Chosen by a panel of independent judges, Moneywise salutes the pension providers that give you the features you need and the returns you want
The roll out of auto-enrolment means more people than ever are saving into a pension, but simply paying money in every month is not enough to guarantee you a comfortable retirement.
Of course, the amount you pay in is important: the more you save and the younger you start, the better. However, which provider you choose and the investments you select can also have a material impact on your eventual retirement income. The right personal pension or Sipp platform for you won’t overcharge and will offer features that encourage you to engage with your pension. The right fund choice, meanwhile, will work your savings harder and mean you get a higher return.
Research by Hargreaves Lansdown bears this out; the financial provider’s analysis of 58,000 workplace pensions revealed that the most popular funds selected by active investors beat the default funds used by less engaged investors – by a staggering 4.75% a year over five years.
The difficulty, of course, is finding pensions and funds that are right for you, and this is where the Moneywise Pension Awards 2018 can help. Chosen by our independent judges, our awards help you select the right products for you, whether you are at the start, middle or end of your pension saving journey.
Top pensions and Sipps
Best personal pension
If you don’t already have a pension, your first port of call should be your workplace scheme. It may not be the best one on the market, with a top-notch website and app, but if you get employer contributions it’s likely to be the best one for you.
However, if you don’t have access to a workplace scheme because you don’t work, are self-employed or want to consolidate several pensions into one pot, a personal pension could make a lot of sense.
This category is for pensions offered by insurance companies. Our judges were looking for schemes that combined low charges and great customer service with a range of quality investments options.
Taking the award for the fourth consecutive year is Royal London. Mark Stone, judge and financial planning director at Whitechurch Securities, says: “It offers a pension that has flexibilities at retirement and an investment choice through the accumulation phase, at a cost that makes it attractive to all savers.”
Our runner-up is Scottish Widows. Mr Stone says: “Scottish Widows offers a good-quality product that again offers flexibility and investment choice at a competitive cost.”
A Sipp from an online platform offers an array of options
Best Sipp for beginners
A self-invested personal pension (Sipp) from an online platform offers an array of options including funds, trusts and often shares.
With different platforms targeting different customer types and using different charging structures, selecting the most cost-effective option isn’t always straightforward. What makes sense for you will depend both on the amount of money you have invested and how frequently you plan to trade.
Cost should be your main concern, but it’s also important that customer service is up to scratch, you find the website easy to use, and the provider has the tools, features and research to help you make the best investment choices.
Our beginner’s category is targeted at investors starting a Sipp from scratch with a monthly contribution of about £200.
This year’s award goes to last year’s runner-up, Bestinvest. Judge Nick McBreen, independent financial advisor (IFA) at Worldwide Financial Planning, says: “With no charges to open an account and tiered levels of charging, reducing from 0.3% as the fund grows, this is a cost-effective entry-level Sipp.”
Judge Patrick Connolly, chartered financial planner at financial adviser Chase de Vere, adds: “There is a good range of information for those who want to make their own investment decisions, and it is presented in a clear way.”
Coming in second is Fidelity. Mr McBreen says: “The Fidelity Sipp is well worth considering for those who want to invest for retirement and are happy to use just funds and not include direct equities. For the majority of investors, the fund choice available is more than adequate and fairly priced. An added plus mark for the plan is that there are no exit fees.”
The right Sipp for you depends on your savings and how much you’ll trade
Best Sipp for larger portfolios
If you already have a sizeable amount saved, these platforms will probably offer you better value for money than those in the beginner’s category.
The analysis for this award is based on pots worth £200,000-plus, and for the third year in a row our judges voted for Interactive Investor (Moneywise’s parent company).
Richard Bradley, head of data at financial website Boring Money, says: “Interactive Investor is one of the lowest-cost platforms for investors with large portfolios, particularly for those who also have an investment account or Stocks and Shares Isa. It’s suited to more experienced investors who know what they are doing.” Mr Connolly describes it as an “established service with an easy-to-navigate website”.
Second place goes to iWeb. Mr Connolly adds: “This is a competitively priced product which is operated by Halifax Share Dealing. It doesn’t have the frills of many competitor products, but it offers a no-fuss choice for those investors who know what they’re doing and just want to do it.”
Best Sipp for income drawdown
You can use a Sipp to build your pension savings, or for income drawdown once you retire. This could be a monthly income or occasional lump sums as you need them. A Sipp could also be a good place to leave your savings until you need the money.
For the third year in a row, this award goes to AJ Bell Youinvest.
Mr Bradley says: “AJ Bell is low cost for large and small portfolios. There’s a wide variety of investments available and it also offers its own range of passive investments for those who want a ready-made portfolio. It gets really positive views on Boring Money from its customers, who praise its efficiency and customer service.”
Interactive Investor takes second place. Mr Connolly says: “Larger-value investors are likely to appreciate the wide range of investment options, low product charges, flexibility and informative news articles and information.”
Best Sipp for robo-advice
Many people want to invest but are either put off by the cost or the need to decide which investments to pick.
By offering packaged portfolios, robo-advice platforms can drastically reduce costs, while removing the need for investors to make active decisions about where to put their cash.
“Nutmeg is reasonably priced and excels at customer service, with experts on the phone”
A new category for 2018, this award is for the best robo-advice platform that enables its users to save for retirement with a Sipp.
Taking our inaugural award is Nutmeg. Launched in 2011, it was the first of the robo-advice investment platforms.
After answering questions about their attitude to risk, investors choose between a managed portfolio of exchange traded funds (ETFs) run by a team that makes strategic decisions as required, or a cheaper fixed-allocation portfolio that’s reviewed once a year.
Andrew Ashwood, analyst at platform data site Platforum says: “Nutmeg is the market leader in the online digital wealth manager space. It boasts a strong mobile proposition, with apps on Android and iOS, and customers can also trade via the apps.”
He adds: “Nutmeg excels at customer service, with experts on the phone and a webchat service on offer. It’s reasonably priced, with investors (up to £100,000) paying 1.05% for fully managed portfolios, or a cheaper 0.75% all-in for the fixed-allocation models. We also like Nutmeg’s pension calculator tool to help investors plan their retirement savings.”
In runner-up position is True Potential Investor, where, unlike the other platforms shortlisted in this category, the underlying investments are actively managed funds rather than passive funds that track an index.
Mr McBreen says: “So much is said about the pros and cons of robo-advice, but this offering from True Potential is interesting in that it includes access to actively managed funds, rather than the norm of automated systems reliant upon process-driven use of index funds. This may not be the cheapest, but for me it makes a lot of sense for the investor who wants the best of platform-driven investments, plus the added kicker that may come from active management.”
Best-performing funds within a pension
It can be hard to sift through the plethora of funds offered by your personal or workplace pension, but our top funds across four popular sectors are a good starting point.
Mixed investment 20% to 60% shares
Mixed-investment funds offer instant diversification by spreading money across cash and fixed-interest investments (including corporate bonds and gilts) as well as equities (company shares).
Risk is determined by the amount invested in equities – the greater the percentage, the higher the risk. Funds in this category invest 20% to 60% of their assets in equities (with a minimum of 30% in cash or fixed-interest) and are therefore at the lower end of the risk spectrum.
Our judges unanimously voted for Artemis Monthly Distribution. Mr McBreen says: “Artemis Monthly Distribution is all about delivering income as well as capital growth. The managers, Jacob de Tusch Lec and James Foster, are well known for their capabilities using an actively managed combination of global equities, bonds and cash. While the shorter timescale figures are broadly in line with the sector, the three- and five-year numbers of 29.8% and 59% evidence the fund’s capability to make a significant contribution to any retirement fund.”
Royal London Sustainable Diversified Income takes the runner-up prize. Judge Gavin Haynes, managing director of Whitechurch Financial Securities, says: “This fund is managed by Mike Fox and has produced strong returns through a well-diversified bond and equity portfolio. This is a good balanced investment.”
It’s hard to sift through the plethora of funds offered by your pension
Mixed investment 40% to 85% shares
Funds in this category are for investors with a higher appetite for risk, with equity exposure accounting for 40% to 85% of the portfolio. This means they have the potential for higher returns, but investors need to have the time to ride out any volatility in the short term.
For the second year on the bounce, the award goes to the ethical fund Royal London Sustainable World.*
Mr McBreen says: “Mike Fox again appearing in the honours list with another fund mindful of sustainability issues. Investing across the globe and significantly in European, UK, and US equities, it has outstripped the sector over five years by over 100%. The fund has also delivered an 81.2% upside, compared to the sector of 40.1%; no mean feat in the current global market with all the uncertainties.”
Baillie Gifford Managed is runner-up for the second year on the run too. Mr Haynes says: “It has been a strong performer over the short- and long-term, with a track record stretching back 30 years. The team takes a long-term approach, with a typical asset mix of 75% equities, 20% bonds and 5% cash. Charges are very competitive and it makes an ideal pension investment.”
“TB Wise Multi Asset Income provides a diversified income stream”
Flexible investment funds are also mixed-asset, but there are no restrictions on how much of the portfolio is invested in any asset class. This gives the fund manager more freedom to take advantage of prevailing economic conditions.
Our winner this year is TB Wise Multi Asset Income. Mr Haynes says: “This fund has been managed by Tony Yarrow since 2005 and has a strong focus on providing a diversified income stream. The fund currently offers a compelling yield of over 5% and has provided impressive growth to supplement the income.”
Taking runner-up position is Liontrust Sustainable Future Absolute Growth. Mr Connolly says: “It has an experienced investment team with a defined investment process. They believe that companies that will perform well are those that improve people’s quality of life through advanced research and technology, the efficient use of scarce resources and helping to build a robust economy. This approach works and the fund has a consistent record of outperformance.”
UK Equity Income
The aim of these funds is to deliver a regular income in addition to capital growth, and they do this by investing in UK companies with a track record of paying strong and reliable dividends. This makes them a popular choice with retired investors looking to generate an income from their pension.
This year’s winner is MI Chelverton UK Equity Income.* Mr McBreen says: “The brief for this strong-performing fund is to invest in UK-listed and AIM stocks capable of producing dividend income as well as long-term capital growth. Sounds like a tall order, but its return of 85.5% over five years contrasts very favourably with the sector figure of 46.7% and show it is possible. Interestingly enough, it is also done without excess volatility along the way.”
Man GLG UK Income Professional is our runner-up. Mr Haynes says: “The fund is managed by Henry Dixon, who has built up a strong track record of identifying unloved UK dividend shares that are better value than the broader market recognises. The fund has provided attractive total returns through capital growth and generating an attractive income stream.”
Best mainstream annuity
Just because you can leave your pension invested when you retire, it doesn’t always follow that you should. While it is flexible and gives you control, there is always the risk that you will outlive your savings.
Even though you might be disappointed by annuity rates, it remains the only product that is able to deliver an income guaranteed for life.
Thanks to the pension freedoms, annuities are no longer an ‘all or nothing’ option, either. It is possible to start out invested and then buy annuities in tranches as your needs or circumstances change. Alternatively, you can use a portion of your pension to buy an annuity to ensure all your regular bills are covered, and leave the remainder invested.
For the third consecutive year, the award goes to Legal & General. Mr Connolly says: “It is a financially strong company which offers competitive standard rates for most people, and indeed, in many cases it offers the market-leading rate. It also provides a consistently good level of service.”
Our runner-up is Just. Mr McBreen says: “Just has a lot of experience and expertise in the annuity marketplace, with a good service proposition, competitive rates and helpful online access to information and service – ‘just’ what you need from a provider.”
Best enhanced annuity provider
If you have health conditions or a lifestyle that means you are likely to have a reduced life expectancy (for example, if you smoke, are overweight, have high blood pressure or are on medication) you may be eligible for an enhanced level of income from a specialist provider.
Our judges voted Just, runner-up in the mainstream category, their favourite enhanced annuity provider for the third year in a row. Mr Connolly says: “Just has tried to establish itself as the market leader and often offers enhanced annuity rates which its competitors just cannot match. It combines this with a comprehensive range of circumstances which it will cover and excellent levels of service.”
Legal & General is runner-up in this category. Mr Stone says it is a good all-rounder that “can provide a solution for all situations”.
* Denotes a Moneywise First 50 Fund for beginner investors: Moneywise.co.uk/first-50-funds.
Best pensions education initiative
Moneywise launched this award last year to highlight the efforts being made by financial providers to educate their customers – and the public at large – about pensions and retirement planning.
With many savers not accessing advice from financial advisers, pension providers are increasingly playing a vital role in helping people work out how much they need to save for retirement and how they should go about turning that money into income.
The award this year goes to Aviva, which offers a range of pension and retirement planning tools and calculators on its website that anyone – not just its own customers – can access.
Helen Knapman, acting editor of Moneywise, says: “Aviva has an array of helpful information and quick, easy-to-use tools on its website, which don’t require you to submit contact details or to log in, which means it’s accessible to all.”
She adds: “Its ‘Shape My Future’ and ‘My Retirement Planner’ tools are particularly helpful. One uses colourful illustrations to get you thinking about how much income you’re likely to need in retirement, for all the simple lifestyle choices you don’t pay as much attention to when earning. The other uses your pension details to calculate how much you’ll likely get, based on the different options available in retirement.”
Investment platform comparison site Boring Money supplied us with the shortlists for our Sipp categories, while our annuity shortlists were based on best buy analysis provided by JLT Pension Decision.
Fund shortlists were based on the top-performing funds in four categories over three, five and seven years to 31 May 2018. Funds charging more than 1% were excluded. Data was supplied by Morningstar.
The winners of the Moneywise Pension Awards 2018 were chosen by a panel of independent judges.
The best pensions education initiative was judged by the Moneywise editorial team.
- Andrew Ashford, analyst at platform data site Platforum, judging robo-advice.
- Richard Bradley, head of data at Boring Money, judging Sipps.
- Patrick Connolly, chartered financial planner at independent financial advisory firm (IFA) Chase De Vere, judging personal pensions, Sipps, funds and annuities.
- Gavin Haynes, managing director at Whitechurch Financial Consultants, judging funds.
- Nick McBreen, IFA at Worldwide Financial Planning, judging personal pensions, Sipps, funds and annuities.
- Mark Stone, financial planning director at Whitechurch Financial Consultants, judging Sipps, personal pensions and annuities.