Make your pension work harder

Q: I want advice on how to top up my pension, but my adviser says I must pay a fee for this. Is there a way around this?

All independent financial advisers must now charge a fee when they provide advice about any type of investment product under new rules implemented as a result of the Retail Distribution Review, in force on 1 January.

This includes pensions, although if you just wanted advice about the suitability of your investments within an insured pension policy, your adviser could still provide this without an extra charge.

Bear in mind that advice was never truly free in the past. It was paid for out of charges deducted from pensions that were passed on to advisers in the form of commission. Paying for advice yourself is likely to be money well spent.

However, free advice is available on the web, from the government's Money Advice Service, for example. For an assessment of your current pension arrangements, you could try

Q: I have several past pension plans. Would it make sense to consolidate them in a SIPP?

It can make sense to consolidate past pensions in one place so that you have a clear idea of how much your total pension pot is worth and you can plan better for the future. However, the costs and benefits of transferring out of your existing schemes will need to be weighed up carefully if you are to avoid losing more than you gain.

It is rarely a good idea to transfer out of a final-salary pension scheme, while if you have with-profits personal pensions, there may be a penalty, such as a market value reduction factor, to take into account.

An older policy may include a guaranteed annuity rate that can be extremely valuable. There are several potential advantages to transferring into a SIPP, such as lower costs and access to better-performing investments. It is always a good idea to take professional advice before making any consolidations.

Q: Which providers offer low-cost SIPPs that permit shares and investment trusts?

More investment platforms are offering SIPPs that allow access to shares and investment trusts, although some still only permit open-ended funds. Charging structures are changing to reflect the new transparency requirements of the Retail Distribution Review.

Currently, low-cost SIPPs that allow investments in shares and investment trusts include those from Alliance Trust Savings, Bestinvest, Hargreaves Lansdown, Interactive Investor and Sippdeal.

Q: I am uncertain about investment markets. Can I hold cash in my SIPP?

You can hold cash, but interest rates on SIPP cash accounts tend to be low, so there is a danger inflation will erode the value of your fund. This is especially true with instant-access accounts. Higher rates may be available on fixed-rate bonds.

Q: I will start drawing my pension in 2013. When should I buy an annuity?

European legislation, implemented on 21 December 2012, now compels annuity providers to offer women the same rates as men. This means women will get a slightly higher rate and men a slightly lower one.

Remember to shop around. Let annuity providers know if you have any health problems, as you may qualify for a higher rate. It is best to seek professional help to find the best annuity rates.

With most annuity sales, a typical commission of 1.5% will be paid to the sales outlet.

Find the best annuity rate for your circumstances

Q: What are the alternatives to buying an annuity?

Bear in mind that several types of annuity are available. Some pay a fixed income, guaranteed for life. Others pay a lower income at outset but increase it at a fixed rate or in line with inflation.

Investment-linked annuities are also available.

Alternatively, you can opt for income drawdown, which enables you to leave your pension fund invested and take an income of up to the equivalent of the single-life annuity that somebody of the same age could purchase. This is likely to be raised to 120% of an equivalent annuity, perhaps in the next financial year.

However, if you are already receiving a secure pension income of at least £20,000 a year, you can choose flexible drawdown, which enables you to withdraw as much income as you want.

This article was written for our sister publication Money Observer.

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I started work at the age of 16. Now at nearly 55 i am told i will have to work until i am 66, at least. Because of the lack of rights of workers in the private sector over many generations when i was young , having completed a 5 year apprenticeship in a skilled trade, i was still not earning enough to even think about saving for a second pension. No i am told that i have to work a minimum of 50 years before i can claim my state pension but i will get no more money when i do retire than someone who has rarely or never worked because i will get no benefits to top up my pension. Also how can it be right than millions of people on minimum pay have to pay taxes which pay toward the second pensions of people on a lot more money so they can retire at least 10 years younger. I also know that what is not being reported about private sector firms is that the new pension plans where they will have to pay in mean they have drastically reduced the hours of thousands of staff so that they are below the tax threshold and then they don't get enrolled. So this new plan has made a lot of people much worse off now....

Rose - please go to and follow through or write in for a quote. If you have been "contracted in" all these years your pension may be considerably more than the new basic one.
Those, like my husband, who have been "contracted out " most of their working life will not get the enhanced basic rate but, more or les,  the existing level of basic state pension - so you are not missing out in the way you imagine.