Pension Advice - Fund Manager or SIPP
Discussion
Right, now that I'm middle aged I've decided I should probably start a pension. 
I've not really felt the need before as I've hardly ever heard good things about them and I'm making arrangements elsewhere to secure an income for my retirement. However I've been reliably informed by a few people that since I now own a business, a pension is a very efficient way to withdraw surplus funds from the company without getting knocked by the tax man. I've probably left it a bit late to build up a decent pot but I plan to transfer a decent amount each year so as long as the pension doesn't do terribly, it will be an small additional income steam.
However I've spoken to a few pension advisor's and it seems to be a bit of a minefield. The costs don't seem to add up with them talking about transfer fee's, advice fees, commission etc which seems to eat up most of what I'd hope to gain in returns.
So is this the norm when starting a pension or would I be better off with a SIPP. I've not really got the time or don't want to take on the hassle of managing my own pension but if it's going to mean I get to keep more of my money for myself rather than paying someone else to look after it for me I'll consider it. Anyone whose done similar or any advice welcome.
I've not really felt the need before as I've hardly ever heard good things about them and I'm making arrangements elsewhere to secure an income for my retirement. However I've been reliably informed by a few people that since I now own a business, a pension is a very efficient way to withdraw surplus funds from the company without getting knocked by the tax man. I've probably left it a bit late to build up a decent pot but I plan to transfer a decent amount each year so as long as the pension doesn't do terribly, it will be an small additional income steam.
However I've spoken to a few pension advisor's and it seems to be a bit of a minefield. The costs don't seem to add up with them talking about transfer fee's, advice fees, commission etc which seems to eat up most of what I'd hope to gain in returns.
So is this the norm when starting a pension or would I be better off with a SIPP. I've not really got the time or don't want to take on the hassle of managing my own pension but if it's going to mean I get to keep more of my money for myself rather than paying someone else to look after it for me I'll consider it. Anyone whose done similar or any advice welcome.
gibbon said:
SIPP if you want to get involved and control yourself, doesnt have to cost a lot at all.
I use Hargreaves Lansdown.
When you say get involved and control yourself, how much work does this actually involve? I'd rather be working on earning and developing my business rather than worrying about whether I've invested in the right funds. Ideally I'd want someone else to do it for me but they all seem intent on taking my trousers down with their fees. Can I use someone like HL and just invest and forget for a while and then review once or twice a year?I use Hargreaves Lansdown.
A SIPP is just a Pension Wrapper - as is a SSAS - and they're useful for doing different things with your money.
If you want to keep it simple, stick to a Personal Pension PP through your Company but remember if you want to run it passively then you'll need to pay someone at some stage to review it and to check that it still meets your needs / goals / ambitions.
If you want to keep it simple, stick to a Personal Pension PP through your Company but remember if you want to run it passively then you'll need to pay someone at some stage to review it and to check that it still meets your needs / goals / ambitions.
Jockman said:
A SIPP is just a Pension Wrapper - as is a SSAS - and they're useful for doing different things with your money.
If you want to keep it simple, stick to a Personal Pension PP through your Company but remember if you want to run it passively then you'll need to pay someone at some stage to review it and to check that it still meets your needs / goals / ambitions.
Ideally this is what I'd like to do. I don't mind paying for advice but the fees I've seen for 3 different providers look excessive. I have no pension to transfer so most want me to pay an up front fee, then charge me commission for what I invest. I'm a pessimist when it comes to pension investments, if I see a 5% return a year I'll deem that to be a good year but most of that would be wiped out by fees\commission so what's the point?If you want to keep it simple, stick to a Personal Pension PP through your Company but remember if you want to run it passively then you'll need to pay someone at some stage to review it and to check that it still meets your needs / goals / ambitions.
Guvernator said:
When you say get involved and control yourself, how much work does this actually involve? I'd rather be working on earning and developing my business rather than worrying about whether I've invested in the right funds. Ideally I'd want someone else to do it for me but they all seem intent on taking my trousers down with their fees. Can I use someone like HL and just invest and forget for a while and then review once or twice a year?
Of course you can, however it may then be worth while to pay someone for their judgement, you either make the judgement yourself, or pay someone to do it for you.Guvernator said:
Right, now that I'm middle aged I've decided I should probably start a pension.
I've not really felt the need before as I've hardly ever heard good things about them and I'm making arrangements elsewhere to secure an income for my retirement. However I've been reliably informed by a few people that since I now own a business, a pension is a very efficient way to withdraw surplus funds from the company without getting knocked by the tax man. I've probably left it a bit late to build up a decent pot but I plan to transfer a decent amount each year so as long as the pension doesn't do terribly, it will be an small additional income steam.
However I've spoken to a few pension advisor's and it seems to be a bit of a minefield. The costs don't seem to add up with them talking about transfer fee's, advice fees, commission etc which seems to eat up most of what I'd hope to gain in returns.
So is this the norm when starting a pension or would I be better off with a SIPP. I've not really got the time or don't want to take on the hassle of managing my own pension but if it's going to mean I get to keep more of my money for myself rather than paying someone else to look after it for me I'll consider it. Anyone whose done similar or any advice welcome.
You need to differentiate between different costs involved:I've not really felt the need before as I've hardly ever heard good things about them and I'm making arrangements elsewhere to secure an income for my retirement. However I've been reliably informed by a few people that since I now own a business, a pension is a very efficient way to withdraw surplus funds from the company without getting knocked by the tax man. I've probably left it a bit late to build up a decent pot but I plan to transfer a decent amount each year so as long as the pension doesn't do terribly, it will be an small additional income steam.
However I've spoken to a few pension advisor's and it seems to be a bit of a minefield. The costs don't seem to add up with them talking about transfer fee's, advice fees, commission etc which seems to eat up most of what I'd hope to gain in returns.
So is this the norm when starting a pension or would I be better off with a SIPP. I've not really got the time or don't want to take on the hassle of managing my own pension but if it's going to mean I get to keep more of my money for myself rather than paying someone else to look after it for me I'll consider it. Anyone whose done similar or any advice welcome.
1) Administration fees - this covers setting up your policy and the ongoing reporting requirements associated with your investments
2) Advice - this covers the costs of product advice I.e. which type of product is most suitable for your needs. It may also cover generic advice on what type of asset strategy is most suitable for your risk-return requirements.
3. investment - this covers the cost of investing and management your chosen assets
The less you do yourself, the more you need to pay some own else to do it!
As someone has identified, you can set up a SIPP through someone like Hargreaves Lansdown fairly cheaply (covering 1) above).
The rest is down to you and what else you need.
Guvernator said:
...I'm a pessimist when it comes to pension investments, if I see a 5% return a year I'll deem that to be a good year but most of that would be wiped out by fees\commission so what's the point?
You are aware that the contribution will attract 20% tax relief if made by the company? So, if (cashflow permitting) you banged in the full £40k Allowance you will knock £8k off your corp tax bill. I'm assuming you are limited, apologies if incorrect.Jockman said:
You are aware that the contribution will attract 20% tax relief if made by the company? So, if (cashflow permitting) you banged in the full £40k Allowance you will knock £8k off your corp tax bill. I'm assuming you are limited, apologies if incorrect.
Yes I am Ltd so the tax relief is probably the biggest attraction but I'd also be hoping that after 20-25 years I'd be get something back too. Being a pessimist though with the average annual growth of pensions funds at less than 5%, I don't see how paying someone 2-3% for advice, management fees etc really works. That would leave you with growth of less than 2% and I'd be better off investing it elsewhere albeit without the tax relief.Guvernator said:
Ideally this is what I'd like to do. I don't mind paying for advice but the fees I've seen for 3 different providers look excessive. I have no pension to transfer so most want me to pay an up front fee, then charge me commission for what I invest. I'm a pessimist when it comes to pension investments, if I see a 5% return a year I'll deem that to be a good year but most of that would be wiped out by fees\commission so what's the point?
- The HL fees are around 0.5% or less (from memory) depending on the size of your investment.- Ongoing investment management fees should be between 0.2% and 1.5% depending on the type of assets you are considering
- upfront advice should be a one-off, although there may be a (smaller) ongoing fee for portfolio monitoring and an annual review
What actually has been proposed?
sidicks said:
- The HL fees are around 0.5% or less (from memory) depending on the size of your investment.
- Ongoing investment management fees should be between 0.2% and 1.5% depending on the type of assets you are considering
- upfront advice should be a one-off, although there may be a (smaller) ongoing fee for portfolio monitoring and an annual review
What actually has been proposed?
Up front costs seem to vary anywhere from £500 to £1500. Then ongoing managements costs of around 1% plus investment fees as you mentioned anywhere between 0.2 to 1.5. Most also want an additional fee as I'm not transfering over a pension so that's either another one off cost or an additional percentage until I've built up a big enough pot. - Ongoing investment management fees should be between 0.2% and 1.5% depending on the type of assets you are considering
- upfront advice should be a one-off, although there may be a (smaller) ongoing fee for portfolio monitoring and an annual review
What actually has been proposed?
At best we are looking at 1.5% and at worst 3% plus the one off fee. That's all of your first few years growth wiped out by my calculations, just seems a bit excessive and I've asked several. Even the so called cheapest didn't seem that cheap. Who would invest in a pension if you'd be better off just sticking it in a high interest account or investing in far less risky guilts and bonds? I keep thinking I must be missing something but the numbers just don't seem to add up for pensions?
Guvernator said:
Up front costs seem to vary anywhere from £500 to £1500. Then ongoing managements costs of around 1% plus investment fees as you mentioned anywhere between 0.2 to 1.5. Most also want an additional fee as I'm not transfering over a pension so that's either another one off cost or an additional percentage until I've built up a big enough pot.
At best we are looking at 1.5% and at worst 3% plus the one off fee. That's all of your first few years growth wiped out by my calculations, just seems a bit excessive and I've asked several. Even the so called cheapest didn't seem that cheap. Who would invest in a pension if you'd be better off just sticking it in a high interest account or investing in far less risky guilts and bonds? I keep thinking I must be missing something but the numbers just don't seem to add up for pensions?
That is the same view i came to a couple of years ago, so I manage my own SIPP. However, that does take some time and care from yourself.At best we are looking at 1.5% and at worst 3% plus the one off fee. That's all of your first few years growth wiped out by my calculations, just seems a bit excessive and I've asked several. Even the so called cheapest didn't seem that cheap. Who would invest in a pension if you'd be better off just sticking it in a high interest account or investing in far less risky guilts and bonds? I keep thinking I must be missing something but the numbers just don't seem to add up for pensions?
Guvernator said:
Jockman said:
You are aware that the contribution will attract 20% tax relief if made by the company? So, if (cashflow permitting) you banged in the full £40k Allowance you will knock £8k off your corp tax bill. I'm assuming you are limited, apologies if incorrect.
Yes I am Ltd so the tax relief is probably the biggest attraction but I'd also be hoping that after 20-25 years I'd be get something back too. Being a pessimist though with the average annual growth of pensions funds at less than 5%, I don't see how paying someone 2-3% for advice, management fees etc really works. That would leave you with growth of less than 2% and I'd be better off investing it elsewhere albeit without the tax relief.Would you be interested in putting your commercial property in a SIPP? Is your wife a Shareholder and Director of the company?
Jockman said:
Remember you will pay tax on extraction but 25% of your entire pot may see no tax at all.
Would you be interested in putting your commercial property in a SIPP? Is your wife a Shareholder and Director of the company?
ATG - Don't necessarily want to go for low risk assets as I figure I can afford to be a little bit risky in the first few years at least, just don't fancy having all my initial growth potential eroded by fees.Would you be interested in putting your commercial property in a SIPP? Is your wife a Shareholder and Director of the company?
Jockman - Don't worry, I don't envisage having enough of a pension pot to worry unduly about paying too much tax in retirement.
Don't have any commercial property at present but this is definitely something on the cards in the future although I'd probably prefer to keep that separate from any kind of SIPP. Wife is a minority shareholder but not a director, don't want to give her that much control
If she were a Director her share (above 5%) would be eligible for Entrepreneur Relief if that's important to you in the future. Furthermore you would then be able to open a pension strategy for her as she is now an Officer of the Company.
She would not be a controlling Director and would not need to be listed in the Accounts.
She would not be a controlling Director and would not need to be listed in the Accounts.
Ozzie Osmond said:
* SIPP
To be honest I am veering towards this. Seems simple to setup and if you pick a few of the popular funds you might not get the growth of an actively managed fund but you are unlikely to get majorly burnt either and in the unlikely event that you you do, it will be financial meltdown anyway and everyone else will be in the same boat.- Hargreaves Lansdown or Fidelity
- Don't pay for advice (unless you really think you need it. Both of the above provide lots of free information on their websites.)
- Pick some mainstream funds (spread your risk) and hold tight for the ride!
^^ Yes, that's the way I see it.
I've always been entertained by "investment advice",
In your situation Tracker funds are probably worth a look amongst your other choices.
In choosing funds it's worth checking across several sources to see how they rate them. I have found Morningstar particularly useful for this,
http://www.morningstar.co.uk/uk/funds/default.aspx
I've always been entertained by "investment advice",
- Things go up - advisor points out how much value has been added by his expertise.
- Things go down - advisor says it's all due to unpredictable markets and negative sentiment...
In your situation Tracker funds are probably worth a look amongst your other choices.
In choosing funds it's worth checking across several sources to see how they rate them. I have found Morningstar particularly useful for this,
http://www.morningstar.co.uk/uk/funds/default.aspx
Ozzie Osmond said:
^^ Yes, that's the way I see it.
I've always been entertained by "investment advice",
In your situation Tracker funds are probably worth a look amongst your other choices.
In choosing funds it's worth checking across several sources to see how they rate them. I have found Morningstar particularly useful for this,
http://www.morningstar.co.uk/uk/funds/default.aspx
Great site, thank you very much, that's the afternoon productivity out the window! I've always been entertained by "investment advice",
- Things go up - advisor points out how much value has been added by his expertise.
- Things go down - advisor says it's all due to unpredictable markets and negative sentiment...
In your situation Tracker funds are probably worth a look amongst your other choices.
In choosing funds it's worth checking across several sources to see how they rate them. I have found Morningstar particularly useful for this,
http://www.morningstar.co.uk/uk/funds/default.aspx
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