Which pension should I look for as a business owner?

8 May 2017

Q

I am a director of my own limited company and I want to set up a pension for myself. It is only for me as I do not employ anyone. This will have to be a gross contribution paid by my company and I will not be making any personal contribution. What type of pension should I be looking for?

From
GS/Hove

A

It is positive that you’re looking to make pension contributions. Too many business owners don’t focus enough on their personal retirement planning, instead hoping that their business itself will effectively be their pension. This is a high-risk approach if the business doesn’t perform as well as the owner hopes, or if they cannot sell it at the price they want when they wish to retire.

Making pension contributions from your company can be tax-efficient and will also help you to build up your own personal pension provision.

The pension choices you have are broadly similar to those of any other individual – this means a stakeholder pension, personal pension or a self-invested personal pension (Sipp). There can often be little difference between these choices, with stakeholder pensions being no cheaper than personal pensions and personal pensions having a wide range of external fund choices.

 

The right choice for you will depend upon your financial objectives, attitude to risk and the amount of flexibility you want from your pension. A personal pension from a good quality provider offering a wide range of investment funds could be a good choice if you don’t need the extra investment flexibility provided by a Sipp, such as the ability to invest in direct stocks and shares and commercial property alongside funds. I would suggest that you seek the expert opinion of an independent financial adviser to help you work out how much risk you want to take as that will help you choose your pension.

Moneywise says: In the Moneywise Pension Awards 2016, Royal London won the Best Personal Pension category. The judges were looking for excellent breadth of investments at a low cost with slick customer service. Our judges voted Bestinvest the Best Sipp for Beginners – defined as individuals starting a savings plan from scratch and paying in around £200 a month.