CHOOSING the best pension provider is not rocket science – it all boils down to investment performance.
If you don’t have access to a company pension scheme then you have to go down the personal pension route.
In the 1990s people were being ripped off with high charges and bamboozled with complex terms on personal pensions.
But the launch of stakeholder pensions in 2001 means most retirement plans are now lowcost, transparent and flexible.
With stakeholder not only must costs be capped at 1pc but plans must be able to be stopped and started at any time, contributions change easily and lump sum and regular payments allowed. So how do you choose which pension provider to go to?
Brian Dennehy, of independent financial adviser (IFA) Dennehy Weller, says: ‘It basically boils down to performance. Does the pension provider have a good range of funds it can invest your money in?’ He says the benchmark is Scottish Widows. As well as offering a range of 21 of its own funds it has links with another 57 external funds. These include the highly rated Fidelity Special Situations and Jupiter Income funds.
This works on the premise that a pension provider will not be the best fund manager so it gives you access to other fund managers. While you pay about 0.5pc more in annual management fees, performance is likely to be better.
For example, the average internally managed pension fund grew by 4 pc a year over the past ten years so Pounds 1,000 invested in it will now be worth Pounds 1,482. But if you invested the money via an external link to a Jupiter Income fund over the same period it would be worth Pounds 3,255.
Norwich Union has access to 23 internal funds and 19 external funds.
Standard Life has 18 internal funds and 31 external funds.
Petronella West at IFA Investment Quorum says: ‘The key issue is fund choice – get that right and you’ll have a much wealthier retirement.’
