Personal Pensions Explained
Private pensions are a type of defined contribution pension scheme. They’re essentially big pots of money that you pay into during your working life, which you then use to provide yourself with a retirement income.
There are two main types of pension plan to consider when setting up a private pension: a stakeholder pension and, for the more experienced investor with a larger pension pot, self-invested personal pensions (SIPPs).
Personal Stakeholder Pensions
A stakeholder pension allows for flexibility when it comes to the size and regularity of contributions. Stakeholder pension providers also tend to cap charges and, if you’re unsure about the investments you’d like to make, offer a ‘default’ fund that’s designed to suit as many people as possible.
Self-Invested Personal Pensions
A self-invested personal pension, on the other hand, offers much more freedom and flexibility when it comes to managing your investments. With a SIPP, you or your investment manager is free to manage the funds as you see fit to achieve the kind of returns you’re looking for.
Which is the Best Private Pension?
Finding the right private pension requires careful consideration. After all, you’ll hopefully have a long and happy retirement, but you’ll need to fund that somehow. Achieving your financial goals for post-work life is possible, but it requires you to lay the groundwork today with good pension planning.
It’s here that the help of a financial adviser can be invaluable. There are a huge array of options available if you’re starting your own pension, which makes it hard to know if one provider offers a better personal pension than the rest.
You’ll also have to consider your investment choices and possibly commit to managing them. Again, this is an area where a pensions adviser can be of huge assistance, especially for a new investor or someone with limited time to dedicate to their pension investments.
Remember, everyone’s pension requirements are different. Just because one option works out to be the best pension for a friend, family member or colleague doesn’t mean that same personal pension will automatically suit your needs.
There may well be better personal pensions out there on the market for you, which our expert pension advisers can help you search for.
Director at Drewberry
Compare Best UK Pension Funds
Below is a list of some of the top investment management firms whose funds Drewberry makes use of when building pension portfolios. This list is pulled from our own research, but there are many other providers available out there in the wider market.
7 Top Pension Providers
Aegon’s UK operations are based in Edinburgh, but the company is wholly-owned by the Dutch global finance giant Aegon N.V. Aegon was founded in 1831 as Scottish Equitable as a life assurance society and began paying its first pension in 1861. Aegon offers a range of retirement solutions, including a personal pension and retirement annuities.
BlackRock is based in New York City. The American global investment management company was founded in 1988 as a risk management and fixed income institutional asset manager. Today, it’s among the world’s largest asset managers, with over $5 trillion in assets under management.
Fidelity is a global financial services firm based in Boston, Massachusetts. It provides a variety of wealth and investment management services, including retirement planning and investment advice, and also Life Insurance.
M&G Investments is a UK-based investment management firm that can trace its origins back to 1900. It has offices in 16 countries and has more than £200bn in assets under management.
Old Mutual is a UK-based bancassurance company that is also engaged in investment management and the provision of savings. The company was founded in South Africa in 1845. In the UK, Old Mutual also operates the Intrinsic network for financial advisers.
Standard Life Aberdeen Asset Management
Aberdeen Asset Management is headquartered in Aberdeen, Scotland. Established in 1983, Aberdeen was listed on the London Stock Exchange until August 2017 when, following a merger with Standard Life, it delisted and became a subsidiary of the re-branded Standard Life Aberdeen. Standard Life Aberdeen offers a range of investment solutions to private and commercial clients worldwide.
Vanguard Asset Management is part of the wider Vanguard Group, an American investment management firm with more than $4 trillion in assets under management. As well as being the second-largest provider of exchange-traded funds in the world, Vanguard offers brokerage services, variable and fixed annuities, financial planning and trust services.
Pension Pot Calculator
Your Pension Contribution Results
Using our expertise we've modelled how much your pension could be worth at retirement given how much you're currently paying in and the age at which you've indicated you'd like to retire. Assuming your current contributions remain fixed between now and your retirement, we've put together three estimations of the size of your pension pot on that date based on low growth (2%), average growth (4%) and high growth (6%) scenarios.
- Expected Retirement Age
- 2% Growth Rate
- 4% Growth Rate
- 6% Growth Rate
Your Income Drawdown Results
Given the income you'd like to receive, we've used our financial expertise to calculate how long your pension will last. With income drawdown your pension pot remains invested after you retire, so we've projected how long your pension will last based on your fund growing post-retirement by 2%, 4% or 6%.
- Required monthly income
- 2% Growth Rate
- 4% Growth Rate
- 6% Growth Rate
These calculators help but sometimes it doesn't beat talking to a human. If you
need any support please do not hesitate to pop us a call on 02084327333.
Head of Pensions Advice at Drewberry
How Much Does a Private Pension Cost?
There are a number of different options you’ll have to consider to ensure you find the best pension for your needs and circumstances. There’s no shortage of pension funds available on the market, either, so if you’re going it alone you’ll need to do a lot of shopping around to compare pension schemes.
Make sure you compare the fees pension providers charge for any funds you’re interested in. Not only might you have to pay fees for managing your investments – known as annual management charges or AMCs – but there may also be charges for transferring your investments, as well as other fees. Any pension fees you pay will affect the overall pension you receive when you retire.
Can you afford your personal pension contributions?
Although it’s important to build up a good pot of pension savings to see you through retirement, ultimately your pension payments must be affordable during your working life.
Some pension funds may impose a minimum contribution at regular intervals, which might not be suitable if your income is irregular, such as if you’re self-employed.
On the flipside, if you’re fortunate enough to come into some extra cash you might want to contribute a lump sum to your pension. It’s vital to find out whether your personal pension allows lump sum contributions as well as regular payments for additional flexibility.
Use the Pension Pot Calculator below to work out how much your pension could be worth given it’s current size and your current contributions. It’s important to make sure you’re saving enough for retirement, but don’t forget that any pension payments you make need to also be affordable for your circumstances.
Senior Paraplanner at Drewberry
I would like to say thank you to Ciaran King for his professionalism, respect and sensitivity with dealing with my income protection insurance.
What are the Best Investments for My Pension?
The biggest thing to consider when it comes to setting up a pension is your range of investment choices. It’s important that you pick a pension fund that matches with your objectives and offers a degree of investment risk you’re happy with.
When investing your pension pot/choosing a pension fund, these are some of the options you might want to consider:
- How do you feel about investing your pension in emerging markets?
- Would you prefer to invest in mostly UK equities or also include investments on foreign stock exchanges? And, if so, what should the balance be between the two?
- How safe do you want to play it with your pension investments – do you want to hold some in cash and take on inflation risk? If so, how much?
- When it comes to risk, what’s your overall risk appetite? Would you like to aim for investments with high growth potential but at the risk your pension fund might make a loss, or would you prefer safer investments with lower prospects for returns?
- Does investing your pension fund in commercial property appeal to you?
While you might be able to stick with the default fund in a stakeholder pension if you’re unsure or new to investing, this might close off some of the avenues available to you and therefore limit your returns.
If you have a larger pension fund you are likely to be better served with a SIPP, but if you’re not comfortable with making your own investment decisions, then setting up a SIPP is problematic.
With so many investment options available when you’re setting up a new personal pension, it makes sense to entrust the process to an expert adviser whose job focuses on investment management every day.
We’re well-placed to discuss your needs and marry them with your appetite for risk to ensure you put your money into a pension fund that works for you.
Pensions and Investment Specialist at Drewberry
Avoid Pension Scams
Sadly, the wealth people work so hard to build in their pension funds makes them tempting targets for fraudsters and thieves. There’s even a risk that you might become a victim when setting up your first pension fund.
So just how do you avoid pension investment scams? Below is a checklist to follow that could help you avoid scams and invest your retirement savings safely and securely.
If it sounds too good to be true, it probably is
It’s natural when searching for the best private pension that we look for the highest promised returns, but these can sometimes be fake opportunities.
Well-known unregulated investment scams are often overseas and might involve foreign hotels, vineyards or other construction projects.
While there are plenty of legitimate overseas investments, and if you’re happier to take a higher degree of risk there are perfectly genuine high-risk pension investments you could make, always be wary of such opportunities and do your homework to make sure you know what you’re getting into.
You should take advice on all investments from a regulated financial adviser, but this is especially true for investments promising big returns as these are probably carrying a high degree of risk.
A genuine, registered financial adviser should lay out the risks of investing your money in these areas rather than simply promising huge rewards for doing so.
Check the FCA register
The Financial Conduct Authority’s Financial Services Register is totally free to use and is fully searchable, so you can discover if the company you’re thinking of investing with is authorised/registered by the Prudential Regulation Authority (PRA) and/or the FCA to conduct financial business in the UK.
The register has recently been updated to include firms reported as providing regulated products or services without the correct authorisation, as well as those known to be running scams. A search for such a company will throw up its entry on the register with prominent warnings totally clear.
Don’t be rushed
Deciding on a private pension is a big decision. You’re choosing one of the investment vehicles that will see you through your old age. Take as much time as you need to find the right pension for you.
Unscrupulous firms will use high-pressure sales techniques, such as offering tempting investment opportunities for only a short space of time.
Don’t allow yourself to be swept along with such tactics.
Some fraudsters won’t let you call them back at a later date, perhaps because they have no inbound telephone service. That should arouse immediate suspicion.
Do You Get a Better Pension with Financial Advice?
That’s not just financially in the form of higher returns, but also in terms of the peace of mind you get from knowing your investments and ultimately future security are in the hands of an experienced professional.
While there’s nothing wrong with managing your pensions and investments yourself, the reality is that doing so – and doing it well – takes up a lot of time, time that most of us simply don’t have to spend.
Once you’ve engaged a pensions financial advisor, you can sit down with them at regular intervals to discuss your investments, their performance, and whether your pension investments still suit your needs.
That way, your pension fund can stay abreast of changes in the markets even without your constant oversight, minimising the risk of poor performance.
As a result, and as illustrated by the graphic below, paying a fee for financial advice can make you 50% richer than those who don’t.
Does Financial Advice make a difference?
No Goals & No Financial Advice
This is the annual income an individual approaching retirement can expect if they have no financial targets and have not received any professional financial advice.
Financial Advice without Goals
This is the annual income an individual approaching retirement can expect if they have taken the time to consult a financial adviser about their retirement.
This is the annual income an individual approaching retirement can expect if they have consulted a financial adviser and set clear retirement goals.
SOURCE: Morningstar 2013 Study
A 2013 US study by Morningstar found that financial planning advice can add almost a third to the value of retirement wealth.
SOURCE: Redefining Retirement Survey
The Old Mutual Redefining Retirement Survey 2015 found that the average retirement income for those that took regular financial advice and who had a clear investment target was more than 50% higher than the average income for those who did not take regular advice.
Looking for the best pension advice?
If you’re looking for pensions and investments advice, Drewberry’s expert advisers are here to help. The value of using a financial adviser to set up your pension really can’t be underestimated when it comes to finding the best personal pension for your needs.
Wealth and Investments Specialist at Drewberry
Please do not hesitate to pop us a call on 02084327333 to discuss your pension requirements. Alternatively, you can drop us an email at firstname.lastname@example.org.