Stakeholder, SIPP or Penfold/Pensionbee

queenbee_

I'm the sole director of a small limited company, no employees. Take minimum salary (~£8k) for NI and the rest in dividends (less than £20k per year). I want to start paying into a personal pension by direct contributions from the company only, needs to be flexible payments as income isn't phased evenly through the year.  I'm 40 years old, don't have a pension (my wife does have an excellent pension), looking to contribute maybe £5k per year ideally so not huge amounts. Objective is to be more tax efficient with the cash I'm generating in the business. 

I don't have any investment experience so am wary of a SIPP being beyond my level of expertise. Have been looking at Penfold, Pensionbee and the likes - it seems these are branded as SIPPs but with no real control over investment (choice of a few funds only) which seems counterintuitive. I'm nervous about going with a start up - feedback for these is generally good but because they haven't been around that long there's limited experience of what happens when reach retirement age and want to draw down. Also looking at the Aviva Stakeholder pension which allows company contributions and offers 40 funds to choose from (or default) - this seems easy?

Finding this all a bit of a minefield, any advice would be gratefully appreciated.

Marcon

queenbee_ said:

I'm the sole director of a small limited company, no employees. Take minimum salary (~£8k) for NI and the rest in dividends (less than £20k per year). I want to start paying into a personal pension by direct contributions from the company only, needs to be flexible payments as income isn't phased evenly through the year.  I'm 40 years old, don't have a pension (my wife does have an excellent pension), looking to contribute maybe £5k per year ideally so not huge amounts. Objective is to be more tax efficient with the cash I'm generating in the business. 

I don't have any investment experience so am wary of a SIPP being beyond my level of expertise. Have been looking at Penfold, Pensionbee and the likes - it seems these are branded as SIPPs but with no real control over investment (choice of a few funds only) which seems counterintuitive. I'm nervous about going with a start up - feedback for these is generally good but because they haven't been around that long there's limited experience of what happens when reach retirement age and want to draw down. Also looking at the Aviva Stakeholder pension which allows company contributions and offers 40 funds to choose from (or default) - this seems easy?

Finding this all a bit of a minefield, any advice would be gratefully appreciated.

First off - you say your company has no employees but you then say you are taking a salary, so presumably you are a PAYE employee?

SIPPs aren't as scary as they sound, although not all of them accept variable direct debits from employing companies, so that's a point to check. Stakeholder pensions must offer a 'default' option, but (a) this may not be best for you and (b) the charges can be higher than normal personal pensions/SIPPs.

Perhaps a bit of background reading would give you more confidence: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics in making a choice?

dunstonh

Have been looking at Penfold, Pensionbee and the likes - it seems these are branded as SIPPs but with no real control over investment (choice of a few funds only) which seems counterintuitive.

Neither of those offer a SIPP and I don't believe they refer to themselves as such.

I'm nervous about going with a start up - feedback for these is generally good but because they haven't been around that long there's limited experience of what happens when reach retirement age and want to draw down.

It is fair to say that most robo offerings are loss making.  However, that is to be expected.     As they use unit linked funds from external providers, then it really isn't that much of an issue.     However, most of the robos are not actually that cheap.   A SIPP can be half the cost or better.

Also looking at the Aviva Stakeholder pension which allows company contributions and offers 40 funds to choose from (or default) - this seems easy?

I believe there are only four stakeholder pensions still available for new businesses.   The product is largely obsolete but does have niche uses.  There isnt much you can do wrong with a stakeholder pension and if you get the nil commission rate, they can be cost viable (still not the cheapest but good enough).

Take minimum salary (~£8k) for NI and the rest in dividends (less than £20k per year).

You should be taking more than that as salary as the primary threshold moved to £12,500 in July.  

Your objective is good but your fear of SIPPs is sensible but also irrational at the same time.    SIPPs give you full access to the whole of market for investments.  The majority of that market will be unsuitable for you.  However, the suitable areas will result in the lowest cost pensions with the best quality investments.   So, if you filter out the unsuitable and retain the suitable, there is less to fear.

queenbee_

Thanks for the feedback. 

This from the FAQs on Penfold website: SIPP stands for ‘Self Invested Personal Pension’ and is the type of pension we provide at Penfold. A SIPP allows for much more flexible investing and gives you the most control over where your money is invested. 

Any recommendations of where to start looking for a SIPP that will allow company contributions and would be a good starting point for someone with my lack of experience? 

It is fair to say that most robo offerings are loss making.  However, that is to be expected.     As they use unit linked funds from external providers, then it really isn't that much of an issue.     However, most of the robos are not actually that cheap.   A SIPP can be half the cost or better.

Not sure I understand this comment - why is it expected that they would be loss making? 

dunstonh

This from the FAQs on Penfold website: SIPP stands for ‘Self Invested Personal Pension’ and is the type of pension we provide at Penfold. A SIPP allows for much more flexible investing and gives you the most control over where your money is invested.

I thought penfold was a robo provider. Not a SIPP.  i.e. the offered a range small range of in-house portfolios.  Indeed, a quick look at their website indicates they offer six portfolios.     There appears to be no SIPP functionality whatsoever.

This could be a case of a pension provider referring to itself as a SIPP because they know that is what consumers look for.  They would not be alone in this.   I bet if you asked them if they offered self-investing (ie. picking from around 30,000 different investments, as a real SIPP would allow), the answer would be no.

Not sure I understand this comment - why is it expected that they would be loss making? 

The UK is not a particularly profitable market for pension providers unless you get market share.  Most robos are relatively new and dont have much in the way of assets under management.  The costs of marketing are expensive as many people dont like the idea of using a provider they have never heard of.   And the costs of setting up a regulated product from nothing are very expensive.

Most Robos either aim to get the market share that allows them to turn to profit in the long term or enough that a buyer or white knight would become interested.   Most robos are not expected to be there in the long term.   Many that only started in the last decade have already gone.    Their hope was to disrupt the pension market and beat the big providers.   However, their charges are often around double what the big providers can offer

The other issue is that they tend to attract smaller investors.    The most profit is on the larger investors but larger investors are unlikely to use a robo.

Albermarle

You probably do not need the full range of investments that a 'true SIPP' will offer.
However you will find these SIPP's also have guidance for newer investors, and will suggest a small range of possible investment products to choose from. Often mentioned providers are HL, Fidelity and Aj Bell.
The you have robo advisors who offer more in the way of guidance/basic advice but only have a few funds on offer. Like Nutmeg or Wealthify.
Then some inbetween options like Vanguard or Standard Life, who both offer a reasonably wide range of their own funds.
It can be a useful exercise to have a good look at the providers websites, as they have guides for investing, pensions  etc.

Nurse2047

Take a look at Vanguard SIPP, I set one up for my husband who is self-employed. 

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

Or 

https://www.vanguardinvestor.co.uk/what-we-offer/life-strategy-products

set up direct debit and leave it alone. 

https://youtu.be/lGQ9KyQq8Jw James Shack videos are useful also 

Prism

Vanguard is probably your easiest option. You can't use regular direct debits from the company account, but you can make adhoc debit card payments. The range of funds is relatively simple and low cost.