SJP vs. Aegon for Company Pension

periwinkleperkins

I've been reading all the posts about SJP and the "excessive" charges for their pensions, for most people it's clear there are far better options however my situation is a little more complicated.... I am employed by a family owned business, and the family have always enjoyed a good relationship with SJP (which they want to pass on to employees) so they offer employees a standard Aegon pension or enhanced SJP pension.

If I am right, from April onwards...

Aegon would receive employer 3% on earnings between £6,032 and £46,350 so roughly £1200 a year (based on this being a banded earning scheme at minimum auto enrolment contributions).

OR

SJP would receive employer 4% on £60k earnings so roughly £2400 a year.

My main question is whether you think the extra "free" employer contributions outweigh the introductory charges and AMCs for SJP (assuming similar underlying fund performance) ?

I'd also be interested to understand whether you would put additional contributions (above the employee 4% minimum, thinking around 8% additional) into the SJP pension through salary sacrifice or into a different pension elsewhere?

AlanP_2

I would go with the SJP option to gain higher employer contribution and I would add via Salary Sacrifice.

Then, as soon as possible (there may be penalty charges in early years) move the accumulated sum out to a much cheaper alternative.

BTW - You won't get the SS benefit unless you use one of the 2 options offered via your payroll.

ColdIron

AlanP wrote: »

Then, as soon as possible (there may be penalty charges in early years) move the accumulated sum out to a much cheaper alternative.

If I recall correctly SJP impose a tiered exit fee (as much as 6%?) on pensions if you leave within 6 years. Probably worth checking out before you commit

periwinkleperkins

Yes, the early withdrawal fee has a tiered approach ranging from 6% in year 1 through to 1% in year 5.

The management fees on SJP are nearly 3 times higher than Aegon (1.8-2.1% vs 0.7%) and both underlying fund choices have similar performance in the 3rd quartile of the benchmark on TrustNet.

Looks like all things being equal, the extra employer contributions outweigh the fees from SJP.

The only remaining question is would AVCs be better placed in a separate pension (with lower fees and better performance) or should I try to keep all my contributions in one place so that I benefit from buying more units when the funds drop in value and get the salary sacrifice benefits?

Albermarle

The only remaining question is would AVCs be better placed in a separate pension (with lower fees and better performance)

If the 0.7% with Aegon includes the fund(s) cost, then this is quite competitive with most alternatives , depending on the exact fund choice , so probably would be easier to make any extra contributions to that . If the 0.7% is then + another 0.7% for example then could be worth looking elsewhere,
Having said that it depends on the fund (s) as If they are actively managed they will be significantly higher in charges than a passive fund, whichever scheme you are with.

periwinkleperkins

Having said that it depends on the fund (s) as If they are actively managed they will be significantly higher in charges than a passive fund, whichever scheme you are with.

I’m led to believe the 12 funds suggested by SJP are all actively managed and Aegon is more akin to tracker funds in a “lifestyle” option, that said I’m not really sure the actively managed funds are outperforming trackers by sufficient margin to warrant the price hikes?

If I had the time to learn, I’d put the AVCs in a SIPP but right now that just isn’t possible so I want the best growth for the least involvement so accept I’ll gave to pay higher fees somewhere along to line...

Albermarle

If I had the time to learn, I’d put the AVCs in a SIPP

Just FYI , although SIPPS do offer a very wide range of investments , you do not have to make use of the choice .They usually offer recommended funds where you just need to put in your risk appetite, for investors who are not confident to make their own choices . In this respect they are very similar to personal and workplace pensions nowadays.