My private pension
I’ve documented the process that I went through when choosing where to invest my private pension, including the pension provider.
Where to invest
Figuring out where do I want to invest wasn’t too hard, as I’ve already done a lot of thinking on this. Here’s the things that I know:
- I have limited time to manage my investments, which means that I can’t invest in stocks and get the best return.
- This is a long term investment as I won’t be seeing the money for 25+ years or until I’m at least 57 (the age when you can start taking money from your pension pot without any tax penalties). Therefore, I can take larger risks for the potential of larger returns. This sets my expectations to ~8% annualised returns.
- Due to a lot of bad stories I’ve heard about fund managers charging large management fees and failing to beat the market, I want a simple index fund that would follow the market and would be comprised of mostly stocks.
Luckily for me, I’m not the only one thinking this way and there already plenty of index funds to choose from. Because of my “low” expectations of 8%, I was pleased surprised finding Vanguard FTSE Dev World ex UK Equity Index Acc fund which managed to have 12.22% annualised returns over the past 10 years!
Initially the task of choosing a SIPP provider seemed daunting. I’ve searched for “sipp providers” and there was a large number of them. Without a standardized way of rating the providers it seemed impossible to choose one without doing a lot of work. Luckily, I came across an article that did a good summary of things to look for when choosing a SIPP provider. Using this I’ve clarified my search criteria (in order of importance):
- Should allow me to investment to Vanguard FTSE Dev World ex UK Equity Index Acc fund.
- Should have the lowest fees for the amount I want to invest compared to other providers. I reckon that in the next 10 years I will be able to invest £300,000 - £400,000, so I was looking for acceptable fees for the 0 to £400,000 range.
- Should provide have online access to live data about the current value of my pension pot. I want to be able to see how I’m doing so I can report on it regularly.
- Should show me the annual allowance I’ve used up as I want to be able to max it out.
I’ve chosen AJ Bell as it fits all of my mentioned criteria. Registration wasn’t particularly difficult, although it did require me to fill in a lot of personal information. There are also a couple of questions that I have, e.g. when will the annual fees show up, when will the tax relief actually become available for investing, etc., that aren’t crucial to my experience but I still need to answer to feel “safe”.
A couple of downsides that are annoying:
- After issuing a buy order it takes several working days for the order to be processed and actual show up in the portfolio (hence the discrepancy in the amounts seen in the above).
- They are one of those rare websites that require you to enter certain characters of a password (instead of the whole password). Ugh…
Choosing my pension provider and where to invest my pension wasn’t as difficult as I was expecting it to be. My process was lightweight, but I managed to do everything online with a couple of evenings of research.