Pension question

[AdeTuono]

I've had a search about, and while there have been a load of pension threads, I'm struggling with this one...

I'm a director of a limited company, and am about to set up a pension scheme for myself. I hope to reduce my Corporation tax bill by paying contributions in monthly, then a lump sum at year end depending on profits.

I've seen two advisors, one from the bank I'm with, and one independant. Both advise different schemes, one a SIPP, the other a stakeholder scheme. As someone who's fairly 'risk averse' (according to a questionaire I filled out), can anyone steer me in the 'right' direction? I realise that it's not a black & white question, but what's the general opinion? Is it possible to take out two schemes, and contribute half to one and half to the other, and then compare returns? At the moment, I'm not favouring one over the other; whenever I think I've made a decision and start asking questions, the ball seems to roll the other way.

[Eric Mc]

I can't comment on the pros and cons of these two types of pension schemes as an investment vehicle. The rules surrounding Stakeholder Pensions are more "open" as far as I know regarding minimum salaries, maximum contributions etc.

Both qualify for tax relief regarding the company's own Corporation Tax liability and neither would result in the director/employee being taxed on a Benefit in Kind.

It is important that the SIPP is a properly "approved" scheme for Corporation Tax and Income Tax purposes.

I am also quite sceptical of Self Administered Schemes - not so much the fact that they produce good or bad returns - but more on the fact that the responsibility for running the scheme lies on the shoulders of the company directors and I have come across major disasters regarding these schemes where directors failed to produce scheme accounts within the statutory time limits and/or the scheme accountants ended up being heavilly fined for failing to produce legally compliant accounts.
They are a bit of a minefield and are difficult to deal with, even for the professionals..

[trunnie]

It's better to look at pensions as a wrapper in which to put assets. Work out what you want to buy in your pension - which depends on your attitude to risk and then ask your provider whether they provide it and do they limit whom you can buy things from/rebate any initial commission. Pensions themselves are not high or low risk, it's what you put the investments inside the pension into that determines the level of risk.

One of the other things that you may want to do is to look at the charges for running the scheme and buying what you want as investments in it. Its amazing the difference in the final amount that an extra percent or two of charges will make. A starting point for a comparison for charges could be the low cost pensions from Alliance Trust and Hargreaves Lansdowne who publish their charges on their web pages. Alliance also do a full choice SIPP at extra cost.

[AdeTuono]

Thanks for the replies. Went for the stakeholder in the end. I guess only time will tell if it was a good choice. I'm also keeping fingers crossed that now's a good time to plunge in, what with the market being relatively low.