Question
1) I have been invited to join my employers pension scheme but was slightly surprised to find that it was a group pension scheme rather than a stakeholder scheme given that I understood the latter were cheaper to administer and for me in terms of charges - the employer has less than 15 staff. The info provided clearly states that but I wonder what the advantages of them choosing this would be? The providers fees (Standard Life) are 1.02% overall for what appears to be a general managed fund. What are the basic differences between the two?
2) Never having invested in a managed fund (I manage my own SIPP) if I am allowed to go outside of this within the StL offer should I?
3) I also have a pension via another funds platform which I transferred in from another employer 20 years ago. It is contracted out of S2P. Do I have to contract out with this plan?
4) Should I be concerned that the commission paid to the FSA Adviser via an overarching support network is somewhat fluffy and just talks about a monthly commission based on the value of the investment rather than saying this how much I am getting for arranging this and this is the % each month/year
5) The key facts pension illustration shows it will not be paid to my dependant on my death. So what happens as I thought it was the norm that it was although you might have to accept a lower pension? Answer
Stakeholder pensions are really just a type of personal pension that must offer flexibility and low charges. The key stakeholder rules are allowing you to stop/start contributions and transfer your pension without penalty, and limit total charges to 1.5% a year for the first 10 years then 1% a year thereafter.
It's quite possible for a personal pension to have charges on a par with (or even lower than) stakeholder, but they could charge somewhat more - it varies depending on providers, specific plans and how much sales commission is paid to financial advisers.
Investment choice can vary, some stakeholders only offer a handful of funds while others offer more than some mainstream personal pensions
Why would your employer offer a group personal pension rather than stakeholder?
It might be that the scheme offers a very wide investment choice for the owners (perhaps at extra cost) and a limited (lower cost) investment choice for employees, which is less likely to viable with stakeholder pensions.
Or maybe a financial adviser has simply persuaded your employer a group personal pension is a good idea (because it's more profitable for the adviser than a stakeholder scheme!).
Either way, although an annual charge of 1.02% is not unreasonable (provided there are no other charges), having just one fund to invest in far from satisfactory. Even if the fund is decent, it's very limiting having no other choice.
If your employer will contribute money into a pension as part of your remuneration package then I'd be inclined to ask them to pay it into your existing SIPP instead of the group personal pension. They're not obliged to agree, but hopefully it won't be a problem given it's a small company. If they refuse then it's probably worth joining the group personal pension (as you're getting something for nothing) but ask if you can have a wider fund choice or use the single fund with the intention of transferring the money into your SIPP if/when you leave the employer (make sure there's no penalty for doing so).
If the employer doesn't pay any money into the pension for you then there's little point joining the scheme. You could continue using your existing SIPP or use a lower cost stakeholder pension if you want to make your own ongoing contributions.
You don't have to contract out of the S2P with a money purchase occupational pension (which is what a stakeholder/personal pension is) and, in any case, even if you want to this is being abolished from 6 April 2012.
Any commission paid to a financial adviser should be clearly stated as a percentage and amount. Provided the commission is absorbed within the 1.02% annual charge you'll pay then I wouldn't worry too much about it, but do ask for it to be clearly disclosed. Also make sure there are no additional charges, including penalties for stopping contributions or transferring the fund to another scheme in future.
The rules covering what happens to a money purchase pension should you die before taking benefits are standardised: a nominated person can receive the pension fund as a tax-free lump sum (it's taxed at 55% above the lifetime allowance, currently £1.8 million) or dependent's can receive it as a taxable income. If the lump sum and you haven't nominated someone to receive it then the money will pass into your estate hence could be subject to inheritance tax.
If you've already taken benefits using an annuity then any spouse's income on your death will depend whether you selected this option when buying the annuity. But don't worry, it makes no difference whether or not this is shown on your illustration now - it's a decision to be made in future.
1) I have been invited to join my employers pension scheme but was slightly surprised to find that it was a group pension scheme rather than a stakeholder scheme given that I understood the latter were cheaper to administer and for me in terms of charges - the employer has less than 15 staff. The info provided clearly states that but I wonder what the advantages of them choosing this would be? The providers fees (Standard Life) are 1.02% overall for what appears to be a general managed fund. What are the basic differences between the two?
2) Never having invested in a managed fund (I manage my own SIPP) if I am allowed to go outside of this within the StL offer should I?
3) I also have a pension via another funds platform which I transferred in from another employer 20 years ago. It is contracted out of S2P. Do I have to contract out with this plan?
4) Should I be concerned that the commission paid to the FSA Adviser via an overarching support network is somewhat fluffy and just talks about a monthly commission based on the value of the investment rather than saying this how much I am getting for arranging this and this is the % each month/year
5) The key facts pension illustration shows it will not be paid to my dependant on my death. So what happens as I thought it was the norm that it was although you might have to accept a lower pension? Answer
Stakeholder pensions are really just a type of personal pension that must offer flexibility and low charges. The key stakeholder rules are allowing you to stop/start contributions and transfer your pension without penalty, and limit total charges to 1.5% a year for the first 10 years then 1% a year thereafter.
It's quite possible for a personal pension to have charges on a par with (or even lower than) stakeholder, but they could charge somewhat more - it varies depending on providers, specific plans and how much sales commission is paid to financial advisers.
Investment choice can vary, some stakeholders only offer a handful of funds while others offer more than some mainstream personal pensions
Why would your employer offer a group personal pension rather than stakeholder?
It might be that the scheme offers a very wide investment choice for the owners (perhaps at extra cost) and a limited (lower cost) investment choice for employees, which is less likely to viable with stakeholder pensions.
Or maybe a financial adviser has simply persuaded your employer a group personal pension is a good idea (because it's more profitable for the adviser than a stakeholder scheme!).
Either way, although an annual charge of 1.02% is not unreasonable (provided there are no other charges), having just one fund to invest in far from satisfactory. Even if the fund is decent, it's very limiting having no other choice.
If your employer will contribute money into a pension as part of your remuneration package then I'd be inclined to ask them to pay it into your existing SIPP instead of the group personal pension. They're not obliged to agree, but hopefully it won't be a problem given it's a small company. If they refuse then it's probably worth joining the group personal pension (as you're getting something for nothing) but ask if you can have a wider fund choice or use the single fund with the intention of transferring the money into your SIPP if/when you leave the employer (make sure there's no penalty for doing so).
If the employer doesn't pay any money into the pension for you then there's little point joining the scheme. You could continue using your existing SIPP or use a lower cost stakeholder pension if you want to make your own ongoing contributions.
You don't have to contract out of the S2P with a money purchase occupational pension (which is what a stakeholder/personal pension is) and, in any case, even if you want to this is being abolished from 6 April 2012.
Any commission paid to a financial adviser should be clearly stated as a percentage and amount. Provided the commission is absorbed within the 1.02% annual charge you'll pay then I wouldn't worry too much about it, but do ask for it to be clearly disclosed. Also make sure there are no additional charges, including penalties for stopping contributions or transferring the fund to another scheme in future.
The rules covering what happens to a money purchase pension should you die before taking benefits are standardised: a nominated person can receive the pension fund as a tax-free lump sum (it's taxed at 55% above the lifetime allowance, currently £1.8 million) or dependent's can receive it as a taxable income. If the lump sum and you haven't nominated someone to receive it then the money will pass into your estate hence could be subject to inheritance tax.
If you've already taken benefits using an annuity then any spouse's income on your death will depend whether you selected this option when buying the annuity. But don't worry, it makes no difference whether or not this is shown on your illustration now - it's a decision to be made in future.
Read this Q and A at http://www.candidmoney.com/questions/question454.aspx
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