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A question about pensions for UK bootstrappers


#1

Anyone know of good independent resources to consider merits of various company pension schemes?
The more advisers we speak to, the more complicated it seems to get and wondered if we could benefit from comparing research from other small companies that have gone through the process.
There are small platforms that are quite cheap to set up and larger ones that are less so.
We want something that is simple to maintain and set up but also something where long term returns are likely to be good for employees.
Everyone says they are the best.


#2

No answers for you as I started this process then withdrew in horror - its an Omnishambles!

I’ve a fear this is going to turn in to the next big financial scandal.


#3

I can’t comment on the legislative aspect or the costs to business.

But if I was a prospective employee I’d favour a scheme which minimised costs at all levels. I’d favour market linked investments. I’d like something that made it easy to get a good broad asset allocation. Think Vanguard, ETFs and the like.

My impression, which might be false, is that many company schemes force you down the actively managed, costly investment route.

When I went solo one of the first things I did was hoover up all the crappy pensions from previous employers (100% of them) and put them in a SIPP with a low charge and invested in index trackers. Since then, performance is far better.


#4

The government approved ones seem to have a 0.5-1% fee annual AUM and then a fee of up to 2% of money you put in. Some have set up fees for companies, some don’t but then have monthly charges for basic bullshittery.

There seems to be two approaches, offer something ‘cheap’ for company, then skin employees with fees or, get company and employees to pay.

If I understand you correctly gravelld, you are now self employed so don’t have employees?

Wonder if anyone has experience of SIPP route for employees?


#5

It could well be Rhino from what we can see. One of those things that is a classic, ‘only time will tell’, by which time, everyone responsible will have moved on so they don’t really care.

When you say you withdrew, how did you manage that?


#6

When you say you withdrew

Deferred/postponed for 3 months and is unlikely to be a problem for me by then with no UK employees any more (doesn’t apply to directors) as current UK employee wants to move on and they are not likely to be replaced by UK employee. Not a viable strategy for most!

It really is a big leap in bureaucracy overhead for a business to take on its first employee (not just this of course). The pension regulator estimate that this will ‘only’ take 10 hours a year of admin overhead for businesses with 1-4 employees - does that square with your experience?

If I ran the country my alternative would be - employee responsible for setting up their own pension to meet their own needs (you know, like the adults we’re supposed to be) - if they do then they are rewarded with employer responsible for paying in 1/2/3% of earnings as with auto-enrollment. Then no conflict between scheme thats good for employer and scheme thats good for employee, lower admin burden on employers, don’t end up with dozens of forgotten about pension pots as you move jobs, govt encourages us to be less of a bothersome burden on them and more likely to achieve the key aim for all of this which is individuals start taking some interest and responsibility for their retirement.

I’ll get off my soapbox.


#7

Hi Mark

I spoke the an ‘independent’ financial adviser about pensions and other financial stuff. Despite being recommended by my account (who I like and respect) he turned out to be exactly the sort of grasping, lazy, parasite that I feared he would be.

I have some money invested with nutmeg.com, who also do pensions. They don’t have the lowest fees but I have been fairly impressed with their operation and the ease of use of their website so far.

http://www.cavendishonline.co.uk/pensions/ might be worth a look.

I agree with @gravelld that low fee, index funds are the best investments long term.


#8

Only just saw this but it made me laugh! :slight_smile:


#9

Best advice I have had was that if you invest in ‘standard’ pensions (typically a fund investing in public stocks), go for the funds with the lowest fees. The biggest factor in ultimate returns is the management fees. (This was from someone who retired at 35 from Goldman Sachs). ‘Active’ funds, often demonstrate greater returns, though not in all cases, sometimes they go spectacularly wrong. Despite the higher headline return, the higher fees more than remove the value from the customer.


#10

I think that is very good advice. Low cost index funds have been shown to consistently outperform managed funds. It also has the added bonus that you don’t have to talk with financial low-lifes.


#11

PS/ Friends Provident have recently been spectacularly incompetent in my dealings with them. They seem to be in the middle of some sort of system migration disaster. Avoid like the plague.


#12

I’d change “often demonstrate greater returns” to “sometimes demonstrate greater returns”.

The trouble is, and the reason you shouldn’t choose active funds, picking which ones will do well in the future.

Personally I use AJ Bell, they’ve never fucked up. Not the best UI but then I only check once per year.