Provider shortlist for £2880 per year pension

Pat38493

Need to convince my wife who is early retired on an NHS 95 pension to put £2880 per year into a pension.

She has no other pension provision other than SP and the NHS 95 pension which is already in payment - 20% tax bracket and plenty of headroom.

Can anyone help with names for a provider shortlist for this purpose.  My criteria would be

- Low charges for small pots (also low or none transaction charges for paying in and taking out)
- Can interact fully online with the account (i.e. pay in and take out) a least as much as possible - I gather there might be the need for some phone calls for the first withdrawals.
- Ideally I would like it to pay at least some amount of interest on cash balance - first step is to convince her to put the money in to this "savings account" and the next step is to discuss how to invest it.
- Reasonable range of investment options but don't need full SIPP functionality - just some reasonable index based funds and suchlike and maybe money market fund to get interest on "cash".

I would appreciate any suggestions of providers for a shortlist as I know that some are better than others depending on the pattern and size of your pot.

Also does this take a while to set up - i.e. is it too late for this tax year?

NedS

We use HL for my wife's SIPP. It's not the cheapest at 0.45% platform fee for invested funds. I've also used Fidelity for a 'small pots' SIPP and they are a little cheaper (although I think recently they have increased their minimum price cap). I'd be happy to use either again if starting from scratch although I'm sure there are cheaper alternatives if you are looking to invest the funds rather than just constantly recycle them.

You can open a SIPP immediately - assuming you pass the ID checks, debit card at hand you can make your £2880 initial deposit so no reason why you cannot do that now (this tax year). The 'contribution' needs to come from her bank account/debit card to avoid complications.

Regarding interest, I would not be too concerned chasing the SIPP paying the highest interest on cash balances as it would be better to just park the cash in a short term money market fund at the moment as these are yielding around 4% (and will comfortably beat any cash interest rates on offer in a SIPP) whilst you decide if you want to invest for the longer term.

coastline

Both of these have been updated in March..

Broker comparison: cheap investment platforms UK (monevator.com)

Find the best & cheapest SIPP - Money To The Masses

Pat38493

NedS said:

Regarding interest, I would not be too concerned chasing the SIPP paying the highest interest on cash balances as it would be better to just park the cash in a short term money market fund at the moment as these are yielding around 4% (and will comfortably beat any cash interest rates on offer in a SIPP) whilst you decide if you want to invest for the longer term.

So for example Vanguard Sterling short term money market fund would do the job?  Vanguard looks like the cheapest to me for very small pots of  less than 100K (and obviously this would be very small at the start and might stay small depending whether she just cycles the money back out again or leaves it there for a few years).

Obviously you have to be ok with Vanguard's limited choice of investments.

Albermarle

The main point is that it has to be a % based charger whilst the pot is small.
So Vanguard, HL, Fidelity as mentioned.

NedS

Pat38493 said:

NedS said:

Regarding interest, I would not be too concerned chasing the SIPP paying the highest interest on cash balances as it would be better to just park the cash in a short term money market fund at the moment as these are yielding around 4% (and will comfortably beat any cash interest rates on offer in a SIPP) whilst you decide if you want to invest for the longer term.

So for example Vanguard Sterling short term money market fund would do the job?  Vanguard looks like the cheapest to me for very small pots of  less than 100K (and obviously this would be very small at the start and might stay small depending whether she just cycles the money back out again or leaves it there for a few years).

Obviously you have to be ok with Vanguard's limited choice of investments.

Any short term money market fund that aims to track the SONIA overnight rate should be OK.

I'm not sure what impact the current flight to money market funds is having on returns - there have been very large inflows lately and the SONIA rate (4.18%) is now above short dated gilts which are currently trading on yields to maturity of around 3.75% so money market funds may struggle to yield much above that.

Pat38493

By the way what is the official justification for this £3600 allowance for non earners?

The only way I can think of to justify it is that for most people, you can consider it as a tax relief of taxes that you paid in the past while you were working.  Other than that I can't think of a particular reason for this as it seems to be used mainly by IFAs to get £180 free for their clients each year.

dunstonh

By the way what is the official justification for this £3600 allowance for non earners?

To allow low earners to put something aside for their retirement.    it was introduced in 2001 but has never been increased.  So, in real terms, it has been reducing over the years.

There were threats to abolish it if too many non-earners were using it for tax efficiency rather than retirement planning but nothing has come of it yet.   I suspect most £3,600 contributions are done for tax efficiency.  Certainly are on the advice side.

RetSol

I used AJ Bell for a small pot.  I cashed it in last year. All went very smoothly and there were no charges for holding cash. 

Pat38493

RetSol said:

I used AJ Bell for a small pot.  I cashed it in last year. All went very smoothly and there were no charges for holding cash. 

Thanks - if you don't mind me asking was there any particular reason you chose AJ Bell over for example Vanguard or Fidelity?

RetSol

Pat38493 said:

RetSol said:

I used AJ Bell for a small pot.  I cashed it in last year. All went very smoothly and there were no charges for holding cash. 

Thanks - if you don't mind me asking was there any particular reason you chose AJ Bell over for example Vanguard or Fidelity?

If there was, I don't remember it!