How to Choose a Pension Provider

It is key that you plan out your retirement income now, to ensure you will be able to cover the cost of care in later life. Alongside your state pension and any workplace vehicles you may be eligible to receive, you could take out a personal pension, to supplement your income. Prestige Tax and Trust Services explains how to choose a pension provider, to ensure you secure a stable revenue stream.

Types of pension

Personal pensions are supplied by banks, insurance firms, building societies and other specialist supplies, including online pension companies. There are three types of private pension, which are:

  • Standard personal pension: You make regular financial contributions into a pension fund, which are then invested e.g. in shares and stocks. With this option, you receive a guaranteed fixed monthly payment in retirement, via an annuity.
  • Self-invested personal pension (SIPP): SIPPs supply greater investment flexibility than standard vehicles. For example your contributions can be invested in investment trusts and property/land insurance bonds, but this can increase the associated risk.
  • Stakeholder pension: This works on a defined contribution basis. These schemes provide greater flexibility over the sum and timing of your contributions and they must meet certain legal criteria, for instance they cannot charge penalties if you stop or miss payments.

Ask which type of personal pension is right for your circumstances. If you are just wanting to develop a steady stream of income during later life, opt for standard vehicles. If you wish to acquire greater pension freedoms, you may want to choose a SIPP or a stakeholder pension. With SIPPs, for instance, you can choose and manager your own investments. There is no legal limit on the number of schemes you can sign up to, but there is a cap on how much you can contribute per year and still gain tax relief.

Shop around

Once you have chosen the type of personal pension you want to sign up to, you need to select a provider. Here we would suggest that you compare the products offered by each provider, via price comparison sites such as Money Advice Service, to find value for money. Also ask providers to issue you with a list of the key facts concerning their products, which they are legally required to provide.

Minimum contributions

Check whether your provider obligates you to submit a minimum monthly contribution to your pension fund. Ask yourself whether you can afford to make these payments. If you are a freelancer, for example, you may earn income irregularly. This would make it hard to make monthly payments, so you would be advised to select a provider which allows you to vary how much and when you pay.

Check charges

Pension providers issue various charges. These can include administration fees, transfer payments e.g. for if you want to change providers, investment management charges, missed payment penalties and fees for taking your pension early. Charges are withdrawn from your fund, impacting the amount of income you receive to live on. Therefore, you should check what charges you may be obligated to pay with different pension providers, to ensure you will have enough revenue to support your lifestyle.

Prestige Tax and Trust Services

With so many factors to consider, it is wise to seek guidance from a financial adviser, when selecting a personal pension provider. You should also ensure that with your desired provider, you can safeguard your assets e.g. home, bank accounts and savings, from the cost of care. As experts in this field, the team here at Prestige Tax and Trust Services can advise you on cost of care matters.

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