Looking to start a pension - advice needed

bpk101

Hi

I'm looking to start a pension before the start of the new financial year in April. At 45yo i'm very late to the party and don't wish to leave it any longer. 

I'm a freelancer / sole-trader with a relatively stable and consistent income and i'd be looking to contribute £500 a month to begin with (£625 including the added 20% relief at source). In terms of my retirement plan i'd be looking to retire at 65 and start drawing down income from the pension when I do. 

I've done a fair bit of reading and research and a lot of it pointed to Vanguard Target Retirement Funds as being a no-brainer for people like me who want a low cost, easy to set up option that manages the investments for me. 

However, an IFA i've been chatting to recently as part of a free introductory consultation has advised me against TRF's due to them being too regimented (automatically changing asset allocation - possibly at a sub-optimal time) and de-risking too early.

It's entirely possible the IFA is steering me towards one of their own products but their sentiments do reflect other opinions i've since come across online.

Given i'm desperate to get this set up before April, can anyone shed any light on what might be the best option(s) for me?

Should i jump into bed with the IFA or try and go it alone with an auto-invest SIPP like the Vanguard TRF?

Thanks.

andyjb999

I am no expert but if you are unsure you can open a Vanguard sipp initially and deposit money into. In future you can always transfer to a different scheme should you choose. 

Dazed_and_C0nfused

I think a lot of people would tend to agree with the IFA.

You don't have to choose between an IFA and TRF, there are plenty of other options but if you went for something like Vanguard Lifestrategy 80% or 100% funds (not a recommendation just an often mentioned choice on here) them you would need to decide for yourself when to start moving to a lower risk option.  And how much of your fund should be moved.

What's the importance of starting before April?

TimSynths

I have a Vanguard SIPP and simply went with my own fund choice in equities. Its not my only pension and probably accounts for 15-20% of my pension savings. I've found the process of using them very good and straight forward. I originally just had an ISA with them but was so pleased and happy I moved some pension savings to them too.

andyjb999

Lots of videos on YouTube explaining the various Vanguard funds to help you with selecting what's right for you.

bpk101

Dazed_and_C0nfused said:

What's the importance of starting before April?

So it's up and running in time for the new tax year which is what i base all my annual budgeting around. My pension contributions and the subsequent tax relief will be factored in to this new 2022/23 budget. 

Dazed_and_C0nfused said:

You don't have to choose between an IFA and TRF, there are plenty of other options

Can you help me understand what some of the most common options are? As much as i'm trying to educate myself i'm still finding some of it confusing.

bpk101

andyjb999 said:

I am no expert but if you are unsure you can open a Vanguard sipp initially and deposit money into. In future you can always transfer to a different scheme should you choose. 

I did consider this as an option — open a Vanguard SIPP and switch it later — but wondered if there might be huge fees involved when i do come to switch?

andyjb999

There are fees if you use a IFA, but I moved my Prudential pension into Vanguard and it cost nothing. I thinks administration costs with Vanguard are very low generally. Easy to check on their website.

Grumpy_chap

bpk101 said:

I'm a freelancer / sole-trader with a relatively stable and consistent income and i'd be looking to contribute £500 a month to begin with (£625 including the added 20% relief at source). In terms of my retirement plan i'd be looking to retire at 65 and start drawing down income from the pension when I do. 

It's entirely possible the IFA is steering me towards one of their own products

Given i'm desperate to get this set up before April, can anyone shed any light on what might be the best option(s) for me?

Should i jump into bed with the IFA or try and go it alone with an auto-invest SIPP like the Vanguard TRF?

How did you work out your contribution level?  Is that based on what you can afford to contribute?  OR did you start with the income you wish to receive from the age of 65 and work backwards?  You need to understand both ends of the equation, contributions and desired income level, to have a full understanding.

AIUI, a true IFA won't have "their own products".

Why the desperation to get set up before April?  Are you looking to use previous years of carry-forward unused contribution allowance?

No-one can advise on the choice between an IFA and a self-serve product, other than to say to research all the options fully and ensure you understand the charges.  I recently reviewed my own pension provision (because I eventually found out what the charges were from the old IFA) and settled on an IFA-solution because the total fees were lower than a self-serve system.  You need to understand the total fees and charges for your situation though and, if truly starting from "zero", the IFA fees may well be proportionally higher.

bpk101

Grumpy_chap said:

Why the desperation to get set up before April? 

As mentioned previously, so it's up and running in time for the start of the new tax year which, being a freelancer, is the period i find easiest to plan my annual budgeting around. For convenience i'd like the new pension contributions and subsequent tax relief to be factored in to this new 2022/23 budget from the outset. It also gives me a concrete deadline to work towards in terms of finally starting a pension, if i don't have a deadline another year will easily pass by without me doing anything about it!

Grumpy_chap said:

Are you looking to use previous years of carry-forward unused contribution allowance?

Carry-forward unused contribution allowance? Tell me more...

Dazed_and_C0nfused

Do you expect your taxable profit to exceed £40,000 in 2022:23?