Reply to: Pensions

[pmeswani]

Just a follow-up to my original suggestion of Alliance Trust Savings for a SIPP (even though I don't use them myself.)

For Blackrock UK Absolute Alpha they discount the 5% initial charge down to 0%, and the 1.5% annual charge is rebated down to 1%.

If I've understood Hargreaves website correctly, they also give back the 5% initial charge, but they only give you 0.1% off the management charge, so they are considerably more expensive than Alliance Trust. (The difference is 0.4% per year.)

So apart from the obvious self selected funds and shares, what does Alliance Trust give that is above and beyond?

The one thing that concerns me about Alliance Trust is the "Fixed flat rate online dealing charge of £12.50 per deal regardless of size of deal".. Does that mean for every fund you want to invest in you have to pay £12.50? Or is that just for shares?

Also, Hargreave's offer a better rate of interest on investments from £1k onwards, whereas Alliance offers a flat rate interest across the board. This may be important if you decide not to invest some of the money until the market picks up.

[IR35 Avoider]

Just a follow-up to my original suggestion of Alliance Trust Savings for a SIPP (even though I don't use them myself.)

For Blackrock UK Absolute Alpha they discount the 5% initial charge down to 0%, and the 1.5% annual charge is rebated down to 1%.

If I've understood Hargreaves website correctly, they also give back the 5% initial charge, but they only give you 0.1% off the management charge, so they are considerably more expensive than Alliance Trust. (The difference is 0.4% per year.)

[pmeswani]

Most personal / stakeholder pensions accept payments from companies, especially now that every employer has to provide access to a stakeholder pension for their employees.

By paying pension from the company, there is no benefit against paying personally from income derived from dividends, BUT you avoid NI if the money was to be paid as salary.

I thought this was only true for companies that employ 5 or more people.

[FarmerPalmer]

How do I go about getting my Ltd company to contribute to my personel pension.

Or do I have to convert a personel pension to a company pension.

Are there any tax advantages I can make from this now and/or later when pension matures.

Most personal / stakeholder pensions accept payments from companies, especially now that every employer has to provide access to a stakeholder pension for their employees.

By paying pension from the company, there is no benefit against paying personally from income derived from dividends, BUT you avoid NI if the money was to be paid as salary.

[moorfield]

Almost every book you can buy on investing will tell you that the more you pay in management charges the worse your returns will be.

An index tracker mighg charge 0.5% in management charges, an active fund might charge 1.5%. 1% of extra charge on a share fund will reduce your returns (at todays stock-market valuations) by about a sixth. I think avoiding a 17% voluntary tax on returns is a good idea.

WHS. HL have a very good pension calculator which if you play around with the settings illustrate this point emphatically.

Edit: linky here

This is one reason I invest in a diversified basket of blue chip shares directly. Max £200 trading + stamp duty charges per year on average and zero management charges for me.

[IR35 Avoider]

I hold a mixture of funds. Some Gold, Some Bonds, Some Gilts and some specialist funds. Yes there is an annual fee for managing the funds... what did you expect? . Don't go for cheap for the sake of going for cheap. Go for something that would make your pension grow. The fees are small enough, unless your pension is at the upper threshold.

Almost every book you can buy on investing will tell you that the more you pay in management charges the worse your returns will be.

An index tracker mighg charge 0.5% in management charges, an active fund might charge 1.5%. 1% of extra charge on a share fund will reduce your returns (at todays stock-market valuations) by about a sixth. I think avoiding a 17% voluntary tax on returns is a good idea.

[GreenerGrass]

What do people reccomend pension funds to be held as?

Stocks, Shares, Gold, Cash, Bonds, Gilts?

What holding carries the least overheads with regards to fees?

I like the idea of tax savings but hate the idea that I would still end up paying fees even if i were to run my own sipp, how does one go about minimizing running costs?

Solidec, in these rocky times check out some absolute return funds for your core holdings - they can go both "long and short":
BlackRock UK Absolute Alpha
Threadneedle Absolute Return Bond Fund
Cazenove Absolute Target

They haven't all made money in the last year, but they've certainly done better than standard equity funds.

Then you can add other stuff like energy/oil funds, index-linked gilts, gold etc.
When we are through the worst of things a low cost FTSE tracker index fund/ETF might be worth buying into again.

I find Moneyweek.com and marketoracle.co.uk useful for general market trend research, certainly more useful than speaking to an IFA who has only known a long term bull market.
I don't know of any IFAs that would have told you to move everything into cash & absolute return funds this time last year (as I did with my pension).

Most of them would tell you to sit tight and lose 40% of your investments value last year because "the market always goes up in the long term". A 40% loss needs a much bigger gain to make up for it.

[Solidec]

100% UK equities , I'm using the High Yield Portfolio model (see Motley Fool for details). 25+ yrs to go.
<£300 dealing charges/stamp duty per year, 0% fees, with Sippdeal.

Any performance figures to hand?

[moorfield]

What do people reccomend pension funds to be held as?

Stocks, Shares, Gold, Cash, Bonds, Gilts?

What holding carries the least overheads with regards to fees?

I like the idea of tax savings but hate the idea that I would still end up paying fees even if i were to run my own sipp, how does one go about minimizing running costs?

100% UK equities , I'm using the High Yield Portfolio model (see Motley Fool for details). 25+ yrs to go.
<£300 dealing charges/stamp duty per year, 0% fees, with Sippdeal.

[pmeswani]

What do people reccomend pension funds to be held as?

Stocks, Shares, Gold, Cash, Bonds, Gilts?

What holding carries the least overheads with regards to fees?

I like the idea of tax savings but hate the idea that I would still end up paying fees even if i were to run my own sipp, how does one go about minimizing running costs?

I hold a mixture of funds. Some Gold, Some Bonds, Some Gilts and some specialist funds. Yes there is an annual fee for managing the funds... what did you expect? . Don't go for cheap for the sake of going for cheap. Go for something that would make your pension grow. The fees are small enough, unless your pension is at the upper threshold.

[davedave]

You don't need to have a SIPP to transfer other pension pots to, you can do this with the vast majority of pensions. A simple stakeholder pension will accept transfers from any eligible pension scheme, and will almost always have lower annual management charges than a SIPP.

As for taking the benefits on retirement, you also don't need a SIPP to have flexibility. With a stakeholder you can use various drawdown options, SIPP's offer no addiotnal benefit at retirement.

If you're planning on investing in traditional gilts, shares etc, there's no point in paying the higher charges of a SIPP

[Solidec]

What do people reccomend pension funds to be held as?

Stocks, Shares, Gold, Cash, Bonds, Gilts?

What holding carries the least overheads with regards to fees?

I like the idea of tax savings but hate the idea that I would still end up paying fees even if i were to run my own sipp, how does one go about minimizing running costs?

[PhilAtBFCA]

Pensions

DaveP

You can use either a personal pension or company pension for efficient tax planning in your company.

But please take good advice from an IFA, SIPP's can have high charges and how efficient it is for you will depend on contribution levels, existing arrangements etc..

Dont leave it too lon either, now is a good time so that you can get contributions into this tax year.

HTH

Phil

[GreenerGrass]

Yes, what he said above.

You can probably keep your personal pension but my Scottish Widows one was so rubbish I set up a SIPP with Hargreaves Lansdown and transferred existing personal and previous company pension (including a protected rights pot) into it.

Easy to make company contributions, through monthly direct debit or ad hoc cheques when you feel like it. Tax efficient and no risk of IR35 claw back.

[moorfield]

How do I go about getting my Ltd company to contribute to my personel pension.

Or do I have to convert a personel pension to a company pension.

Are there any tax advantages I can make from this now and/or later when pension matures.

Setting up a SIPP is probably the easiest route (Sippdeal or Hargreaves Lansdown are the most popular on here) as they are very easy to admin and contribute to on an ad hoc basis via your ltdco. You can also transfer any old pension pots you have into these (they now accept protected rights).

Despite being unpopular with some on here pensions are the biggest tax break left for us contractors (particularly those caught by IR35). And SIPPs offer more flexibility in where you invest and how you extract your cash through retirement ie you are not obliged to buy into hefty management charges or buy an annuity, and with some careful planning it will be quite possible to extract a tax free income through retirement.