Moneywise Pension Awards 2011: Top pension providers
Whether it's debate over public sector contributions or criticism of charges, pensions continue to be a hot topic in the media and for consumers.
Sadly, the good news that we are living longer seems to have been swept aside by savers worrying about what they will live on in their later years, and indeed, the future looks rather gloomy in that respect.
The increased state retirement age of 66 is being brought forward to 2020 instead of 2026 and state contributions to public sector pensions are being significantly cut.
To encourage us to save more into our pensions, the government will introduce its low-cost pension scheme, NEST, in 2012. Its opt-out rather than opt-in approach will aim to get more people saving towards retirement, but there is concern that existing workplace pensions could take a beating as a result of its roll-out.
NEST requires a minimum 8% contribution, including 3% from the employer. Given that in many schemes employers contribute more than this, the worry is they will reduce their contributions in line with the statutory 3%.
More worrying is that in today's tricky financial climate, many of us aren't saving enough - if anything at all - into our pensions. The latest retirement index from Sun Life Financial of Canada reveals that 58% of Britons expect to work beyond age 65.
Almost half those surveyed also fear they haven't saved enough for their retirement, with only 6% claiming to be "very satisfied" with their prospective retirement income.
With all of this in mind, it's absolutely crucial that when you pick a pension, you get one that you can rely on to work the hardest for you.
To help you, the annual Moneywise Pension Awards unveil the top pension providers and pension funds. Our independent panel of judges based their decisions on more than a big name: the winners had to match up to their scrutiny in terms of charges, funds availability, administration and ease of use.
BEST STAKEHOLDER PENSION PROVIDER: SCOTTISH WIDOWS
Winner: Scottish Widows
Number of funds within pension: 35
Restrictions: Can invest in up to 10 funds only
Charging structure: AMC set at 1% for whole pension term.
Contact: 0845 767 8910
Commended: Standard Life
Stakeholder pensions were introduced with the purpose of making pensions accessible to those at the lower end of the pay scale. Charges must be capped at 1.5% for the first 10 years and 1% thereafter. Contribution levels are also low, with providers required to accept as little as £20 a time; these can be paid at regular intervals (monthly or weekly) or on an ad hoc basis with no penalty.
Last year's winner Scottish Widows again claims first place and according to James Sumpter, senior financial planning consultant for BestInvest, offers "excellent administration". This, he believes, is the key to a good stakeholder pension given its limited investment and income options.
Although fund options are somewhat limited in stakeholder plans across the board, Nick McBreen, independent financial adviser for Worldwide Financial Planning, likes the funds on offer with Scottish Widows: "This pension plan allows access to a couple of external funds and is worth considering. Scottish Widows has a very strong investment track record and plenty of internal funds on offer."
Runner-up in this category is Standard Life. McBreen and Sumpter applaud the provider's administration and fund discounts.
BEST PERSONAL PENSION PROVIDER (NON STAKEHOLDER): AEGON
Number of funds within pension: 255
Restrictions: Application form only has space for 20 initial fund choices. After that unlimited.
Charging structure: Financial advice charge approximately 1% AMC. IFAs can charge up to 8.5% on further single contributions or up to 50% of total annual pension contributions in the first year.
Contact: Through IFAs only.
Commended: Standard Life
For the majority of savers without an employer's pension, personal pensions are a more likely place for their retirement savings. They offer a broader choice of funds and potential growth compared to stakeholder plans, but are deemed to be less complicated and require less capital than a comprehensive self-invested personal pension (SIPP).
This year's winning personal pension, offered by Aegon, is described by McBreen as an excellent choice due to its flexibility regarding pension contributions and when holders can take their benefits.
Meanwhile, Philip Pearson, partner at P&P Invest, praises the "wide choice" of funds available. Customers can initially hold 20 funds in their personal pension, after which they have access to all 255 funds. He also likes Aegon's website, which he says is "helpful" and "provides information on retirement planning that can help to build a long-term saving strategy".
"Customers can log on and have online information regarding their accounts, which is also a useful feature in helping them keep in touch with their savings," he explains.
As with the stakeholder pension category, Standard Life - last year's winner - is pipped to the post, but the provider's second place position in the two main pension categories highlights it's still doing something right.
McBreen describes it as a "fair value plan", while Sumpter says: "Standard Life provides an excellent service, processing transfers via letter without the need for discharge forms, and is always the quickest to action pension transfers."
A form of money purchase defined contribution pension launched by the then Labour government in April 2001 with low charges and no-frills minimum standards. Designed to appeal to people on low and middle incomes who wanted to save for retirement but for whom existing pension arrangements were either too expensive or unsuitable, the stakeholder didn’t really take off and looks to be superceded by the National Employee Savings Trust (NEST).
Like a self-select ISA but for pensions, self-invested personal pension is a registered pension plan that gives you a flexible and tax-efficient method of preparing for your retirement. It gives you all sorts of options on how you put money in, how you invest it and how it’s paid out and offers a greater number of investment opportunities than if the fund was managed by a pension company. SIPPs are very flexible and allow investments such as quoted and unquoted shares, investment funds, cash deposits, commercial property and intangible property (i.e. copyrights, royalties, patents or carbon offsets). Not permitted are loans to members or people or companies connected to the SIPP holder, tangible moveable property (with the exception of tradable gold) and residential property.