder and pension pensions). You can also hold unregulated investments with no FSCS protection (which is why the biggest area of complaint in pensions for the last few years has been about SIPPs. It is also why all the scams use SIPPs. Although some have moved to SSAS

The advice market uses stakeholder pensions as a niche and is mostly personal pension but is increasingly moving to SIPP.

The DIY market has nearly universally gone to SIPP (DIY market is cost focused and SIPPs are cheaper to offer a provider due to lower regulatory requirements and lower consumer protections) and ignored personal pension and its only a handful of insurers offering a stakeholder on the DIY side.

Brynsam

dunstonh wrote: »

Bicycle vs Ferrari.

....and sometimes 2 wheels beats 4. Stakeholder pensions offer little by way of financial reward to IFAs, which could be why the advice market 'uses them as niche' !

They are simple and straightforward - or at least as much as anything in pensions can be described that way. Many 'ordinary' (non-SIPP) personal pensions now have stakeholder compliant charges unless you opt for some of their racier investment options.

See https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/contract-based-schemes for info on all these types. You can always give TPAS a call (details on their website) to discuss in general terms. Although they can't give financial advice, they do give accurate, helpful and impartial information.

Dox

SIPPs offer all sorts of flexibilities and investment options that you won't find in a stakeholder/personal pension - but if you don't need them, why buy them?

If later in life your financial situation changes (ditto your wish to take an active part in pension investment decisions on a regular basis), you can usually transfer the funds you have built up in your stakeholder/personal pension to a SIPP, so it isn't a one-off decision which can never be changed.

dunstonh

....and sometimes 2 wheels beats 4. Stakeholder pensions offer little by way of financial reward to IFAs, which could be why the advice market 'uses them as niche' !

It's more that you can get cheaper PPPS than SHPs. However, there are times that SHPs do fit. Mainly the small premium side as PPPs tend to have higher minimum premiums.

Alexland

From what we know of the OPs situation in the previous thread I see many advantages to the simple Aviva stakeholder.

My wife works part time and we contribute most of her income to her workplace pension (via PAYE salary sacrifice) and the rest to an Aviva stakeholder (to get a government contribution on her untaxed income). Then we live frugally on the scraps of my income that do not get invested.

It's a nice simple product and she is happy with it.

Alex

zagfles

Brynsam wrote: »

....and sometimes 2 wheels beats 4. Stakeholder pensions offer little by way of financial reward to IFAs, which could be why the advice market 'uses them as niche' !

Indeed, whereas most personal pension providers insist you go via a middleman, so no wonder the middlemen want to steer you towards them

Luckily the likes of Cavendish will act as middleman for a small fee rather than the usual high advisor fees: https://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/

bluenose1

I am thinking of starting a simple pension scheme in addition to my works pension.
The Aviva one mentioned above sounds a possibility and I have also been looking at a Hargreaves Lansdown SIPP.
From what I can see the HL one is slightly cheaper at 0.45% and it looks simple enough to set up online.
I just want to be able to save in it for a few years then drawdown easily without any financial penalties.

dunstonh

The Aviva one mentioned above sounds a possibility and I have also been looking at a Hargreaves Lansdown SIPP.
From what I can see the HL one is slightly cheaper at 0.45% and it looks simple enough to set up online.

HL is 0.45% PLUS fund charges.

The stakeholder pension is bundled with charges.

Indeed, whereas most personal pension providers insist you go via a middleman, so no wonder the middlemen want to steer you towards them

And the anti-IFA brigade seem to forget that cheaper products can exist on the advice side the break even point for advice can be as little as 2-4 years. For pensions that can be in place for many decades, a couple of years is not necessarily an issue. Not that an adviser option seems suitable here given the small amounts.

I just want to be able to save in it for a few years then drawdown easily without any financial penalties.

Stakeholders wont do drawdown. So, you will need to transfer out again when you want to do that.

zagfles

bluenose1 wrote: »

I am thinking of starting a simple pension scheme in addition to my works pension.
The Aviva one mentioned above sounds a possibility and I have also been looking at a Hargreaves Lansdown SIPP.
From what I can see the HL one is slightly cheaper at 0.45% and it looks simple enough to set up online.
I just want to be able to save in it for a few years then drawdown easily without any financial penalties.

HL are quite good value for smallish amounts, you'll need to add fund charges to the platform charge but they have trackers funds under 0.1%. Could always save in a personal/stakeholder pension then transfer to someone like HL when you want to drawdown, they don't charge for drawdown.

zagfles

dunstonh wrote: »

And the anti-IFA brigade seem to forget that cheaper products can exist on the advice side the break even point for advice can be as little as 2-4 years. For pensions that can be in place for many decades, a couple of years is not necessarily an issue.

Yeah right - Cavendish offer pensions under 0.5%, advice charges alone are typically 0.5% or more. I somehow doubt an IFA could get much cheaper than Cavendish anyway. Nowhere near enough to make up for the advice charge anyway.