Know nothing about pensions - advice appreciated

ClaireLR

Hi
I'm hoping someone can point me in the right direction.
Myself and OH run our own business. 
I have a small (approx £1k) pension from a previous employer with Scottish Widows.
We're looking to start saving regularly into a pension. I'm not sure whether I should just start saving into mine and set OH a completely new pension up. Or can/should we have a joint pension in case something happens to either of us. 
I know pretty much nothing about pensions and trying to avoid making a costly mistake, both now and in the future. Not sure where to start.
Any help or advice appreciated. 

Marcon

ClaireLR said:

Hi
I'm hoping someone can point me in the right direction.
Myself and OH run our own business. 
I have a small (approx £1k) pension from a previous employer with Scottish Widows.
We're looking to start saving regularly into a pension. I'm not sure whether I should just start saving into mine and set OH a completely new pension up. Or can/should we have a joint pension in case something happens to either of us. 
I know pretty much nothing about pensions and trying to avoid making a costly mistake, both now and in the future. Not sure where to start.
Any help or advice appreciated. 

Try https://www.moneyhelper.org.uk/en/pensions-and-retirement and click on 'Pension basics'.

MX5huggy

Do you have a limited company, accountant, pay corporation tax, pay yourselves dividends or salaries?

Or just both self employed? If the former talk to your accountant, not that accountants are normally good at pensions but they may know someone that is because it’s going to be better if the company contributes to the pension than you. 

You’ll have a pension each (joint pensions don’t exist or are very rare if they do). 

It very unlikely that adding to the SW pension is not a good plan, I would ignore it for now and when sorted pension decide to move it or not. 

tacpot12

You can't have a joint pension. You each need your own pension.

Whether or not you should pay into your Scottish Widows pension probably comes down to the charges. If a new scheme is going to have higher charges, then paying into your Scottish Widows pension would be a good idea. So check the charges in on your Scottish Widows pension, and get your OH to find a pension that would suit them, and compare the charges.

Have a read of the information here:Pensions for self-employed people (moneyhelper.org.uk)

The NEST pension is ok, apart from the charge they make on money you put into your pension. (They deduct 1.8% of your contributions, which is quite a bit).

Generally, to buy any sort of pension other than NEST or a SIPP you will need professional financial advice, which you might find expensive, both for the advice and what you are advised to buy. You could ask the IFA to limit themselves to Stakeholder pensions as these should deliver better value for money. But there are some other options, such as PensionBee. 

If you find a plan that has lower charges that your Scottish Widows plan, you could transfer the money to a new pension so that it is all in one place and managed in the same way. 

I'd be interested to hear what to end up doing. 

ClaireLR

Thanks all.
We run a limited company. We pay corporation tax, and pay ourselves salaries and dividends. 

I didn't even know you were charged on the money you put in! So will look into what Scottish Widows are charging.

Is PensionBee a good option? 

My accountant has recommended someone but I'm not sure if it's because he's good or because he's in a networking group with him! So I'm trying to steer clear in case I end up making an expensive mistake. 

Can I ask, why does a stakeholder pension deliver better value for money? And if I wanted a lump sum when I retire could I take it regardless of what pension I take out? I know the rules are changing (2028 I think). I'm not due to retire for around 20 years yet. 

dunstonh

We run a limited company. We pay corporation tax, and pay ourselves salaries and dividends. 

That means company contributions to the individual pensions would be better than personal contributions.  Its more tax efficient that way as you get money out of the company without dividend/income tax/NI and the company reduces its corporation tax bill.

I didn't even know you were charged on the money you put in! So will look into what Scottish Widows are charging.

How did you think SW were making money out of it?

Is PensionBee a good option? 

They are targeting pension transfers and not new money.

My accountant has recommended someone but I'm not sure if it's because he's good or because he's in a networking group with him! So I'm trying to steer clear in case I end up making an expensive mistake. 

Most accountants will  refer you to an IFA. It is commonplace for accountants, solicitors and IFAs to work together as there are many overlaps in advice, legal and taxation areas.     An expensive mistake is getting it wrong.   Using an IFA referred by your accountant would avoid mistakes.

Can I ask, why does a stakeholder pension deliver better value for money?

It doesn't.     They did back in 2001 but by around 2005, personal pensions were coming in cheaper in many scenarios.  By 2012, the stakeholder pension was in big decline and a niche option (it can still be best in some cases). Ss.  In 2021, it's unlikely a stakeholder pension would be best value for money.

 And if I wanted a lump sum when I retire could I take it regardless of what pension I take out? 

No.  You would need a pension that facilitates that option. Not all do.

I know the rules are changing (2028 I think). I'm not due to retire for around 20 years yet. 

There is nothing happening in 2028 that affects you then.

MX5huggy

Go and see your Accountants recommendation as long as they are an IFA emphasis in the “I”. Your first meeting should be free not that there will be an explicit charge for subsequent meetings. Yes their fees will be more than just opening a SIPP with Vanguard (or even adding to your SW pension) but they will open up tax savings which will far exceed these. Theoretically you can do it on your own probably but theoretically you can do your company accounts on your own but you don’t, your time and effort are better spent elsewhere. 

There are 2 types of accountants, ones that just think they are an extension of HMRC, and account for every penny and those that see their job to minimise the tax liability. A company I worked for changed, suddenly the director/owners had new phones, got company cars, pensions and life insurance etc. 

Albermarle

I didn't even know you were charged on the money you put in! So will look into what Scottish Widows are charging.

Normally you are not charged when contributing to a pension, but you are charged for the money that is in the pension , usually a % charge .

NEST is unusual that there is a initial charge but there ongoing charge is rather low .

Remember that a pension is just an administrative entity that deals with contributions, withdrawals, tax etc.

Your money is actually in investment funds within the pension and it is important that the right funds are chosen for your situation.

So the choice of pension provider, is less important than the choice of investment funds. 

Nurse2047

have a maybe have a read of this, I use target retirement funds with Vanguard

https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds

[Deleted User]

Going to an IFA might be worthwhile but keep it to a one-off transactional advice. Whatever a good IFA sets up should be very easy to run on auto-pilot.  Some IFAs have preference for platforms and schemes requiring ongoing support and charges. Thats a bad deal. 1% may not sound like a lot but when every pound you put in is “taxed” again and again for decades, the cumulative impact is huge. 

dunstonh

Be wary of people on the internet trying to put bad ideas into your head when it is them that lacks the knowledge and understanding.     In some cases, they may be right. In some cases, they may be wrong but they usually think they are right all of the time.