I wrote previously that I think that the best way to choose a pension is to decide on a strategy and work out the cheapest way to buy it. I’m going to have a go with my imaginary friend Clive. Clive has decided that his asset allocation strategy for his pension portfolio is as follows:
- 60% in a UK Index Tracker fund
- 10% in a US Index Tracker fund
- 10% in a European Index Tracker fund
- 5% in an emerging markets fund
- 15% in UK gilt fund
Since Clive is imaginary, please do not think that this is a good strategy for any real person. This post is about how to get a strategy cheaply, not what strategy you should pursue.
Clive can contribute Â£80 per month (before tax) to this pension. Lets look at three different providers, Hargreaves Landsdown and their SIPP, Standard Life and their Personal Pension and Friends Provident and their Stakeholder Pension. In each case, I couldn’t find any set up or administration charges associated with the pension, so the only charges appear to be the fund management charges. Each of the pensions has a minimum payment with the highest being Â£50 per month after tax.
The table above gives the weighted charges, assuming that all funds grow equally. You can see that for this strategy, the Hargreaves Landsdown pension is the cheapest.
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