Self Employed Pension for an Older Newbie?

LizMac42

Hi Forumites

I want to give my daughter some money (about 50K) to start a self-employed pension.  She would then continue monthly payments of £200 with occasional lump sums from me. 
She is 52 and has a very small NHS pension.
She has paid 8 extra years of State Pension to bring her up to full state pension at 67 - if she carries on paying her self-employed stamp.  We are both quite ignorant of the pension area so would "in the Know Forumites" advise a Stakeholder Pension or other type? 
Can anyone advise on one, or some, in particular?
Any comments and advice would be gratefully received.

Marcon

LizMac42 said:

Hi Forumites

I want to give my daughter some money (about 50K) to start a self-employed pension.  She would then continue monthly payments of £200 with occasional lump sums from me. 
She is 52 and has a very small NHS pension.
She has paid 8 extra years of State Pension to bring her up to full state pension at 67 - if she carries on paying her self-employed stamp.  We are both quite ignorant of the pension area so would "in the Know Forumites" advise a Stakeholder Pension or other type? 
Can anyone advise on one, or some, in particular?
Any comments and advice would be gratefully received.

How much is she earning (gross)?

Albermarle

The benefit of a pension over other ways of investing for retirement, is due to the fact you get tax relief on the contributions. However the amount you can add and get relief depends on earnings ( of your daughter)

Otherwise it is easy to start a new pension online with many different providers ( a stakeholder is a bit outdated)
Remember that the money goes into investments within the pension, which you have to choose. It is not as daunting as it sounds, as many providers have ready made products ( although you still have to choose) .

dunstonh

I want to give my daughter some money (about 50K) to start a self-employed pension.

How is she self employed?  i.e. limited company, partnership or sole trader - it makes a difference.
If not limited company, then does she earn enough to make a net contribution of over £50k? (you may have to phase that contribution over multiple tax years if not)

We are both quite ignorant of the pension area so would "in the Know Forumites" advise a Stakeholder Pension or other type? 

Stakeholder pensions are pretty niche nowadays and can be improved upon with modern alternatives.   There is still a place for them but there are only a couple of providers left in the market that still offer them.

How she wants to buy and how she wants to run it are important in the decision.  Stakeholder pensions are old-fashioned, and don't support most of the modern income methods and are very paper based in their processing.   Most modern alternatives have little or no paperwork and are computer based.

Beddie

LizMac42 said:

Hi Forumites

I want to give my daughter some money (about 50K) to start a self-employed pension.  She would then continue monthly payments of £200 with occasional lump sums from me. 
She is 52 and has a very small NHS pension.
She has paid 8 extra years of State Pension to bring her up to full state pension at 67 - if she carries on paying her self-employed stamp.  We are both quite ignorant of the pension area so would "in the Know Forumites" advise a Stakeholder Pension or other type? 
Can anyone advise on one, or some, in particular?
Any comments and advice would be gratefully received.

She can only put in an amount equal to her earnings, so perhaps the surplus can go into a cash ISA and she can then pay more in each tax year.

It's more complicated than just that one sentence, but I just wanted you to be clear on that point.

LizMac42

Thank you for the replies Forumites - they have made clear that we will not be looking at Stakeholders and probably not at Sipps as we wouldn't know enough about funds etc.  So probably search of Best Personal Pensions??
Marcon - she earns about £45k after tax and her professional health business is going well. Would a lump sum (from me) to start the pension also be included in the amount she can pay in during present year?

Marcon

LizMac42 said:

Thank you for the replies Forumites - they have made clear that we will not be looking at Stakeholders and probably not at Sipps as we wouldn't know enough about funds etc.  So probably search of Best Personal Pensions??

That limits you to non-stakeholder personal pensions if you rule out stakeholders and SIPPs.

Nothing wrong with a modern stakeholder, which by definition is the only sort you can open these days, so why rule them out? Aviva's can be managed online and offers full flexibility in terms of accessing funds at retirement. Their charges are capped at 1%, but many of their funds are cheaper (e.g. the 'default' fund is currently 0.55%).

Stakeholders are having something of a resurgence thanks to their flexibility in terms of minimum contribution levels (£20 - although you pay just £16 and the provider adds the extra £4 through tax relief), the fact you can pay at irregular intervals, the guarantee of no exit fees if you move to another provider, and a decent but not overwhelming choice of investment options. That could be why Aviva and Standard Life are still open to new stakeholder business!

The only 'paper' bit is the original application form, which isn't exactly onerous - and you don't need to pay an adviser to set it up for you. See https://www.aviva.co.uk/retirement/aviva-stakeholder-pension/ for details and https://static.aviva.io/content/dam/document-library/adviser/pensions/sp01006.pdf for an application form.

LizMac42 said:

Marcon - she earns about £45k after tax and her professional health business is going well. Would a lump sum (from me) to start the pension also be included in the amount she can pay in during present year?

Yes. Her annual contributions are limited to a maximum of the lower of earned income (her own) before tax, or £60K. That maximum includes all contributions from whatever source, including a helpful parent, and any tax relief at basic rate claimed on her behalf and added to her pot by the provider.

dunstonh

Thank you for the replies Forumites - they have made clear that we will not be looking at Stakeholders and probably not at Sipps as we wouldn't know enough about funds etc.  So probably search of Best Personal Pensions??

There are not many personal pensions nowadays either.

Nothing wrong with a modern stakeholder, which by definition is the only sort you can open these days, so why rule them out?

There is no modern stakeholder pension.   They are still the early 2000s product.  No modern functionality has been added.

Stakeholders are having something of a resurgence thanks to their flexibility in terms of minimum contribution levels 

I haven't seen any data to suggest that in the published data I have seen.  Do you have a link that shows that?

Albermarle

 they have made clear that we will not be looking at Stakeholders and probably not at Sipps as we wouldn't know enough about funds etc.  So probably search of Best Personal Pensions??

With a personal pension, you still have to pick your investment funds, although some try and make it easy for you.

Some pensions can only be opened via a financial advisor.

This is one that you can open yourself, but worth having a look around.

Pensions | Standard Life

xylophone

Would she care to consider the Vanguard option, perhaps using a Target Retirement Portfolio?

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

LizMac42

Thanks again Forumites - a lot of helpful information here - I was thinking of looking at the Vanguard one as my son has one to supplement his other pensions.  I would also need one which we can start up by paying the maximum lump sum (which I have read is now £60k) as a lump sum from me (gifting for IHT reasons!)