Stakeholder Pensions/ MoneySavingExpert.com Discussion Area

oceanblue_3

[If you remove the charges aspect from a drawdown straegy, much of the risk goes away.]

How much of the risk goes away? How do you minimise the risk that is left? For all but the most wealthy investors, who are better placed to cope with the consequences of investment volatilty, drawdown is inherently risky. Everybody acknowledges this risk and, as a result, treads carefully. Fools rush in, eh?

LPChamberlain

I am recently divorced & as a result of a pensions sharing order, must now re-invest the pensions I have been given. I think shall probably invest them in a stakeholder scheme but could somebody advise the pros/cons of a 'stakeholder' versus a 'stakeholder with profits' scheme? The latter would appear to be a financially more secure option but is there a catch?
I would also like to say the articles regarding pensions on this website have helped me tremendously whilst I have been trying to 'educate' myself about this subject. Many Thanks!!

EdInvestor

Hi LPC

Stakeholder refers to a type of pension wrapper (noteably its low-cost fee structure). With profits refers to one of the types of funds (of which there are a large range) that you can invest in within the wrapper.

I think it's fair to say that in almost all cases, With-profits funds should be avoided now. Their charges are too high, their investment mix has a much low growth focus than in the past, you have to pay for their guarantees and they have hidden penalties. There may be a very few exceptions to this, but in general I would avoid.

Where is the money invested now?

dunstonh

I think it's fair to say that in almost all cases, With-profits funds should be avoided now.

Most cases. With profits is a niche fund that may be suitable for those that don't want to lose capital and are certain to stay until the maturity date.

Their charges are too high,

A with profits fund within a stakeholder still matches stakeholder charges so are not too high.

their investment mix has a much low growth focus than in the past, you have to pay for their guarantees and they have hidden penalties.

Legacy with profits funds maybe but modern with profits contracts may still offer benefits which are attractive. However, there are a limited number of providers that you would really be comfortable with.

Although any experienced or professional investor would have no need for with profits and can easily see all the negative points, someone with little or no experience and no intention to get involved in the investment side may consider the principle of with profits funds as quite attractive. Its just a case of making sure you get the right provider and the right type of with profits. Seeing as there are more bad with profits funds, than good, it would take some reseach on your part which you may or may not be willing to do.

Without full research, there is only one stakeholder pension fund that I would even come close to considering and even then I would push the alternatives as a better option and only use it if I was being overuled or where the security was the priority over potential returns.

I think shall probably invest them in a stakeholder scheme but could somebody advise the pros/cons of a 'stakeholder' versus a 'stakeholder with profits' scheme?

Same thing different funds as mentioned already. Your options are really stakeholder vs personal pensions (including SIPPs).

Stakeholders have a defined charging structure which can be a maximum of 1.5% annual management charge for the first 10 years and 1.0% thereafter. Personal pensions allow a varied charging structure with no cap. This means you can get very good value personal pensions or very poor value personal pensions. Often personal pensions, with terms of 15 years or more can result in lower charges than the a stakeholder. However, that would depend on the provider being used and their contract being used.

Some stakeholders appear quite cheap on face value but have a really poor selection or very limited selection of funds. For example, the NU stakeholder is cheap but the fund selection (currently) limited. However, the NU personal pension has a much larger range of funds, over 40 of which are charged within stakeholder limits (1%) and the personal pension also has better fund based discounts resulting in lower charges on higher fund values. So, in this case, the NU PPP would be better than the NU SHP. (subject to the revised NU SHP contract coming out in a few weeks).

LPChamberlain

:hello: Thank you very much for quick response. At the moment the money is invested in Canada Life (2 plans), NPI, and AXA, a total of 4 plans in all, and each has different amounts in them. I have been informed that I have to transfer all of them into plans with other providers, (as for some reason they cannot remain with the existing company) which also means I incur charges. I am on a very steep learning curve and one thing I have learnt so far is that the pension companies and IFA's (I don't think they are all bad) like to charge varying amounts for services/advice which is something of a minefield itself. Therefore your help is much appreciated.

LPChamberlain

All this is a great help, as I am sure I am not the only woman who has remained blissfully ignorant of such important financial matters whilst being married. I shall look closely at NU to see what they have to offer....Thank you :A

dunstonh

Cananda Life and NPI are closed for new business. They will accept pension sharing orders individually but cannot combine other providers into theirs. I have done a PSO on a canada life pension recently and they will allow it to be left with them. However, after a transfer analysis was completed, there was no reason to do so. I have 6 NPI transfers on the go (not PSOs) and have done at least 30 in the last 18 months and only found one occassion so far when its been best to leave it with NPI. AXA contracts vary depending on the distribution channel and legacy company that was used.

With a pension sharing order, you may find a number of providers unwilling to take transfers in without getting written confirmation that advice has been sought first. Indeed, you may find a number of IFAs are also unable to offer advice in that area as they do not hold the required licence to do it. (its considered a higher risk transaction to a normal personal pension transfer).

I am on a very steep learning curve and one thing I have learnt so far is that the pension companies and IFA's (I don't think they are all bad) like to charge varying amounts for services/advice which is something of a minefield itself. Therefore your help is much appreciated.

The best attitude to assume is that financial services companies are like shops. Goods are sold at different prices with different shops and the service you get will be different. If you go into a Sony shop, you will be sold only Sony, even if its not the best. Or you can go to Tesco and have a wide range. Morrisons, round the corner may have same range but charge more.

edit: Please do not consider anything on this thread as advice, regardless of who posts it. These are discussion points and your circumstances are not known enough to give advice.

LPChamberlain

Ahh, something I can relate to...shopping... I just have to find the 'John Lewis' of Pension providers!

EdInvestor

I just have to find the 'John Lewis' of Pension providers!

I'd say this is Legal and General, on the basis they have the lowest charges, though I don't think L&G are "never knowingly undersold".

Not advice, but as well as comparing charges, it's sensible to look for good performance.There are two types of funds which are worth looking at these days more than others, as a general rule IMHO.

For shares, the Equity Income funds are tending to do better than the Growth funds (they're the ones which concentrate more on shares which pay dividends).At most insurance companies, Commercial Property funds are also a good bet.

If you split your money between these two types of funds at whatever insurer and try to keep charges below 1.5%, you probably won't go far wrong.

Try https://www.cavendishonline.co.uk if you need an IFA - they are execution only ( no advice) but may be able to sort it out and will rebate the charges.

dunstonh

I'd say this is Legal and General, on the basis they have the lowest charges, though I don't think L&G are "never knowingly undersold".

They don't necessarily have the lowest charges. I also find their service is really poor on transfer business. All my slowest transfers, and the ones which have resulted in the most "pain" have been with L&G and it has got to the point where I rarely use them now.