Good Personal Pension?

Ms_MoneyPenny_2

Hi, I know there is lots of info. all about me on pensions but I wonder if I can ask a simple question that someone may be willing to answer?

I don't think I understand investments enough, or have time enough to manage my own funds so just want a good personal pension I can pay monthly into (Probably quite low at present £100-150) and relax that it is taken care of. I will paying for another 30 years at least so believe it is best to go higher risk in the long term.

Does anyone have any suggestions? I know this isn't the place for advice but I need some other brains to help me.

much genuine thanks in advance

dunstonh

Does anyone have any suggestions?

See an IFA that does servicing. Your contribution is good enough and if you want the best priced products then you can only access those from IFAs. You can get lower charges than going DIY (due to the 30 year term) and you get investment advice given.

EdInvestor

Ms_MoneyPenny wrote: »

I don't think I understand investments enough, or have time enough to manage my own funds so just want a good personal pension I can pay monthly into (Probably quite low at present £100-150) and relax that it is taken care of.

Nothing like as easy as it looks. You can pay an IFA to choose a pension and invest it in a mix of funds at the start, but you'll need to pay him to review it every year as well.

When you look at the costs of this,particularly over 30 years ( a 1.5% annual fee will eat up a third of the total fund and that's often before you pay the IFA) you may feel it is worth a little time and effort to get a grip on the investment basics so you can pick your own funds and do the annual review yourself.

Dithering_Dad

EdInvestor wrote: »

When you look at the costs,particularly over 30 years ( a 1.5% annual fee will eat up a third of the total fund and that's often before you pay the IFA) you may feel it is worth a little time and effort to get a grip on the investment basics so you can pick your own funds and do the annual review yourself.

Naturally, if you go DIY and do badly, you will have saved a lot of money on commissions but won't have made any money on the investment. If you don't feel confident enough or simply don't have the time to do your own investment research and investing then see a professional.

It's a bit like when I got a builder in to do my extension. I'm a clever guy and quite physical so I have no doubts that had I put the time and effort in I would be able to learn the skills necessary to build the extension myself. In theory this would have saved me a fortune in labour costs.

In reality, I wouldn't be able to get the materials at the same discount as the builder and the extension would have to be built a few times until I got the hang of it - costing more than if I'd just gotten it done properly in the first place!

There is no shame in employing experts to advise you.

Dick_here

Dithering_Dad wrote: »

It's a bit like when I got a builder in to do my extension. I'm a clever guy and quite physical so I have no doubts that had I put the time and effort in I would be able to learn the skills necessary to build the extension myself. In theory this would have saved me a fortune in labour costs.

Did he advise you to take out an ISA instead of a pension every time he stopped for a tea-break ?

dunstonh

The timescale involved here is 30 years. That means the more modern personal pensions come into play which are factory gate priced and this can make them cheaper with an IFA getting paid then going with a mono charged personal pension or stakeholder from Cavendish or whoever.

When you look at the costs of this,particularly over 30 years ( a 1.5% annual fee will eat up a third of the total fund and that's often before you pay the IFA) you may feel it is worth a little time and effort to get a grip on the investment basics so you can pick your own funds and do the annual review yourself.

So, why do you tell people to use HL's SIPP which invests in unit trusts which typically have a 1.5% AMC? You get no advice with that option. However, an IFA can arrange investments with a reduction in yield of 0.6% to 1.5% and give advice and servicing.

The DIY options are limited options, mostly mono charged. The IFA options include products which are not available DIY and can beat the mono charged options.

EdInvestor

dunstonh wrote: »

The timescale involved here is 30 years. That means the more modern personal pensions come into play which are factory gate priced and this can make them cheaper with an IFA getting paid then going with a mono charged personal pension or stakeholder from Cavendish or whoever.

So, why do you tell people to use HL's SIPP which invests in unit trusts which typically have a 1.5% AMC? You get no advice with that option. However, an IFA can arrange investments with a reduction in yield of 0.6% to 1.5% and give advice and servicing.

The DIY options are limited options, mostly mono charged. The IFA options include products which are not available DIY and can beat the mono charged options.

All true, but the punter has to know all this before s/he starts to take advantage of it.Most don't and thus walk into a situation where they have IFA fees on top of what they could get by going DIY.[1.5% was an example of what it all adds up to over a long period of time.]

A cheap pension wouldn't involve funds in the first place, especially given that we are not taking into account the hidden transaction charges on top of the AMC, which usually mean you lose more like half the value of your fund to charges.In fact the IFA is not the most serious offender in this area: the insurers are the worst, with their often high charges for dross funds. At least the fund managers usually offer some quality choices in return for their high fees.

The cheapest way to invest is to buy shares, (or investment trusts/ ETFs) directly and reinvest the dividends once a year in a low cost SIPP with no annual fee.Particularly for anyone with decent amounts to invest, flat rate (not percentage) charges will always be best.

Dithering_Dad

!!!!!!_here wrote: »

Did he advise you to take out an ISA instead of a pension every time he stopped for a tea-break ?

Yes, he said "that's what I'd do if I were you". I found out later that he had a final salary pension, 2 money purchase pensions and a protected rights pension. Talk about 'do as I say, not as I do'!

Ms_MoneyPenny_2

Hi - thanks to all who have replied it is very helpful - not sure I get it all at the mo., the impression I am getting though is that...

if I can do DIY investing in funds - using SIPPS(?) and do well that is great - perhaps even the best option but

if I don't do well becuase I am no expert, or make bad choices, could be risky

so, I can go to an IFA to do the 'work' for me which I will pay quite a lot for over time but less risk (?)

and/or buying a product direct off the shelf such as 'Clerical medical Personal Pension' through Cavendish is perhaps the worst option as there is little flexibiliy in fund choice and I still need to know what I am choosing as it is a bare bones service?

is that about right?
thanks again

dunstonh

so, I can go to an IFA to do the 'work' for me which I will pay quite a lot for over time but less risk (?)

To make it clear, if you went on commission basis, the cost to you would be little or no different to doing a SIPP from HL. Indeed, it could be cheaper.

Using an IFA is not the expensive option here. Getting it wrong is the expensive option. The options Ed has mentioned, such shares, ETFs etc are experienced investor options and whilst cheaper over the long run, do require more time management. If you go with funds (which most do) then a SIPP would be more expensive than a stakeholder or personal pension. If you use an IFA for the stakeholder or personal pension it can still be cheaper than doing it yourself with a SIPP.

and/or buying a product direct off the shelf such as 'Clerical medical Personal Pension' through Cavendish is perhaps the worst option as there is little flexibiliy in fund choice and I still need to know what I am choosing as it is a bare bones service?

Clerical Medical has a limited product range in that it only has around 100 funds. However, you are unlikely to be in any more than 10. Plus they do tend to focus on the lower risk side and the IFA version of the CM pension does allow factory gate pricing (unlike the Cavendish version which is mono charged). On £100pm example over 30 years, an IFA can take £2500 commission for setting the CM pension up and still come in cheaper than Cavendish doing the nil commission mono charged version.

Ms_MoneyPenny_2

Hi,

thanks your reply really helps explain.

I think given that I am no expert and not likely to pick investing up overnight my best option is to see an IFA to find me the best product.

When I see an IFA what should I be asking for and avoiding in terms of commission only, AMC's etc.? What is a good deal and what is a bad one?

thanks