Pension query / advice

[Ecosseven]

Afternoon all,

I was promoted at the end of last year and started my new role on 1st January. Whilst I did have thoughts of splashing my pay rise on a nice shiny / expensive toy I'm actually thinking about putting some more money into my pension (boring I know!)

Bit of background to start with.............

I'm 42 and hope to retire when I'm 58-60 years old. I'm a higher rate taxpayer and contribute to my employers workplace pension scheme. This is a money purchase scheme with a generous payment made each month by my employer - I pay 6% of my pre-tax salary, they pay 19% for a total contribution of 25%. I have contributed to various employers pension schemes for 17 of the last 20 years.

My current pension scheme does not allow AVC's, however there is a new workplace pension scheme that I can also join that does allows AVC's. This does not affect my existing workplace pension and the two schemes can run alongside each other independently. There would be no contribution from my employer to this new scheme as they are already making a contribution to my existing workplace pension as noted above. The total contribution by both myself and my employer would be well below the £40k limit set by HMRC.

So to my question............

If I make AVC's to the new scheme these will be deducted from my pre-tax and pre-NI salary and invested in a combined investment fund of my choosing managed by Zurich. The selection of the fund is down to my approach to risk vs reward.

The alternative is I can take money from my post tax / post NI salary and either pay this into a SIPP or stakeholder pension.

1. What re the pro's and con's of a SIPP vs a workplace pension where, in the workplace pension I can select from a range of investment funds and move money between these as required?

2. What would you consider a reasonable management fee for an investment fund? I've seen anything between 0.3% up to 2%?

3. What growth would you see as achievable above inflation for a well managed fund? I would be hoping for 3% above inflation over the long term. Is this realistic?

Thanks in advance.

Edited by Ecosseven on Sunday 14th January 16:37

[xeny]

1)SIPP gives you ultimate levels of control, at the cost of losing salary sacrifice NI advantage. Sometimes these workplace schemes have significantly disounted management charges compared to a SIPP.

2)Depends what kind of fund - a simple S&P 500 tracker is potentially lower than .3%. Personally I try and avoid anything charging over ~1% unless the past performance is biblical, and even then I tend to be keep a close eye on it..

3) - short answer 3% is possibly a little pessimistic. Page 58 of https://www.allocationblog.com/content/uploads/sit... gives an average real return for equities of 5% over the last 116 years.