Confused about what to do with your pension savings? We highlight which personal pension and self-invested personal pension (Sipp) providers are the best. Plus, we explain which pension funds and annuity providers were judged to be this year’s top performers.
The most important part of retirement planning is undoubtedly regular saving, and the sooner you start the better.
However, the right products are also important – you need a flexible plan that allows you to take advantage of the pension freedoms. These are rules – introduced in April 2015 – that enable you to do what you like with your pension once you turn 55.
It’s also important that you are investing your money in the right funds and that your investment returns are not being eroded by high charges.
To guide you through the pensions maze, the Moneywise Pensions Awards 2017 aims to help you choose the right products to achieve your retirement goals, whether you are at the start of your savings journey or looking at how to turn your pension pot into an income at the end.
Best personal pension provider
If you are just starting to save into a pension, your first port of call should always be your workplace pension. Even if it’s not an all-singing, all-dancing online proposition with a wealth of investment offerings, it’s foolish to turn down the cash your employer pays in on your behalf.
However, if you do not have access to a workplace scheme (for example, you are self-employed or don’t work) or have several different plans you want to consolidate into one pot, then a personal pension will often make sense.
This category is for personal pensions offered by insurance companies and our judges were looking for schemes that combine quality investments and customer service with low charges.
The winner for the third year running is Royal London. Judge Mark Stone, financial planning director at Whitechurch Financial Consultants, says the plan provides a one-stop shop for savers.
“I have found that its overall service, cost and investment choice provides an ideal solution for all pension savers, whether you are starting your retirement planning journey or have reached retirement and are looking to take retirement benefits,” he explains.
Runner-up in this category – for a second consecutive year – is Aviva.
Judge Nick McBreen, an IFA at Worldwide Financial Planning, says: “Aviva is one of the few providers that still offers a budget, entry-level pension for contributions at £50 a month or a £10,000 lump sum, plus a reasonable fund choice across some self-select funds or portfolios ready and waiting for the investor. With a charging range from 0.4% to 0.7%, its pension offering looks fair value for people wanting to make a basic start to pension planning.”
Best Sipp for beginners
Most online investment platforms now offer self-invested personal pensions (Sipps) for those savers who want to take control of their pension investments and want access to a full range of funds, investment trusts and often shares. Yet there remain massive differences in the way platforms charge for their services, and which platform suits you will depend on how much you have invested and how frequently you plan to trade.
This means it’s vital you do your research first, looking at not just cost, but ease of use, customer service and tools to help you make the right choices. This award is for the best Sipp for beginners – defined as starting a pot from scratch and paying in around £200 a month. Last year’s runner-up, Hargreaves Lansdown, takes the crown in 2017.
Judge Richard Bradley, head of data at Boring Money, says: “For smaller portfolios like this, it’s pretty low cost and there’s plenty of help with picking funds and building portfolios. Hargreaves Lansdown continually tops Boring Money’s customer experience ratings: it’s easy to set up and manage an account, and phone calls are answered quickly by people who know what they’re talking about.”
Taking second place is last year’s winner, Bestinvest.
Judge Patrick Connolly, chartered financial planner at Chase de Vere, says: “Bestinvest provides a wide range of information for consumers who want to make their own decisions. This is a halfway house between offering useful guidance information and having low charges.”
Best Sipp for larger portfolios
Different products will suit investors with larger portfolios – defined as £200,000 plus for this award. For the second year in a row, the award goes to Interactive Investor (Moneywise’s parent company).
Mr McBreen says: “Interactive Investor has been around long enough now to have got its act together pretty well. Although the website isn’t overly intuitive, it has lots of good functionality and the Sipp comes at a price that is hard to compete with. There’s lots of choice on investments to hold, along with helpful supporting information.”
Coming a close second is AJ Bell Youinvest. Mr Connolly says: “This is a straightforward and comprehensive product from a reliable, progressive provider. It is a good choice for Sipp investors and is improving as AJ Bell continues to enhance its service proposition.”
Best Sipp for income drawdown
In addition to helping you build a pension, you can also use a Sipp to run an income drawdown plan.
This involves leaving your pension invested and taking money out of it as and when you need to. This might be a regular monthly income in lieu of salary or the withdrawal of ad hoc lump sums. It might be that you can afford to simply leave the money invested until such a time as you need it. Taking the crown for the second year running is AJ Bell Youinvest.
Mr Bradley says: “AJ Bell Youinvest scores well on Boring Money’s user ratings and has some solid Sipp heritage. There’s a wide range of investments from which to choose and it has its own range of passive funds available at different levels of risk. It also comes out pretty well on cost, whether you have a small or large portfolio, shares or funds, or if you’ve started taking income from your pension.” The easy-to-use website also has a lot of information for retirees, helping them navigate the ins and out of the pension freedoms.
It was tight at the top, and Interactive Investor comes in as a very close second place. Voted as favourite by Mr Connolly, he says: “This is an established service with an easy-to-navigate product and website, with a good range of investment options, low charges and informative news and information for customers.”
Best performing funds within a pension
To make the most of your pension contributions, invest them wisely as the performance of your chosen funds could have a significant impact on your retirement income.
Although pension providers do offer default funds for those who do not wish to select their own funds, there are likely to be better performing options available for those who want to play a more active role in their retirement saving. Our winning funds, across four sectors popular among pension savers, are a good place to start.
Mixed investment: 20% - 60% shares
Mixed investment funds offer instant diversification by investing across a range of asset classes including equities (shares in companies listed on a stock exchange), fixed interest (such as government and corporate bonds) and cash. How those investments are split determines the risk profile of the fund. At the lower risk end of the spectrum is this category (previously known as ‘cautious managed’) where equity exposure is limited to 20% to 60% of the fund and 30% of the fund must be in cash or fixed interest.
For the third year in a row, the award goes to Kames Ethical Cautious Managed.
Judge Gavin Haynes, managing director of Whitechurch Securities, describes it as an “excellent core holding for balanced investors”.
He says: “This is a balanced proposition investing in UK equities, bonds and cash, while only investing in companies that pass Kames’ ethical screening process. The equity part of the portfolio (currently a little over 50%) is managed by Audrey Ryan, who has produced strong returns with the UK Ethical fund. Plus, Kames has a very strong fixed-interest team, and David Roberts, head of fixed income at Kames, has proven that he can produce competitive returns.”
AXA Global Distribution, until recently managed by Jim Stride, takes second place this year. Mr Connolly says: “This is an ideal ‘buy and hold’ pension fund. It invests in a broad range of international equities and fixed interest and provides an added layer of security by focusing on income producing assets.
“Despite the retirement of the fund’s experienced manager in June 2017, it should still be in safe hands to produce consistent results, while managing risks going forward.”
Jamie Forbes-Wilson and Matthew Huddart, who were co-managers with Mr Stride since February 2017, now co-manage the entire Axa Distribution fund range.
Mixed investment 40%-85% shares
Moving up the risk spectrum, funds in this category must invest between 40% and 85% of their assets in equities. This higher exposure to company shares offers higher potential returns for long-term pension investors who have the time to ride out the ups and downs of stock market investing.
Taking top spot this year is another ethical fund, Royal London Sustainable World, run by Michael Fox.
Mr Connolly says: “This is the stand-out performer in the sector. The fund invests in good quality UK and overseas companies, which act in a sustainable way and provide services that tackle global issues such as climate change and world health. Focusing on key themes has proved successful and the fund has performed well in both rising and falling markets.”
For the second year in a row, Baillie Gifford Managed, comes a very close second. Mr McBreen is a big fan. “The Baillie Gifford Managed fund, run by a team management approach, consistently delivers value to investors. Returns for the fund over five years is a cumulative 93% compared to the sector average of 63%. When you drill down further over shorter timeframes, the fund still regularly outshines other funds in the Mixed 40-85% Shares sector, making it a strong contender for inclusion in any pension portfolio,” he explains.
The final of our mixed investment categories looks at the Flexible Investment sector, in which funds can invest across a range of asset classes but have no rules restricting how money is divvied up. This year’s winner is Newton Multi Asset Growth.
Mr McBreen says: “Apart from a little hiccup on the one-year numbers, Chris Metcalfe’s fund delivers well over longer timeframes and this is crucial for any investor looking to build a retirement pot where they have a reasonable duration on their side to be invested. The five-year returns of 92% should get a tick in the box for most investors. It is well diversified in terms of asset classes, sectors and geography and is smartly invested in UK and international securities.”
Unicorn Mastertrust is the runner-up – a position it has occupied for the past three years.
Mr Connolly says: “This fund invests in a wide range of underlying investment trusts, providing a high degree of diversification while, clearly, not impeding growth potential. A particular tactic, which has proved successful, has been taking advantage of anomalies in investment trust pricing.”
UK equity income
Funds in this sector aim to deliver an income, in addition to capital growth, by investing in strong, dividend-paying UK companies. As such, they are an incredibly popular option among retirees who have shunned annuities in favour of more flexible income drawdown plans that allow you to take an income from an investment portfolio.
The winner this year is CF Miton UK Multi Cap, with our judges voting unanimously for the fund. Mr McBreen says: “The UK Equity income space over recent years has not been the easiest place to fi nd growth and/or income to return to investors without taking undue risk.
Martin Turner and Gervais Williams have managed to drill out some good returns for investors, utilising their management skill in finding good dividends and respectable capital growth. That’s no mean feat.”
He adds: “Cumulative performance of 128% over five years is very acceptable and has been achieved with a careful eye on volatility and risk.”
Taking the runner-up position is Rathbone Income.
Mr Haynes says: “This is a solid core defensive UK equity income strategy, ideal for pensions, managed by the highly regarded Carl Stick. The focus will be on investing in primarily UK bluechip dividend producing shares.”
Best mainstream annuity provider
Income drawdown offers retirees the ultimate in flexibility, but because it involves leaving those assets you’ve worked so hard to save invested, it’s not without risk. Stock market falls could see you lose capital and reduce the level of income your remaining pot is able to generate. You’ll also have the responsibility of choosing the right funds and managing the portfolio yourself, unless you pay an adviser to do it on your behalf.
For this reason, there will always be a demand for annuities. Although rates continue to disappoint, they pay a guaranteed income for life which is something no other product can do.
For the second year in a row, the winner is Legal & General, which our judges say is strong where it matters most. “It is the most competitive in all categories and has the financial strength and flexibility to continue to provide attractive products in this space,” says Mr Stone.
The runner-up this year is Aviva. In addition to great rates, Mr McBreen says: “It has the experience and expertise to deliver annuity business service, and being a long-established brand name with deep pockets can offer peace of mind to the annuitant.”
Best enhanced annuity provider
When choosing an annuity, you need to be up front about any health issues and mention if you are overweight or smoke. This is because you may be eligible for an enhanced annuity that pays a higher rate of income because, statistically, you are likely to have a lower life expectancy. These deals are available from specialist providers.
The judges voted unanimously for last year’s winner, Just (previously Just Retirement). “Just is looking very competitive right now on rates being offered for enhanced annuities,” says Mr McBreen. “It has a good service base with experienced people on the phone to deal with applications and queries, as well as ongoing support.”
Scottish Widows comes in second place. Mr Connolly says: “Scottish Widows has become a major player in enhanced annuities and offers competitive rates for many circumstances.”
Best pensions education initiative
Working out how much you need to put away for retirement, and what you do with that money once you retire can be something of a minefield. Here at Moneywise we are big fans of financial advice but the expense means it’s not an option for everyone. With this in mind, we launched this new award to give recognition to providers that are doing their bit to guide the public through the pensions maze, with innovative tools and calculators.
The first winner of this new award is Fidelity for its online pension calculator, which helps savers get a clearer idea of how much they need to save to get the retirement and whether they are on target to achieve that goal.
This award was selected and judged by the Moneywise editorial team. Commenting on our winner, editor Moira O’Neill says: “This tool helps educate the public to think carefully about what type of lifestyle they want and how they will pay for it. I really like the way Fidelity sets out clearly from the start how much retirement will cost per year, from basic living costs to paying for treats such as holidays and eating out.”
You can test out the calculator yourself and work out if your saving are on target at: Fidelity.co.uk/investor/pensions/calculator.page
- Patrick Connolly, chartered financial planner, Chase De Vere
- Mick McBreen, IFA, Worldwide Financial Planning
- Mark Stone, financial planning director, Whitechurch Financial Consultants (sipps, personal pensions and annuities)
- Gavin Haynes, managing director, Whitechurch Financial Consultants (funds)
- Richard Bradley, head of data, Boring Money (sipps)
All our categories were judged by a panel of independent financial advisers. Boring Money supplied the shortlists for Sipps, while the annuity shortlists were based on best buy tables from JLT Pension Decision. Our fund award shortlists were based on the top-performing funds across four sectors, listed over three, five and seven years to 30 April 2017. Funds charging more than 1% were excluded. This data was supplied by Morningstar.