Personal pension options

A question about : Personal pension options

I want something i don't have to think about too much. The Cavendish one online looked pretty decent to me but I don't really know.

Having looked into SIPPs a bit more I realise I don't really know what I'm doing so would prefer to invest in a personal pension.

Part of what I see on them though seems to suggest that you still invest in funds though which is confusing??

Best answers:

• It isn't the pension wrapper so much (although that does affect costs) it is the investments you put inside the wrapper that count for both pensions and S&S isas.
  So you need to decide what investments you want, but they trackers, managed fund, bonds/gilts or a mixture (such as with Lifestyle funds).
  Once you know what you want to use (or what combination) diversification is key( then you can choose the platform that works out cheapest.
• Isn't that the idea with a personal pension that someone manages it for you? Ie its for someone with a less than knowledgeable expertise in investing in anything??
• yes, but you could choose to open a SIPP and put a Managed Fund in that too..
• Basically with a PP you get simpler choices as you have a smaller list of funds to choose from. Cavendish will introduce you to someone like Aegon Scottish Equitable or Aviva but within the personal pensions or stakeholder pensions that they offer you will still get the opportunity to make choices from a variety of funds.
  With a PP you don't get the ability to buy individual shares, individual bonds, ETFs, Investment Trusts, structured products, directly owned commercial property with a mortgage on it, or all the other weird and wonderful things you can technically hold in a SIPP. Basically it's just funds, but there's still choice; the efficiency comes from the fact that you are not paying for a platform that can hold anything and everything and you don't get access to real time trading 'just in case' you want it, etc.
  Personal pensions often have a set of standard funds for different levels of risk and then a set of their own more specialist (e.g. single sector) funds and then some externally managed funds. Some of the externally managed funds might come at a premium over the headline annual fee of (say) 0.5%, but generally it can be a relatively low cost solution as you can get a reasonable set of funds with a built in platform fee.
  For example Aegon via Cavendish you are only paying 0.4% all in for a Ј50k pot and even less for a Ј150k pot ; if you have a smaller pot you could have Ј1 to Ј50k with an Aviva stakeholder for only 0.55%
  If you compared that to something like a fund supermarket platform, depending on the amount invested you might be spending 0.25% (Charles Stanley) to 0.45% (Hargreaves Landsdown) just for access to the platform that you don't even need to use the features of because you're not share trading and you don't want 2000 fund choices... And then you'd have to pay the fund fees on top, which could be 0.25% for a bargain basement simple fund of trackers like Vanguard Lifestrategy that everyone bangs on about here, or 0.75% for Woodford etc. So, that could be an all-in cost of 0.5% to 1%+, depending on what you buy where.
  You are probably right to say in a PP 'someone manages it for you': the fund manager manages it... but you can still choose from a range of options what it is you would like them to manage. You can certainly just buy a generalist fund or two and leave it, just like you could with a SIPP. If you actually want someone thinking about your circumstances and giving you advice, you would employ an IFA to set up your PP instead of Cavendish; Cavendish just make the introduction and get you a foot in the door to deal with the provider but they don't tell you how to pick a portfolio. Effectively PP via Cavendish is still DIY, it's just less 'in at the deep end' DIY found with a SIPP.
  With a SIPP it is completely 'self invested' and you have a heck of a lot more options and, generalising, more platform costs. Of course there are some very cheap ETFs available through SIPPs and there are some very high quality active managed funds which many would say are worth paying for but I'm just generalising. The ongoing charges of paying 0.3% for a SIPP platform AND 0.5% for a fund to sit on the platform, can add up. IFAs on this board say that with a reasonable sized pot, people could be getting a fully advised personal pension through them for less total annual cost than going your own way on a SIPP, fumbling your way through it trying to guess what to do and paying for access to funds or other instruments that you don't actually need.
• Thanks Bowlhead you are always a bit of a legend with these things.
  Do you have any knowledge of the cheapest personal pensions with regards to the platform themselves? Also are you aware of any reading I should do before I start putting money into it.
  You are right in that basically what I want to do is just drip an amount in per month to a generalist fund or two and leave it.
  I want to get going straight away on this as I don't want to miss the tax relief, but I am nervous about investing without having the best knowledge of the markets / what to invest in etc.
  If you had to invest in two generalist funds what would they be? Vanguard? Woodford etc? Can you invest in a higher risk Vanguard and a lower risk. I.e. the 100 and 60?
• Basically you need to get out your calculator.
  The only way to figure out the 'cheapest' for you is for you to decide how much per month you will invest. AS some platforms have a flat fee, and some a % of the funds fee. And % works out cheaper in early times and with low amounts, and flat works better with larger amts/larger funds
  You can get an IFA to set up the pension for you and help choose your investments, but this comes at a cost.
  Or yo could put everything into one lifestyle fund like the Vanguard series, or a range of trackers- you dont want to choose one UK tracker.
• You can invest in the Lifestrategy 60 and the 100 but you might as well just invest in the 80.
  The 80 is a generalist fund as it invests in at least 2 different types of assets (shares and bonds) and has a broad global spread. Woodford is not a generalist as he doesn't have a wide global spread - he invests in a narrow set of regions, aims for a specific type of company, and only invests in shares and not bonds or property etc.
  Plenty people here decide what specific mix of specialist name brand funds they want and then shop around to see what platform is cheapest to hold them on. But you are not a sophisticated investor and don't need the services provided by platforms to pick individual shares and bonds and funds from individually famous brands off the shelf. The example I gave above showed it was going to cost you half a percent or so, all in, to just get one of the most popular cheap funds of trackers, if you are going to buy from a platform. If you don't even want platform services anyway, you might as well just get a personal pension which can cost you half a percent or so. As mentioned, Cavendish can give you access to that or you can use an IFA for more money and actual advice.
  It is a bit reckless to get your "which funds would you pick" off a forum if you don't really understand how to pick them yourself. I would not pick something suitable for you I would pick something suitable for me. Either buy IFA services or do some research yourself. Either way you're unlikely to need a DIY SIPP platform when PPs are adequate for your needs.
• Thanks Bowlhead. Where would you suggest I start research wise?
  I think a PP in one or two funds is the way forward for me