Should I start contributing to my pension again?
11 March 2021
Question by Stephen
I stopped my Reassure Pension 15 yrs ago with £60,000 worth but I’m going to start contributions again at £400 a month. I’m self-employed and I’m looking for a managed fund.
I'm 56 years old. I’m not going to retire hopefully for another 10 years or so.
Answered by Dennis Hall
That’s an interesting question and given ReAssure’s business model I suspect many people will have similar queries. ReAssure is a life and pensions company which buys and administers closed books of business from other companies including National Mutual, Barclays and Guardian. They now have 2.2 million policies acquired from several former life and pension companies, each with their own terms and conditions, charges, and fund ranges. Without knowing more about your Reassure pension it’s impossible for me to say whether restarting this pension is a good idea, or what managed funds you have access to.
However, in the 15 years since you stopped making contributions there have been some notable new entrants in the personal pension sector who don’t have the legacy problems that some older policies have. In case you weren’t aware you are allowed to have more than one personal pension, so you are not restricted to adding to your Reassure pension. It’s worth comparing your existing pension with what else is available today.
For simplicity and low charges, I have been impressed by the Vanguard Personal Pension. It has a low 0.15% administration charge which is capped at £375 per year – though that is really only relevant if you have £250,000 invested with them on their platform. In addition to the administration charge there are underlying fund charges, which are low. They have a wide range of funds, but you may be interested in their range of five ‘LifeStrategy’ funds. These funds have a blend of equity and fixed interest funds stepping up from 20% equity and 80% fixed interest, all the way to 100% equity. Looking at the fund size the most popular LifeStrategy Fund is the 60% equity 40% fixed interest, which would suit a Balanced Risk investor. An Overall Fund Charge (OCF) of 0.22% when added to the 0.15% Administration Charge brings the all-in cost to 0.37% you would be hard pressed to beat that. Don’t think that low-cost means low-performance, over the 5 years to 31st January 2021 the LifeStrategy 60% Equity fund returned just over 54%.
Chartered Financial Planner
I’ve only ever had two careers, Royal Marines Commando and Financial Planner. The physical requirements between the two roles are a world apart, but what I learned in the Marines about high standards, ethical behaviour and purposefully serving others has served me well as a financial planner.