Personal pensions: do adviser charges upfront help your pension grow more, long-term?

Brynsam

Silver66 wrote: »

Thanks everyone.

I’m so out of my depth here, I really don’t know what to do. Can anyone recommend a way forward? I’ve been researching this for weeks, and still haven’t made progress. Even when phoning the different pension providers, they can’t tell me straight up, in numbers, what their charges are, which makes it very difficult to compare them and make a decision.

Do something rather than nothing (and well done for persevering this far in such a foreign climate!). Open a simple stakeholder pension and put some money into that, using their default fund option, until such time as you have confidence to take any sort of investment decision for yourself.

Google on 'open a stakeholder pension online' and take your pick.

Silver66

Thanks Brynsam.

I totally agree with you about doing something sooner rather than later. At the moment, I'm thinking that I might go for the company that my friends are using, because I'll only be investing £2,880 (£3,600 with tax relief) this year, as this is the maximum I can get tax relief on this year. The 3% adviser charge would mean that I pay £108, which would probably be cheaper than seeing an IFA separately to choose funds for a DIY pension. (I've read that IFAs charge on average £150/hour.) I could then get on-going advice all year, which would help anyway because I'm starting out as a freelancer and need some advice on how much I need to be earning in order to have a reasonable income in retirement (I think that DIY pensions offer an automatic calculation of this on the annual statement, but it would be good to have the chance to get on-going advice this year that I start out). The company that my friends use doesn't charge you if you decide to switch to a different scheme, so if after year one my pension doesn't look in good shape, I can try a different scheme.

Thanks for the advice on stakeholder pensions. I've just looked at Legal & General. I see that they have a default lifestyle fund, which I would probably go for, because I'm not confident enough yet to choose my own funds. I'm just a bit confused: what is the difference between stakeholder pensions and personal pensions? As far as I understand, stakeholder pensions can't charge more than the maximum set by the government, but are there any other differences? Do stakeholder pensions tend to perform better or worse than personal pensions, or does it all depend on which funds your money is invested in?

Silver66

Thanks AnotherJoe,

I think I want a type of pension where I can opt for a default choice of funds, as seems to be the case with some stakeholder pensions (I don't know if personal pensions offer default portfolios as well?). I've just been on Legal and General's site, and they have a guide to choosing investment funds. Just from reading it, I realise that I'm not yet confident or informed enough to make a good choice. I could decide to read up on it (there was a book recommended, 'DIY Pensions' by John Edwards, elsewhere on this forum) and then in a year's time switch to a DIY pension, but just right now I think I need to choose a pension where the decision about funds is already made for me. I think that leaves me with two options: 1) go for a stakeholder pension with a default portfolio; 2) see an IFA to choose my funds for me; 3) go for a scheme similar to the one my friends use, where an IFA chooses the funds and actively manages them, switching them round if they're not performing well. Are there any other options?

AnotherJoe wrote: »

...They arent seeing that they've likely lost multiple £10ks and maybe £100k's compared to low cost funds and simple advice instead of switching every five minutes.

Someone here the other day took badly to being told that their 40% growth (which to be fair was the result of not very good DIY) which they though was pretty good and up to that point were "very happy with" , would have been 100% had they just gone for boring index funds.

Can you tell me about what kinds of low cost funds and boring index funds might do well like that? (I'm very new to the subject of choosing investment funds.) Thanks!

Silver66

Thanks Prism,

Yes, sorry I wasn't clearer in my earlier post. I spoke with Aviva and they said that for any other pension than an SIPP, I would need to see a financial adviser first.

Silver66

Thanks for your reply Dunstonh.

dunstonh wrote: »

That sounds more like transactional advice than ongoing advice.

i.e. they have no obligation to provide any ongoing advice and probably only officially do it each time there is a top up. Chances are they are using simple investments (such as multi-asset funds) that do not require ongoing servicing.

Can you tell me a bit more about what are simple investments like multi-asset funds that don't require ongoing servicing? I'm new to the topic of investing.

dunstonh wrote: »

So do other providers through advisers. For example, you can get 0.34% easily with an adviser for a transactional case.

Is this a pension that offers 0.34% and ongoing advice? Sorry, I'm a bit confused. Or do you mean if I saw an adviser in the first instance, to choose my funds, and then went for a pension with an 0.34% annual charge?

dunstonh wrote: »

Investment choices are opinion. Our model portfolio has been beating some of the frequently mentioned multi-asset funds on this board for a number of years. However, these cost more and there is no guarantee it will continue. Its a choice you decide. Despite that, we still put plenty of people in simple multi-asset funds as not everyone is suited to the more advanced portfolio methods.

Which model portfolio is this? I'm interested to know. Also, what are simple multi-asset funds?

Thanks for your thoughts.

dunstonh

Do stakeholder pensions tend to perform better or worse than personal pensions

Its not the pension that performs. it is the investment that performs. Put the same investments in a SIPP, PPP or SHP and you get the same returns.

Stakeholder pensions are niche nowadays as most personal pensions are cheaper but can offer the same investments plus more.

I'm just a bit confused: what is the difference between stakeholder pensions and personal pensions?

Stakeholder is a defined charging method. It meets stakeholder rules. Personal Pensions dont have to meet those rules. In 2001, stakeholder pensions were cheaper. Today they are not.