I want to set up a pension. Robo adviser or SIPP?
19 July 2021
Question by Dave
I have a rough total of £30,000 in two separate company pensions from previous employers. For the last 12 years I have not contributed to a pension. I am now 44 and know I need to put money into one. I'm not financially aware and the robo providers sound tempting but, obviously, I want the possibility for the best return at medium risk. I aim to invest about another £30k immediately. Your Q2 2018 results update showed Nutmeg’s Portfolio 10 as returning 7.92%, but the Best Buys page for Nutmeg says it returned -5.9% in 2018 - I read at as a 5.9% loss. Please can you advise why the figures are so different? I've also heard that things like Vanguard Lifestrategy 60 are also a good choice but they don't have a SIPP - but then I don't know if I need a SIPP - I just want a good, solid pension. Many thanks.
Answered by Boring Money
It is not going to be possible to tell you what you should do in your situation – sadly, this is because we don’t know each other well enough.
However, I can give you some facts that might help guide you.
Your point about whether you need a SIPP? Self-Invested Personal Pensions originated from rules that allowed people to manage a range of different assets and investments, all under one umbrella. Including property. And even fine art.
The flexibility idea took off but sadly, that flexibility came with a high price tag. And when people didn’t use the flexibility – most people as it happened – that price was definitely not one worth paying.
Personal pensions – and stakeholder pensions – on the other hand, have always been more straightforward, offering only a few funds, but with a lower overall price tag.
Today, however, the lines are becoming more blurred.
Price competition is increasing across the pension landscape. As long as the fees you pay for your situation are competitive, the question of whether that is via a SIPP or a Personal Pension is generally less important.
In terms of the actual investment...
The idea of targeting a multi asset, passive fund is a good one. You can choose something that suits your risk profile, benefit from great diversity AND keep your costs down, all within a single fund. After making the decision to save in the first place, these are three of the most important factors in your potential for future wealth.
The Vanguard LifeStrategy funds are excellent examples of multi-asset, passive funds. But they are not the only examples.
And no, Vanguard do not currently offer a SIPP (or any personal pension) via their own platform. But… You can access their funds via another provider (and the Best Buy tables on here include some providers that will allow that) or you can consider the equivalent fund offered by the provider(s) which do not.
Either route, with the appropriate amount of risk, should provide you with a good foundation for that solid pension plan.