L&G stakeholder pension via discount broker?
|Retirement | Stakeholder Pension
Asked by Moonfish, submitted
21 June 2010.
I am looking for a stakeholder pension. Do you think it is worth investing in a Legal & General pension via Cavendish Online? Will they pay me rebate every year while it growing until retirement age?
Answered by Justin on 22 June 2010
The Legal & General stakeholder pension combines reasonable charges with a fairly decent range of funds. So yes, I think it’s well worth considering when looking for a stakeholder pension.
Whether it’s better value buying via a discount broker like Cavendish Online depends on how much you’re likely to save until retirement.
When bought directly from L&G via the web they’ll charge 1% a year on the first £25,000, 0.9% on the next £25,000 and 0.8% thereafter.
So the annual charges on a £10,000 pension pot would be £100, rising to £475 on a £50,000 pension and £875 on £100,000.
Cavendish Online charges a one-off £35 fee for setting up a stakeholder pension, but rebates trail commission (there’s not much on stakeholder) to reduce annual charges. However, the annual charge on the first £15,000 is 1.1%, higher than L&G. It then falls to 0.6% between £15,000 - £25,000, 0.5% on the next £25,000 and 0.4% thereafter.
So, comparing to above, the annual charges on a £10,000 pension pot would be £110, rising to £350 on a £50,000 pension and £550 on £100,000 (ignoring the one-off £35 fee).
This means L&G will be cheaper for stakeholder pension funds up to about £19,000 (although as you can see above there’s not much it in) but Cavendish Online offers progressively better value above that.
[note: if you use funds run by external fund managers the annual charges could increase by 0.15%, but as this is the same whichever route you choose it makes no difference to the comparison. Total annual charges must also be capped at 1% after 10 years.]
Cavendish Online should offer this deal until you reach retirement. If for any reason the terms change or they go out of business before then, you can switch the ‘agency’ on the pension to another discount broker or L&G to benefit from prevailing deals at that time.
You could start the pension with L&G then transfer to Cavendish when cost effective to do so, although I think the pension would physically have to be transferred (not just a simple change of 'agency') which means paperwork and a potential transfer delay.