Help please with New Personal Pension for Sole trader / Self employed 33 year old

mopsymuffin

I am desperately looking for help & advice if possible in setting up a pension for my daughter who set herself up as a sole trader mid 2020 during COVID. Currently she has no pension in place as we were waiting to see how well she did on her own. She does have a very small deferred pension with NEST set up by her previous employer only for about 6 months. I have been researching this & her options for the last few weeks & whilst I think I am quite savvy with finances I am finding the whole pensions process completely daunting & such a minefield. So far I have found the most useful advice on the MSE forum & I can see that some of you are giving what seems like very good advice based on your own experiences. I am not sure what info I need to post to be able to get some help & advice but here goes. She is 33 & would probably like to retire at circa 60. Currently earning as a sole trader about 30k pa min but depending how well she does could reach 60k but not guaranteed income. She does have an accountant but he says he does not have the experience to advise on pensions only the tax element & that she must set up herself. From my research I think she needs a Personal Low Risk simple pension that she can pay into on a monthly basis. Not a SIPP or a Stakeholder we have no knowledge of S&S or Investments & therefore do not want anything complicated or too risky. (I do understand there is an element of risk with all pensions) I thought I had decided that PensionBee was right for her but have changed my mind after reading many reviews on MSE & other sites. Fidelity seems too complicated for what we are looking for so now looking at Nutmeg, Penfold, Vanguard & A J Bell. I want a provider that will manage this for her without her having to choose her own investments, is as safe as it can be, trustworthy & with a good customer service/reputation & fairly low annual charges (within reason) if that is all possible. Happy to manage whatever she decides online.

Also would anyone recommend that she also opens a LISA to back up her pension? There does not seem to be many providers for LISA but am looking at Moneybox.

Any help or advice you can give on all this is really appreciated. Thank you

Dazed_and_C0nfused

I want a provider that will manage this for her without her having to choose her own investments

That really isn't the providers role.  

There may be schemes which have a default plan but I suspect they wouldn't consider that that amounts to managing her investment choices.

If she is going DIY route rather than an IFA she will need to pick her investment within the pension wrapper.  But she doesn't have to pick say 20 different funds, it might be when she starts out she has just one multi index fund like Vanguard Lifestrategy (not a recommendation, other similar options are available) where once selected she doesn't need to actively manage anything in the short to medium term.

On the figures you have quoted she won't make any personal tax saving at present but will benefit from the basic rate tax relief that is added by the pension company, courtesy of HMRC.  For example a £300 monthly payment from your daughter will have £75 added making a gross contribution of £375 (£375 x 20% = £75).

Once her taxable profits take her into paying higher rate tax the pension contributions have the added bonus of increasing her basic rate tax band so she will pay more tax at 20% and less at 40%, adding an extra 20% tax relief to some or all of of her contributions.  The exact benefit depends on how much higher rate tax she would be due to pay.

dunstonh

 She does have a very small deferred pension with NEST set up by her previous employer only for about 6 months. 

Nest do not offer the type of pension that can be deferred.  So, it wont be that.

She is 33 & would probably like to retire at circa 60. Currently earning as a sole trader about 30k pa min but depending how well she does could reach 60k but not guaranteed income. 

Can she realistically afford that?     It sounds as if she is already behind on her retirement planning and having to fund an extra 8 years income in retirement without state pension is quite a gap to fill.    With an income of £30k, that doesn't give a lot of scope to achieve that.

From my research I think she needs a Personal Low Risk simple pension that she can pay into on a monthly basis. Not a SIPP or a Stakeholder we have no knowledge of S&S or Investments & therefore do not want anything complicated or too risky. 

Neither a SIPP or Stakeholder pension are cautious or risky.  They are just the container for the investments.  Stakeholder pensions are a little less risky than SIPPs on the basis that you cannot do too much wrong with a stakeholder pension whereas a SIPP you can.   SIPPs are the most dominant version retailed today.  Stakeholder pensions are largely out-of-date.

 Fidelity seems too complicated for what we are looking for so now looking at Nutmeg, Penfold, Vanguard & A J Bell

Fidelity do the same job as AJ Bell.  So, eliminating one but no the other doesn't really make any sense.   Vanguard is in between the robo-providers but would be a lot cheaper than the robos.

I want a provider that will manage this for her without her having to choose her own investments, is as safe as it can be, trustworthy & with a good customer service/reputation & fairly low annual charges (within reason) if that is all possible. Happy to manage whatever she decides online.

Providers dont manage the investments.   Providers are the administrators and software tool effectively.  The end user or their adviser chooses the investments.     Nearly all providers/platforms will have options that include pre-built portfolios but the end user has to pick the one they want.

Also would anyone recommend that she also opens a LISA to back up her pension?

As a basic rate taxpayer it would make sense.  When she becomes higher rate it switches over to pension as the better option.

xylophone

How about Vanguard using Target Retirement Fund?

See 

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account

And once set up, she could transfer in the NEST pension.

Marcon

Plenty of basic information here: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics

I suggest she reads it. This is her pension and she's an adult. You really don't need to be 'getting desperate' on behalf of a 33 year old - nor for the record does she! Nothing dreadful is going to happen if she doesn't set up a pension in the next few weeks...but she does need to do something in the not too distant future, and that link should give plenty of help.

Albermarle

From my research I think she needs a Personal Low Risk simple pension that she can pay into on a monthly basis. Not a SIPP or a Stakeholder we have no knowledge of S&S or Investments & therefore do not want anything complicated or too risky. (I do understand there is an element of risk with all pensions) I thought I had decided that PensionBee was right for her but have changed my mind after reading many reviews on MSE & other sites. Fidelity seems too complicated for what we are looking for so now looking at Nutmeg, Penfold, Vanguard & A J Bell. I want a provider that will manage this for her without her having to choose her own investments, is as safe as it can be, trustworthy & with a good customer service/reputation & fairly low annual charges (within reason) if that is all possible. Happy to manage whatever she decides online.

Your research should have found that a younger person, with many years to go before retirement is better to avoid low risk funds as they are also low growth . A higher risk fund is more suitable . It will go up and down more but in the long term should grow more. As mentioned in the end whichever pension provider she chooses, she will still have to pick the investment fund.

The target retirement fund mentioned in a previous post - also sometimes called lifestyle or lifetime funds, start off with a higher % of shares content ( higher risk) and then reduce this as you get nearer retirement 

Nutmeg and Penfold have the simpler offerings , with not much choice and relatively high fees

AJ Bell probably have too much choice for her at this stage .

Vanguard should be OK , she can also look at L & G Personal Pension | Private Pension | Legal & General (legalandgeneral.com)

conradmum

mopsymuffin said:

I am desperately looking for help & advice if possible in setting up a pension for my daughter who set herself up as a sole trader mid 2020 during COVID. Currently she has no pension in place as we were waiting to see how well she did on her own. She does have a very small deferred pension with NEST set up by her previous employer only for about 6 months. I have been researching this & her options for the last few weeks & whilst I think I am quite savvy with finances I am finding the whole pensions process completely daunting & such a minefield. So far I have found the most useful advice on the MSE forum & I can see that some of you are giving what seems like very good advice based on your own experiences. I am not sure what info I need to post to be able to get some help & advice but here goes. She is 33 & would probably like to retire at circa 60. Currently earning as a sole trader about 30k pa min but depending how well she does could reach 60k but not guaranteed income. She does have an accountant but he says he does not have the experience to advise on pensions only the tax element & that she must set up herself. From my research I think she needs a Personal Low Risk simple pension that she can pay into on a monthly basis. Not a SIPP or a Stakeholder we have no knowledge of S&S or Investments & therefore do not want anything complicated or too risky. (I do understand there is an element of risk with all pensions) I thought I had decided that PensionBee was right for her but have changed my mind after reading many reviews on MSE & other sites. Fidelity seems too complicated for what we are looking for so now looking at Nutmeg, Penfold, Vanguard & A J Bell. I want a provider that will manage this for her without her having to choose her own investments, is as safe as it can be, trustworthy & with a good customer service/reputation & fairly low annual charges (within reason) if that is all possible. Happy to manage whatever she decides online.

Also would anyone recommend that she also opens a LISA to back up her pension? There does not seem to be many providers for LISA but am looking at Moneybox.

Any help or advice you can give on all this is really appreciated. Thank you

I'm in a similar position to your daughter - self-employed and in need of a straightforward way to contribute to a pension. I went with the Vanguard Target Retirement fund in the end. Very easy to set up and contribute to. Your daughter can pick her estimated year of retirement and contributions and Vanguard will provide a range of estimates on what she'll receive when the day comes. Then she can decide if her contributions are sufficient to provide the funds she'll need in order to retire.

mopsymuffin

Thank you all for your responses above & all comments & links have helped her to come to her final decision. She has chosen the Vanguard Target Retirement fund 2055 in the end. You are right conradmum it was easy to open & to set up D/D monthly contributions. We think that this is right for her now & she will move at a later date if necessary. We absolutely understand that the market can go up & down but she is in it for the long-term. As our knowledge of investments is extremely limited & this is very early days, only set up a week ago but her initial investment is already showing a loss with a rate of return -2.48%. Could this be due to what is going on in the World at the moment? She wants to transfer a lump sum to the fund before the end of this financial tax year but is now a good time to do this or would it be better for her to wait due to the volatility in the financial world right now? I know that none of us can predict the future. What I am asking for are opinions of what anyone with a better understanding & experience of the market would do at this time? FYI she is a sole trader & her earnings fluctuate but we have worked out that her income for the current tax year will take her into the higher rate.

Dazed_and_C0nfused

One must commented on advantage of buying when markets are down is that you get more units for your money.

And she will save some personal tax, as well as getting the basic rate tax relief added to her pension fund, if she is going to be higher rate payer this tax year.

If in doubt she can always add a contribution and leave as cash until she wants to invest it.

wjr4

mopsymuffin said:

Thank you all for your responses above & all comments & links have helped her to come to her final decision. She has chosen the Vanguard Target Retirement fund 2055 in the end. You are right conradmum it was easy to open & to set up D/D monthly contributions. We think that this is right for her now & she will move at a later date if necessary. We absolutely understand that the market can go up & down but she is in it for the long-term. As our knowledge of investments is extremely limited & this is very early days, only set up a week ago but her initial investment is already showing a loss with a rate of return -2.48%. Could this be due to what is going on in the World at the moment? She wants to transfer a lump sum to the fund before the end of this financial tax year but is now a good time to do this or would it be better for her to wait due to the volatility in the financial world right now? I know that none of us can predict the future. What I am asking for are opinions of what anyone with a better understanding & experience of the market would do at this time? FYI she is a sole trader & her earnings fluctuate but we have worked out that her income for the current tax year will take her into the higher rate.

Does she have a limited company? 

She cannot access the pension for at least 27 years so a tiny loss now is not an issue at all. 

Has she nominated a beneficiary? 

On a separate note - has she got an income protection insurance policy? 

mopsymuffin

 wjr4 said:

mopsymuffin said:

Thank you all for your responses above & all comments & links have helped her to come to her final decision. She has chosen the Vanguard Target Retirement fund 2055 in the end. You are right conradmum it was easy to open & to set up D/D monthly contributions. We think that this is right for her now & she will move at a later date if necessary. We absolutely understand that the market can go up & down but she is in it for the long-term. As our knowledge of investments is extremely limited & this is very early days, only set up a week ago but her initial investment is already showing a loss with a rate of return -2.48%. Could this be due to what is going on in the World at the moment? She wants to transfer a lump sum to the fund before the end of this financial tax year but is now a good time to do this or would it be better for her to wait due to the volatility in the financial world right now? I know that none of us can predict the future. What I am asking for are opinions of what anyone with a better understanding & experience of the market would do at this time? FYI she is a sole trader & her earnings fluctuate but we have worked out that her income for the current tax year will take her into the higher rate.

Does she have a limited company? 

No she is a sole trader.

She cannot access the pension for at least 27 years so a tiny loss now is not an issue at all. 

Has she nominated a beneficiary?

Yes she has nominated a beneficiary. 

On a separate note - has she got an income protection insurance policy? 

No