Late and new to SIPP

modelreject

Hi everyone. I am 40 and need to set up SIPP. I am self employed with low income. I can save £100 a month.

From what I read the idea of me making investment choices as opposed to someone with financial background is intimidating. I would hate to choose a bad investment and really need my money to work for me. 

Is anyone paying into a good SIPP with low fees and could you provide some advice. I was thinking Aviva (high fees), Royal London or Vanguard.

Taking Aviva as an example, there is little information about what happens after you have signed up for their SIPP. I mean is there a low/medium/high risk options grouped and can you change the investments per year etc. As I say, I am totally new to this and a retirement fund is so important so don't want to make the wrong choices. 

Many thanks

Marcon

modelreject said:

Hi everyone. I am 40 and need to set up SIPP. I am self employed with low income. I can save £100 a month.

From what I read the idea of me making investment choices as opposed to someone with financial background is intimidating. I would hate to choose a bad investment and really need my money to work for me. 

Is anyone paying into a good SIPP with low fees and could you provide some advice. I was thinking Aviva (high fees), Royal London or Vanguard.

Taking Aviva as an example, there is little information about what happens after you have signed up for their SIPP. I mean is there a low/medium/high risk options grouped and can you change the investments per year etc. As I say, I am totally new to this and a retirement fund is so important so don't want to make the wrong choices. 

Many thanks

Why do you need to set up a SIPP if you don't want to make investment choices? What's wrong with a non-SIPP personal pension or stakeholder pension?

Helpful reading before you go any further: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics

Steve_666_

Investengine at 0.15%, capped at £200 is a low cost option,  as long as you're happy to be restricted to ETFs. For simplicty, as you seem to have 20+ years of investment to go, I would pick a global index tracker, maybe one of the modern style multi-factor funds, FSWD, HWWA and forget for 15 years or so..

barnstar2077

You could do a lot worse than holding a low cost global tracker fund, like the FTSE Global All Cap index fund (accumulation), on Vanguards own platform (website.)

El_Torro

While a global tracker is a good long term investment you need to be ready for a rough ride. When your investment suddenly loses 50% of its value (chances are this will happen at some point at least once in the next 20 years) will you be happy to stay invested and watch it recover? Or are you more likely to lose your nerve, crystallise your losses and move to cash? If it’s Option 2 then a global tracker is probably not right for you. 

gm0

There is a do it yourself investing community here.  And a few advisers doing daily good deeds with a bit of introductory guidance. 

We can and do fall foul of assumed knowledge in trying to help people coming into this for the first time.  I am no exception.   Be welcome.  Apologies if I miss the target.

A "personal pension" product from a big life insurance company would be fine. Not the cheapest.  But not a terrible choice in the sense of being a major error.  If you find their approach and the way they work with you suits you.  Checking costs to do what you want carefully of course.

A modern digital startup mobile phone app investing platform (which will operate and feel quite different to the old life company) may suit you.  Different strokes for different folks.  There are many.  I don't use them so cannot suggest one with conviction.

A "stakeholder" pension is an older product now but a few are still available.  And the point of these was to be a capped cost.  And simple.  Vs what was available back then.  It would not be my first port of call in 2024.  As the cap was a useful cap when created but the world moves on.   And the product category has rather stagnated.  I have used one.

Vanguard have a an International (UK available) setup and are a huge and reputable provider in the US.  Known for fair value.  Not the cheapest in all circumstances.  But again not a terrible decision either.  Nothing you are suggesting is wildly off. Family have used Vanguard and it's OK.  Not "best".  And not a major error either.  Reputable.  But again - check the costs for a regular saving approach that matches what you want to do.

Aviva - I did not find Aviva that great when we used them a few years ago.  Their communications were not the easiest.  Have never used Royal London.  Also used Virgin Money.  Comms better than Aviva. But they have been bought and sold since so I don't know what they do now.

Other "full SIPP" platforms - wider range than Vanguard - AJ Bell. HargreavesLansdown, iWeb, Fidelity etc. etc. More than you need but with care - would also do the job.  A lot less hand holding though.  So maybe from what you say - not the first place to go.

With most of these choices - you will have to choose your own investment - either by choosing a "risk tier" (with an implied *fund choice) attached to it.  Or by choosing a fund directly.  Some of them will ask you a series of questions and a "risk tier" will pop out as a suggestion leading you to an answer.  Sometimes this is called "roboadvice".   While this is helpful.  It can be difficult to appreciate the significance of the questions being asked.  And to be led - astray.

*A fund is just the thing you buy "units" of - a slice each time you add money. It could be an "equities" fund (meaning stocks/shares).  Or something with mixed content so equities and "bonds" in it as well. All the providers, new, old, big, small - have products which are split into tiers of how cautious or aggressive the investor wants to be.  May be called 12345.  20/40/60/80/100 (as in % equities) or other words like "cautious" and "moderately aggressive".  
Whatever it is called - it's all very much the same thing.  Pre-packaged tiered choices which suit different people. 

Different people doing different things - over different timescales.   The longer the timeframe you invest over - the more aggressive you *can* be in ignoring what goes on in the short term.  You don't have to be super aggressive it is still a choice you make - this is about "can be" not must.   But low risk assets have low potential for rewards.  So holding lots of them in the mix for decades at a time - discards a lot of "potential" return from higher risk things not invested in. And your pot will be smaller at the end for it - in the vast majority of unknown futures.  A lot of people fail to understand this and when asked how they feel about short term losses - quite reasonably say they don't like them.  And if they say that a a lot.  Are directed to lower risk investments. With smaller swings (known as volatility).   Lower risk investments with a baked in lower long term potential return. Which may not be explained as clearly.

A widely held "benchmark" for the "middle of the road" is the classic 60% equities portfolio.  Which has 40% bonds making up the full pie.  Some of us - myself included saved our pensions at 100% equities. Way more aggressive. Max risk. Max potential return. Least worried about 5 year or 10 year variations and swings along the way. 
And we saw our pensions halve in value along the journey around the big crisis in 2007/8. Everything we had saved. Half is gone - if we access it today.  Other crises are available. Carrying on buying. And at times buying at very low prices. Which is a good aspect of the swings when saving. I raise this as handling the emotional side of investing.  Losses and loss aversion which is baked into all of us. Is something to be aware of also.  A paper loss isn't real until you panic and sell. If you don't need the money for another 20 years - you do not panic. And you do not sell.  I was very grumpy upon learning about my 50% dip.  And then parked it as something I could not do anything about.  Carry on. 2008-present day. It worked itself out in the end.  A look at stock market history across the decades on any financial news site will show this picture of a long term trend line.  And massive swings above and below that line.  For a decade at a time sometimes.  This is what "normal" has looked like.  What the future looks like - may - or may not - be normal.  None of us know.  There are many opinions and a lot of noise - with a short term focus generally.

There are startups like PensionBee. And they have their own "digital" take on things with mobile phone apps.  Which attracts some.  And repels others.

Here are some ideas

Read a basic investing book (book threads on here are regular so can search).   This will help you on the how it works and to feel more confident about any decision on what to invest in.

Have a wander on youtube over to Pensioncraft and some of Ramin's introductory videos would not be time wasted either.

Fees

All providers have to declare fees.  And will have a page that describes them on their web site.

There is normally a fee to have investments with them at all.  A fixed amount.  Or a % of your funds.  And it is usually capped if the latter at some value per year.  We refer to that as a "Platform fee".

There are trading fees - this matters to you *more* with £100 arriving and trades happening regularly.  Some offer regular savings plan which alter this vs the general cost for "a trade".  So this is not super simple.

And there are the costs you pay while saving that come directly from the particular funds you hold. (Fund Management Charges) which are deducted from the prices of the "units" that you hold.  So are there - but less obvious.

With £100 per month.  The costs each time you buy investments when operating regular savings on an automatically  each month approach are significant to you - and you should look at this aspect carefully in terms of who you pick. 

Some will be poor value on trading charges for a £100 trade.

Starting out you don't need a wildly extensive investment range to sort through.   Yes a SIPP will stiil work. But it has many things you don't need or want at the start. And may be more confusing to get to grips with than a simpler product. 

One of the digital investing firms "robo advisors" will lead you through to what to invest in on your PC or phone.  
And as "startups" you are dealing with someone who expects to "get big" or "get bought".  I am not in general a fan of these. The more they pay for tv ads the more I think that either their fees must be higher somewhere.  Or they are burning the venture capitalists money - on ads for growth - who is going to want it back - and soon.

But I can also see the appeal and the on-ramp they provide to new investors.  They meet modern expectations of how things now work on phones.  A lot more than some legacy providers who have barely got their act together on the PC web.  Let alone on mobile phones.

Good luck

DeLaSole

Hi model,

Deciding what kind of pension to open and what to invest in is important, but perhaps a few other things, if not already done, may be thrown out there:

- Check your State Pension forecast on gov. website, never assume what it 'might/should' say.

- On low income, consider if the Universal Credits system may help. There are UC calculators online which can show if it would help you financially, taking into account pension contributions. The related board here on MSE has people who can help.

- Not to avoid starting, but understand the reality of the retirement pot and income that £100 per month might achieve, especially if no other source of provision. At 40, ONS suggests a life expectancy of 84 and 25% chance of 94. The amount put in, what it's put into, investor behaviour (not stopping when markets crash etc.), fees, and the time horizon all combine... but it's built from the foundation of what goes in.

Both self-employed on low incomes, I started my pension in my 30s, my wife in her 40s. It's easy to get lost in all the choices available. But for us it was the getting going that mattered most; pensions can be transferred, new ones opened, investments changed, contributions upped when possible etc. We are now on course to have a much better retirement than we could have imagined 10 years ago when we started.

Best wishes.

LHW99

And get started!

Whatever you choose is unlikely to be desperately bad initially, because you won't have too much in there.

During the first year read more (books, on here, websites maybe like monevator), and see how you feel about how your unit purchase price changes month by month, and how the total changes.

After a year or two, if you think a different fund / provider would suit you better, it isn't hard to transfer elsewhere. But if you never start, you don't get the benefit of time. Even if you don't choose the highest returning fund(s) you will still have more than if you didn't begin at all.

Marcon

LHW99 said:

And get started!

Whatever you choose is unlikely to be desperately bad initially, because you won't have too much in there.

But if you never start, you don't get the benefit of time. Even if you don't choose the highest returning fund(s) you will still have more than if you didn't begin at all.

Probably the best advice on this thread....

modelreject

gm0 Thank you. You have all been really helpful!

Albermarle

If you want something simple with an established company you could look at this.( only 5 investment options) 

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