Help Stakeholder or Personal pension.

Sandeze

Hello can anyone help me?
I seem to always get a job that is contract work and getting a company pension is not viable, what I would like to know is at 37 I have no pension and desperately need to know which is better for me a Stakeholder or Personal Pension. I understand that you receive tax back on both, and that the Stakeholder pension you can pay in a min of £20 and contributions can be stopped and started but Personal Pensions can be invested in more funds, but I am still not sure which is best for me. I am looking for a new job and it could have a Company pension but that could be sometime off yet.
Regards.

dunstonh

Both are identical as far as workings go.

The stakeholder pension is a simplified version of the pension as far as charges go as it has a defined maximum charging method.

The personal pension allows the providers to choose the charging method and allow features to be included which cannot be included within the stakeholder.

Sometimes the stakeholder will be cheaper, sometimes the personal pension will be cheaper. Sometimes there is absolutely no difference.

I will give some examples to help. This is not advice but just to show some of the differences.

A number of other providers offers a PPP and a SHP. The SHP has a limited range of funds charing 1% annual managment charge (with large fund discounts). The PPP has exactly the same funds at 1% as the SHP but also has a larger range of external funds, some of which cost more than 1%. If you go with the SHP you limit your fund choice. If you go with the PPP you get a better fund range but you can still pick the 1% funds if you want.

Some providers will take an increased charge up front on their PPP but have lower annual management charges. This can mean that if you have less than 20 years to go until retirement, this PPP will cost more than a stakeholder. However, if you have more than 20 years to go, the PPP will be cheaper than the stakeholder.

At the end of the day it depends on what YOU want and what YOU are looking for. If you want simple, go stakeholder. If you want more options which may include cheaper or more expensive (depending on provider) options, then go PPP.

Sandeze

Thank you for your reply, however if you were in my shoes which one would you go for and were would I start to look to take a pension out? This is more complex than I thought.
Regards

dunstonh

I have arranged over 300 pensions in the last 12 months across 15 providers using SIPP, personal pension and stakeholder. There is no "one size fits all" answer. It is impossible for me, or anyone else, to tell you what you should go for as we know nothing about what your goals are.

Its not that complicated really. If you dont want to seek professional independent advice and know nothing about investing, then you should really be looking at a stakeholder pension.

It may not be the best option but it wont be the worst and there are minimal options/funds to confuse you. Just make sure that when you choose where to invest, you dont pick the default with profits fund or bog standard "managed" fund. Ideally pick a range of funds covering a range of investment areas that average out to meet your investment risk attitude (most providers risk rate their funds).

EdInvestor

(most providers risk rate their funds).

Do they indeed? How would an investor find out what a product's risk rating was?

dunstonh

Editor wrote:

Do they indeed? How would an investor find out what a product's risk rating was?

Not the product, the funds. Most provider's have a funds brochure with their own scale of risk

Sandeze

Thank you for your advice.
Regards.