New Pension
If you are looking to open a new pension there are 3 options open to you:
- Stakeholder Pensions: Offered typically by life insurance companies in line with government standards on what charges can be levied, tehse are a cheap and basic option where typically there are a limited range of fund choices.
- Personal Pensions: Also often offered by life insurance companies where typically fund choice is limited to inhouse funds, although external fund options may be available. Usually more expensive that stakeholder pensions with greater fund choice.
- Self Invested Personal Pensions (SIPPs): Similar to a personal pension but provide you with control over what you invest in giving flexibility. Charges may be higher for a SIPP. Some SIPP platform providers offer a flat fee structure such as Interactive Investor which may suit if you are intending to transfer in other pensions.
Compare Pension Providers
A low cost award-winning SIPP that gives you a choice of over 40,000 investments; Selected funds; Ready made portfolios.
Sipp fee: £5.99 pm – assets up to £50,000, £12.99 pm – assets over £50,000
Offering commission-free DIY investing from a choice of 700 ETF’s, or low-cost professionally managed income or growth portfolios built for you
Sipp fee: 0.15% for your InvestEngine SIPP, capped at £200 per year, plus the costs of your investments — commission‑free for our DIY portfolios, or add a Managed portfolio for 0.25% a year
Build your investment portfolio from over 12,500 investments, from stocks and shares, funds, ETFs and more
Sipp fee: Low platform fee is a maximum 0.30%
A wide choice of investments, including over 2,000 funds, shares from 25 markets, ETFs, investment trusts and more
£0 – £250k: 0.25%
£250k – £500km: 0.1%
Over £500k: FREE
Over 11,000 investments to choose from including funds, investment trusts, ETFs, company shares, bonds and more.
£0 – £250k: 0.45%
£250k – £1m: 0.25%
£1m – £2m: 0.10%
Over £2m: FREE
Thousands of funds to choose from; Select 50 – Browse a list of expert picks. Pathfinder – Risk profiled fund options. Investment Finder – Search 1000s of investment ideas.
Less than £25,000: 0.35% if you have a regular savings plan or £90 (£7.50 a month) if you don’t
£25,000 or more but less than £250,000: 0.35%
£250,000 or more but less than £1 million: 0.20% – and you will automatically qualify for Fidelity’s Wealth Management Service benefits
£1 million+: 0.20% a year for the first £1 million and no service fee for investments over £1 million
Pension Overview
The term ‘pension’ means different things to different people. However, what can be said with some certainty is that in the UK over the last 30 years successive governments have done their best to make the whole area of pensions as complex as possible – making it very difficult for the layperson to understand .
When we talk about pensions we might be referring to:
State Pension
The UK government brought in a new single tier state pension of £155.65 per week (£8,092 a year) at the full level. Depending on the national insurance contributions you have made you may get more or less than this amount.
The existing sytem is based on 3 parts:
(a) Basic State Pension – As at April 2016 the full basic state pension is £119.30 per week per individual calculated on the number of years you have made national insurance contributions or acquired credits because of looking after children or people with disabilities.
(b) State Second Pension (formerly known as SERPS) – This is paid in addition to your basic state pension and is based on your earnings and national insurance contributions you have made whilst working.
(c) The Pension Credit is an income related benefit for pensioners in the UK which is means tested and is aimed at people who have no other income apart from the basic state pension.
There may be additional monies available if you are disabled, have caring responsibilities or certain housing costs, such as mortgage interest payments.
Company Pensions
(a) Final Salary Schemes – Where the employer will provide the employee with a pension based on their final salary at retirement and their length of service. With these types of schemes the pension is often inflation protected in some way e.g. linked to retail price inflation. With final salary schemes the risk is on the employer to ensure that the pension assets will cover the pension payments required.
(b) Money Purchase Schemes – This is where the employee pays a proportion of salary into a pension scheme with usually a contribution also made by the employer. The final pension pot available to the employee at retirement will depend on the investment performance of the pension scheme. In this respect the employee bears the risk that if investment returns are not as good as expected then this will impact on the fund size at retirement. In addition to this the income that can be achieved by using the fund to buy an annuity will be affected by prevailing interest rates and life expectancy rates. Annuity rates fluctuate and good timing can make a difference to the income you receive in your retirement.
Personal Pensions
Personal pension providers will make available a set range of different asset classes for you to choose from for investing and so the pension fund you build up will depend on the performance of your investment choices over time. At retirement you can take up to 25% of the fund tax free and the remainder of the fund must be used to generate an income – typically an annuity. Different types of personal pension include Self Invested Personal Pensions (SIPPs) which provide a broader range of investments for you to invest in.
Working out what level of pension we can expect in retirement may require expert pension advice. For many people a proper assessment of what pension to expect in retirement is left too late in the day. For many this lack of planning can have serious financial implications. What holds true is that we have to take responsibility for our own pension arrangements and be proactive in ensuring that our retirement provision is adequate in line with our expectations.