Don't doo it on your own! (Buyers Guide: Pensions)

Name: Epiphany

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Product:	Buyers Guide: Pensions
Date:	09/02/01 (113 review reads)
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To write a really good opinion on pensions, I think you have to be a financial advisor with years of experience and the most up-to-date information possible!! However, I have decided to give it a go myself, having spent hours talking to my IFA (Independent Financial Advisor), and close personal friend, about the subject. I apologise in advance for not being an expert on the subject, I just hope that I am able to help to steer people in the right direction. As far as I am aware the information included in this opinion is correct, but if I do make a mistake please, please let me know so I can put it right.

This brings me to my first point. ALWAYS get the help of an IFA before committing to a long-term investment such as a pension. For example, I looked into the Virgin stakeholder pension options and the returns looked REALLY good, but the catch is that they have no performance history which doesn’t tell you how well their fund does over a long period of time. This is one point that many people feel is important and is discussed further in the next paragraph. Don’t just take my advice on the subject, or other people’s opinions in DooYoo, I would recommend that you also get a professionals help!

Second point. You need to know about long term performance of companies and fund managers to see what sort of level of growth to expect and how much risk is involved. That is, how much does this funds performance fluctuate? You obviously want a balance between the two – a good return without too much risk.

Choose the type of pension carefully. Briefly there are now three types of pension; personal, company and stakeholder. Stakeholder pensions are a special kind of pension that have reduced ‘fees’ attached to them. That is, your IFA and other third parties are limited in the amount of money they can take as commission, and as I understand, this amount is 1% or less. Company and personal pensions don’t have this
protection and 5% or more of your money can be take by these people.

Another consideration to make is how much money you can afford to put in a pension. This money is tied up until you are 60/65 years old. If you think you may need access to the money before this time, it may well be better to invest it in an ISA, which has a higher rate of tax free interest but is also accessible. There are many of these products on the market so advice is necessary here as well. To reiterate the point, an IFA would be able to talk you through the options for saving you money (including pensions) and help you decide which is best for you and also which product would be best to invest in.

The final few features to look for in a pension is portability and also if you are able to stop payments. Stopping payments is particularly important if, for example, a woman wants to have a family and take a career break. It is also important for anyone who wants to take extended time off of work or has a job that has an irregular income, such as contract work. Pensions that don’t allow you to stop payments when you want and for as long as you want would not be of any use in this situation. By portability I mean; can you take the pension with you if you were to change jobs and can you transfer it to a stakeholder pension at a later date? You must find this out first!

Now I think this has covered the most important points but I can revise this opinion if necessary. If there is other information you wish to know, please let me know and I will try to add it, if you feel I have left important considerations out please tell me, or else write your own opinion and between all of us we will be informed pension buyers.

One thing I think I should add: I haven’t decided which pension to get yet, but when I do I will let you know and give you my reasons for choosing it.

For more information please see:

http://www.ftyourmoney.com/products/pensi
ons/pension_intro.html
http://www.pensionsorter.com/
http://www.stakeholder.co.uk/
http://www.pensionguide.gov.uk/

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