which stakeholder pension

Several points arise here.

Firstly, it may pay your wife to transfer the accrued fund out of the FSAVC into a personal pension because the charges may be less. But you need someone with the right software to advise you on this one.;

Secondly, the charges on a non-stakeholder pension may be less than on a stakeholder version.

Thirdly, your statement "There is tons of advice on investment funds past performance and

Fourthly, forget the blarney about stakeholder. It was a Labour government initiative that failed, like most of them, and you are deluding yourself if you concentrate on them. The charges are higher (now, they used not to be) and they generally have less funds available.

Fifthly, remember that financial services and products change, like car design. What was true in 2000 is not necessarily so today.

Rob Graham

approx

SIPPs aren't always expensive, have a look at Hargreaves Landsdown or sippdeal.

H-L don't charge anything for most managed funds (unit trusts, OEICs etc) since they get the renewal commission, they also normally rebate all or nearly all the initial charge.

No mate - I said it's *not* a FS AVC.

Maybe, but the odds are against it. There is however, an argument that says it's better to pay higher fees to get a better performing fund, similarly a managed fund with an excellent manager *should* out-perform a tracker even when higher management costs are taken. I prefer managed funds rather than trackers for my own personal investment purposes.

Are there no websites that simply offer comparison tables of the groups of funds offered by stakeholder pensions? Best Invest are my favourite website and indeed my broker but apart from ploughing through each individual fund that each provider offers there doesn't seem to be an simple way to compare. When you take a company's stakeholder pension do you have a set group of funds or do you have to nominate which funds you want to put in your stakeholder? I'm confused about pensions in general because my company has always paid into a good final salary scheme so my knowledge is based on personal investment funds.

So are you saying I should consider a Sipp? The advice I have had so far is that they are generally not a good idea unless your pot is worth more than £50K

hmm that is food for thought. Not sure I wanted any further options though :-) On the face of it a free Sipp may be cheaper than a typical 1% p/a management fee by a stakeholder. As for sippdeal, what happens if that company ceases to trade? they're hardly a household name - presumably the funds she invested in would still exist in her name and could be transferred into another Sipp.

Most managed funds perform worse than a tracker.

Robert

Yup, I know Fool have long been saying that. I guess it's my jy job to make sure my funds consist of the top 20%. I have a spring clean each April.

Whoops. Sorry, you did.

I doubt that. Stakeholder charges are up to 1.5% p.a. for 10 years now. Most non-stakeholder personal pensions (a stakeholder is a personal pension, but of a spcific type) have 1% p.a.

There's no particular reason why you should pay higher fees for better performing funds, apart from to external fund managers (double charging - see below).

The pension provider has a range of funds from which you can choose. This range is likely to be greater if the pension is not a stakeholder. One problem the stakeholder provider has is to conatin the costs to within 1.5% p.a.. Many personal pensions have not only their own funds but also access to external funds. If these extarnal funds were to be available to the stakeholder , because you have to pay the stakeholder provider plus the external fund manager, the costs go over 1.5%. So they don't offer them. Which is a pity. So you then go for a non-SH version.

No, I'm not necessarily promoting a SIPP. SIPPs aren't the only alternative to stakeholder. But I'm not ruling them out, either. I just wanted you to know that stakeholders are not all they are cracked up to be and many people just go for them becauswe they don't know any different.

Rob

So go on then, I dare you...if you were choosing a plan today, which would you go for, a Sipp, a S/H or a straight personal pension? Obviously depends on your choice of funds within the plans, but that won't stop me asking the question :-)

I'm currently veering towards a Sipp if I can get one cheap enough. As Andy Pandy says elsewhere in this thread, the Hargreaves Lansdowne looks good value.

Oh, one more question if I may... Suppose my wife earns £1000 gross per month. She contributes £60 to a plan. Her employers say they'll match any contribution she makes up to 6% p/m, so they add another £60. Does the whole £120 qualify for Government tax relief of 20% or just her £60 contribution?

Just to add some more points -

Don't become fixated on the type of product - it's the fact that your saving that's important. The tax benefits of pensions and ISAs are similar - money into pensions is tax free, money out is taxable (unless below your tax free allowance). Money into ISAs is taxed (unless below your tax free allowance), money out is tax free. Pensions restrict when and how much you can take out, ISAs don't. Pensions are not included in bankruptcy proceedings or means tested benefit calculations, ISAs are.

Is her existing pension going to use up her tax free personal allowance ?

I think you've fallen for FUD as regards SIPPS.

See Sippdeal and Alliance Trust in addition to HL already mentioned.

If employers willing to contribute 6% to a personal pension, then that's quite rare I believe. Normally they limit it to group personal pensions.

The Pensions Advisory Service (TPAS)

are superb.

also the TMF boards -

hth

Just hers. She hasn't paid tax on the employer's contribution.

As I thought. Spoilsports.

Fair enough but an ISA won't make use of the 6% contribution match from her employers. And a pension is a better discipline, she can't get her hands on it so readily should the temptation arise.

No, her previous pension is frozen now until she retires.

Will do - it's just that I've *heard* of HL, not so much of AT and nowt about Sippdeal. Do you know off the top of your head which is the biggest company of the three? What happens to her sipp if Sippdeal go under - her independent funds will still be held by the parent company (e.g. Gartmore) I guess.

Hmmm. She says both her employers are willing to do that as they don't offer a plan themselves.

Yes - I have rung them already.

Well, maybe but the TPAS said a stakeholder seems a better prospect. Maybe I rang them with that mindset. I might try another call.

Yup - I'll have a look through. Thanks for the reply.

Although effectively she is getting tax relief on it, since it's not taxable, unlike most benefits from an employer (company car, private health insurance etc) which the employee has to pay tax on.

Putting it another way, let's say she pays 100 gross and the employer pays

100 gross. She only pays 80 (because employee's contributions are always paid net of basic rate tax) and the other 20 gets given to the pension provider by the HMRC. So 100 goes in.

The employer's 100 is an employer's expense and is paid gross (unlike employee's contributions), so is allowable against the employer's corporation tax. As Andy Pandy says, your wife won't get the tax relief (she's not making the payment, so why should she?), but OTOH neither is the payment subject to tax as an employee benefit.

Rob

In fact, given that her employer seems to be showing signs of unusual flexibility, she should ask them to reduce her salary by the amount she would have contributed herself and to add that amount to the employer's pension contribution instead. This is known as 'salary sacrifice'; the whole amount is thereby tucked away from PAYE and liability to income tax or NI. It's the lack of NI which produces the benefit to both employer and employee.

Don't take this to the extent that it reduces earnings below the NI Lower Earnings Limit, nor so that her salary is too low to justify any mortgage you and she might want to negotiate.

Matti

I think what he means is, when the pension is paid to her at retirement will it use up her personal allowance?

Rob

True and true again if she's not disciplined !

I meant her income tax nil rate band upon drawing the pensions, but it matters not since you've confirmed the 6% employer contribution to a pension, which makes the alternative of ISAs a non starter.

They're what I'd call medium size with £4bn under administration -

I'd guess AT the market cap. is £2.3bn, but that won't include assets under management/administration.

Correct (and a good question!). I dealt with that here -

996217

Excellent news ! Perhaps times have changed and I'm a little out of date. It makes perfect sense of course, I can only think that employers I came across wanted to play the controlling, paternalistic role and try to keep what control they could of assets.

I'd say that they're wrong. It's simple enough to do the sums yourself

-

(for instance) fwiw I've been using Sippdeal since just after they started and am almost completely content. My only minor bones of contention, which are by no means limited to Sippdeal, are cash balances that pay 1% below base - I'd prefer 1% below LIBOR, but maybe I'm being unrealistic, and equity dealing commission which is above 1% for amounts in the >£2,000 to

Aaah

True