Stakeholder pension or SIPP?

Bluebetty_2

Hi,
I became self employed last year so as the end of the tax year approaches I'm looking to open a pension to make the most of the 2018/2019 tax saving. Have previously always been in an occupational scheme so have never given pensions a second thought. I'm financially literate but a total novice to investing, and very risk averse. I'd assumed I'd open a SIPP but have read other comments on here that they're not for everyone. What might be the best option for me, and how much time/attention (and acceptance of risk!) does a SIPP take? Grateful for any advice!

FatherAbraham

How does a very risk-averse person come to choose self-employment?

Dox

Given how close we are to the tax year end, open a stakeholder pension for now. You can always transfer it later (no exit penalty) when you've done some more research and decided whether a SIPP is for you.

Dox

FatherAbraham wrote: »

How does a very risk-averse person come to choose self-employment?

Certain risks are much easier to control if you're self employed - particularly if you have a strong client base. Sometimes, though, there is no choice but to go that route, whatever risks you worry about!

dunstonh

I'm financially literate but a total novice to investing, and very risk averse.

What risks are you averse too? The lower the investment risk, the greater shortfall risk and inflation risk. The latter two are more damaging than investment risk. Although your behaviour with investments could be the most damaging.

stakeholder pensions are the ideal option for small contributions where you dont want to be picking from 30,000 investment options. SHPs have around 10-30 investment funds typically. All funds have had due diligence carried out on them.

Personal pensions are the middle ground. Typically they offer the stakeholder fund range but also a wider range of funds on top of that. Charges can often be cheaper than SHP. All funds have had due diligence carried out on them. However, most PPPs are retailed via IFAs.

SIPPs are the experienced investor option. 30,000+ investment options, none of which have due diligence carried out on them (that is your job or your adviser). There are plenty of simple options available within that 30,000+ Potential to be the most expensive option but can also be the cheapest. The DIY market mostly picked SIPP as it has lower regulatory standards and less FSCS protection. So, lower costs to offer. The pension market as a whole is trending to SIPP.

BLB53

What might be the best option for me, and how much time/attention (and acceptance of risk!) does a SIPP take? Grateful for any advice!

I would suggest a SIPP for lower costs and flexibility. Once set up and you fund(s) selected, set up your monthly DD and that's job done. There are some very simple multi-asset options but something like Vanguard Lifestrategy is very popular with individual investors.

Suggest have a read of 'DIY Pensions' by Edwards and you should get a good idea whether this is for you.

xylophone

You could begin with a stakeholder and transfer later if you wish.

https://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/aviva/

robber2

Sole Trader or Limited Company Director? Your status has a major impact on Pension Options.


Rob

Bluebetty_2

How does a very risk-averse person come to choose self-employment?

I ask myself the same! Purely circumstantial decision but seems to be paying off so will stick with it for now.

What risks are you averse too? The lower the investment risk, the greater shortfall risk and inflation risk. The latter two are more damaging than investment risk. Although your behaviour with investments could be the most damaging.

This is where my dilemma is, in other financial areas I'm careful to get the best return, but the uncertainty and possible incompetence of running my own pension fund is daunting! Seems SIPPs are very much normalised in the pension market now as being great way to get a good return, but I'm not sure it's that easy?

Thank you to those who pointed out I could start with stakeholder and transfer over, that seems like the best way to make a decision pre- end of tax year!

Bluebetty_2

Sole Trader or Limited Company Director? Your status has a major impact on Pension Options.

Sole trader at the moment, unlikely to change for a couple of years at least.

Embarrassed to say I've read DIY Pensions and still non the wiser about which is best for me... Probably a sign I'm not cut out for pension management!

BLB53

Embarrassed to say I've read DIY Pensions and still non the wiser about which is best for me... Probably a sign I'm not cut out for pension management!

Then stakeholder or possibly Robo Advisor such as Nutmeg, Moneyfarm etc. could work?