Our Pick Of The Best Pension Providers For Self-Employed Workers

Best Pension Providers for Self-Employed: A Comprehensive List

Best Personal Pension Providers – Our Top Picks

After conducting extensive research, our team has compiled a list of the best personal pension providers based on our Forbes Advisor star ratings methodology.

Our top picks are:

  • Vanguard
  • Fidelity
  • Charles Schwab
  • TIAA
  • E*TRADE

These providers offer competitive fees, a wide range of investment options, and excellent customer service. We recommend considering these options when selecting a personal pension provider.

BEST FOR HIGH-VALUE PORTFOLIOS

Interactive Investor (SIPP)

Interactive Investor (SIPP) is a platform that charges a flat fee of £5.99 per month for Pension Essentials plan (up to £50,000) or £12.99 per month for Pension Builder plan (above £50,000). The platform offers a choice of investments, including five ready-made managed portfolios, six quick-start funds, and over 40,000 shares, funds, investment trusts, and ETFs.

Customers with pension pots of less than £50,000 will pay £5.99 on the Pension Essentials plan, or £12.99 per month for the Pension Builder plan (for pots over £50,000). Existing customers on the Investor or Super Investor plans can add a SIPP for £10 a month. Existing customers on the Investor Essentials plan can add a SIPP for £5 per month (with a limit of £75,000 across the ISA and SIPP).

The platform offers five ready-made managed portfolios, with the choice of income and growth, active and passive funds. There are also six Quick-Start ready-made funds, comprising three Vanguard LifeStrategy index funds and three Columbia Threadneedle actively-managed sustainable funds. In addition, the Super 60 list comprises ‘best in class’ active and passive funds, ETFs and investment trusts. There is also the ACE 40 for ethical investors.

Interactive Investor (SIPP) offers over 40,000 investments, including more than 37,000 UK & US shares and over 3,000 funds, 1,000 ETFs, and 600 investment trusts. Active fund managers include Baillie Gifford, Fidelity, Invesco & M&G. Customers have the option to choose from the Vanguard LifeStrategy and Target Retirement funds.

The platform has no minimum contributions for lump-sum investments and a minimum contribution of £25 for monthly payments. At retirement, customers have the options of a cash lump sum, buying an annuity, or flexible income drawdown.

Interactive Investor (SIPP) offers competitive fees, a wide range of investments, and excellent customer review scores. The platform has a flat platform fee, an excellent choice of funds, lifestyle profiling available, and low minimum contributions. However, the platform fee can be expensive for small-value portfolios, and some model portfolios have high fund fees.

Typical fees for Interactive Investor (SIPP) are as follows:

  • Portfolio of £10,000: £90 (Pension Essentials plan)
  • Portfolio of £50,000: £162 (Pension Essentials plan)
  • Portfolio of £200,000: £516 (Pension Builder plan)

JOINT BEST LOW-COST PROVIDER

Vanguard (SIPP)

Vanguard is a global investment management company that offers a range of investment options for its customers. With a platform fee of 0.15%, capped at a maximum of £375 per year, and fund fees (OCF) of 0.22% for LifeStrategy funds and 0.24% for Target Retirement funds, Vanguard offers one of the lowest-cost options for investors.

Vanguard provides its customers with a choice of 16 ready-made portfolios and over 80 active and passive funds, across a range of assets and regions. Customers have the option to choose from five LifeStrategy ready-made managed portfolios, 11 Target Retirement managed portfolios, or individual funds.

For those looking to invest, the minimum contribution is £500 for lump-sum investments or £100 for monthly payments. At retirement, customers have the option of a cash lump sum, buying an annuity, or flexible income drawdown.

Vanguard’s low-cost option and decent choice of investments make it an attractive option for individuals looking for Vanguard-only funds. However, it is important to note that Vanguard only offers its own funds, and monthly investing requires a higher minimum contribution.

Pros

  • Lowest platform fees
  • Low fund charges
  • Lifestyle profiling available
  • Low minimum contribution for lump-sums
  • Available directly

Cons

  • Vanguard funds only
  • One of the higher minimum contributions for monthly investing

Typical Fees

  • Portfolio of £10,000: £37
  • Portfolio of £50,000: £185
  • Portfolio of £200,000: £815

Overall, Vanguard is a reliable option for individuals looking for low-cost investments, with a range of investment options to choose from.

JOINT BEST LOW-COST PROVIDER

Pension Bee (personal pension)

Pension Bee is a privately-owned UK company with more than 1 million registered customers. It offers a choice of eight ready-made managed portfolios, with no minimum contribution. At retirement, customers have the options of a cash lump sum, buying an annuity or flexible income drawdown. Pension Bee is a low-cost option for ready-made portfolios, and scores highly on customer reviews.

Fees

Pension Bee’s platform fee includes both platform and fund fee. For portfolios up to £100,000, the fee ranges from 0.50% to 0.95% depending on the plan. For portfolios over £100,000, the above fee is halved on the portion of the portfolio over £100,000 (tiered). The fund fee (OCF) includes both platform and fund fee. Fees by plan are as follows: Tracker and Preserve: 0.50%, Pre-Annuity and Tailored: 0.70%, Fossil Fuel Free: 0.75%, and Impact, 4Plus and Shariah: 0.95%.

Pros & Cons

Pros of Pension Bee include competitive fees, a variety of ready-made portfolios, lifestyle profiling available, and no minimum contribution. The platform is available directly. However, it is limited to ready-made portfolios.

Typical fees for Pension Bee are as follows: Portfolio of £10,000: £50, Portfolio of £50,000: £250, and Portfolio of £200,000: £750.

Bestinvest (SIPP)

Bestinvest is owned by wealth management firm Evelyn Partners and has over 50,000 clients. Customers have the choice of 20 managed ready-made portfolios, split across income, growth, and ESG options. In addition, the Best Funds list comprises around 130 ‘best in class’ funds, investment trusts, and ETFs. Alternatively, the full range includes over 1,400 UK and US shares, 1,600 funds, 390 ETFs, and 270 investment trusts from a wide range of fund managers. Active fund managers include Baillie Gifford, BlackRock, Fidelity, Invesco & M&G. There is also the choice of Vanguard LifeStrategy and Target Retirement funds. At retirement, customers have the options of a cash lump sum, buying an annuity, or flexible income drawdown.

Fees

Bestinvest’s platform fee for ready-made portfolios and US shares ranges from 0.20% to 0.10%, depending on the amount invested. For other investments, the fee ranges from 0.40% to 0.10%, depending on the amount invested. There is a minimum of £120 per year for both options (tiered). The fund fee (OCF) ranges from 0.29% to 1.50%, depending on the plan.

Pros & Cons

Pros of Bestinvest include one of the lower platform fees for ready-made portfolios, a good choice of funds, and a low minimum for lump sum contributions. The platform is available directly. However, there are high fund fees for some portfolios, and there is no lifestyle profiling.

Typical fees for Bestinvest are as follows: Portfolio of £10,000: £149, Portfolio of £50,000: £265, and Portfolio of £200,000: £980.

AJ Bell (SIPP)

AJ Bell is a publicly-listed investment platform with 490,000 customers. Customers have the choice of nine AJ Bell ready-made managed portfolios and six non-managed portfolios split across income, growth, and ESG options. In addition, the Favourite Funds list comprises around 80 ‘best in class’ active and passive funds. Alternatively, the full range includes over 8,200 shares, 3,700 funds, 3,400 ETFs, and 450 investment trusts from a wide range of fund managers. Active fund managers include Baillie Gifford, BlackRock, Fidelity, Invesco & M&G. There is also the choice of Vanguard LifeStrategy and Target Retirement funds. At retirement, customers have the option of a cash lump sum, buying an annuity, or flexible income drawdown.

Fees

AJ Bell’s platform fee for funds ranges from 0.25% to no charge, depending on the amount invested (tiered). The platform fee for shares is 0.25% (capped at £10 per month). The fund fee (OCF) ranges from 0.31% to 0.84%, depending on the plan.

Pros & Cons

Pros of AJ Bell include one of the lower platform fees, a wide choice of funds, and a low minimum for monthly investing. The platform is available directly. However, there is no lifestyle profiling.

Typical fees for AJ

Methodology

To determine the best pension providers for self-employed workers, three main criteria were applied. The focus was on whether providers offer personal pension products, charge competitive platform and fund fees, and offer a range of ready-made portfolios. Other features such as the range of investments on offer, including third party funds, minimum contributions, and whether products were available directly or only through a financial advisor were also considered.

Customer reviews were analyzed, and the provider’s authorization by the Financial Conduct Authority (FCA), the financial watchdog, was checked. Using FCA data, customer complaints levels were reviewed. Combining the above with editorial judgment, Forbes Advisor arrived at their star ratings. No advertising was used in this process.

What Assumptions Were Used?

The overall fees were calculated based on three different portfolio values: £10,000, £50,000, and £200,000. The portfolios were assumed to be 100% invested in ready-made portfolios. The fund fees were calculated based on the minimum ongoing charges figure (OCF) across the ready-made portfolios. Further details about the OCF can be found in the FAQs section below.

What is a Personal Pension?

A personal pension is a retirement savings plan that individuals establish themselves, rather than through an employer. It is also known as a ‘defined contribution’ pension, which is different from a traditional ‘defined benefit’ pension scheme. In a defined contribution plan, the value of the pension pot at retirement is determined by the amount of contributions made and the investment performance of the portfolio.

There are two main types of personal pensions: Self-Invested Personal Pensions (SIPPs) and Stakeholder Pensions. SIPPs offer more flexibility and control over the types of investments made, while stakeholder pensions have low minimum contributions, capped fees, and a default investment fund.

It is important to note that personal pensions do not provide the same level of security as employer-run defined benefit schemes, as the pension income is not guaranteed and is subject to market fluctuations. However, personal pensions offer individuals greater control over their retirement savings and investment choices.

What are the Benefits of a Personal Pension?

A personal pension plan is a retirement savings plan that individuals can open regardless of whether they have a workplace or other private pension scheme. Here are some of the benefits of a personal pension:

  • Consolidation of Pensions: Personal pensions can be used to consolidate other pensions in one place, making it easier to manage retirement savings.

  • Tax Relief: Individuals receive tax relief on their pension contributions, usually at least 20%, and up to the highest rate of income tax paid (subject to certain limits). This tax relief can significantly boost retirement savings.

  • Investment Flexibility: Individuals may have the flexibility to choose their own investments, such as shares and funds, or the option of a set of pre-selected investments. This can help them to tailor their investment strategy to their individual needs and preferences.

  • Tax Benefits: Investments held in personal pensions are free from income and capital gains tax (while they remain within the pension). This can help to maximize investment returns.

  • Tax-Free Lump Sum: Up to 25% of the pension can usually be withdrawn as a tax-free lump sum, providing individuals with greater financial flexibility in retirement.

  • Ease of Management: Investors can often hold their personal pension with the same provider as their ISA and general investment account, which may make their whole investment product suite easier to manage.

Overall, a personal pension can provide individuals with a range of benefits that can help to boost their retirement savings and provide greater financial security in retirement.

What are the drawbacks of a personal pension?

Personal pensions come with several drawbacks that individuals should consider before investing in them. These include:

  • Fees: Personal pensions come with fees that can vary significantly between providers. These fees can eat into an individual’s pension pot, reducing the amount of money they have available in retirement.

  • Lack of financial expertise: Not all individuals have the financial expertise to choose their own investments, which can lead to poor investment choices and potential losses.

  • Limited access: The money invested in a personal pension cannot be accessed until age 55 (rising to 57 by 2028). This is unlike other tax-efficient investments such as an Individual Savings Account (ISA), which can be accessed at any time.

  • Tax implications: After taking the 25% tax-free lump sum, individuals will typically have to pay income tax on withdrawals from the personal pension above their personal allowance. This can significantly reduce the amount of money an individual receives from their pension.

  • Lifetime allowance: The lifetime allowance may be reinstated in the future, meaning that individuals are taxed on any excess above this amount. This can reduce the amount of money an individual has available in retirement.

It is important for individuals to carefully consider these drawbacks before investing in a personal pension. They should also seek professional financial advice to ensure they make the best decision for their individual circumstances.

Frequently Asked Questions (FAQs)

Are there other options for self-employed workers?

Self-employed workers have other options besides personal pensions to invest for their retirement. These include NEST (National Employment Savings Trust), a workplace pension scheme created by the government, and Lifetime ISA, which is open to individuals aged between 18 and 39 who can contribute £4,000 every year into a LISA up to the age of 50.

NEST

NEST is primarily for employees, but self-employed individuals or sole directors of a company that doesn’t employ anyone else can also join. NEST members can opt for Retirement Date Funds which move investments into lower-risk assets as the date of retirement approaches. Alternatively, members can pick from one of five funds, including low and high growth funds and ethical and sharia funds. These invest directly in the underlying assets, such as shares in individual companies.

Lifetime ISA

A Lifetime ISA can also be used to save for retirement, although it is more typically used to save for a house deposit. Individuals aged between 18 and 39 can contribute up to £4,000 every year into a LISA up to the age of 50. They will receive a 25% government bonus on LISA contributions if the money is used to buy a home or supplement retirement income (provided it’s not withdrawn until they’re 60). Contributions are free from capital gains and income tax but come out of the £20,000 overall annual ISA allowance.

What’s the average pension contribution in the UK?

Individual contributions to personal pensions have continued to rise, with £12 billion of contributions made to personal pensions in the most recent period. The average pension contribution is currently £1,700 per year.

What’s the average size of pension pots?

The average value of a pension pot in the UK is £32,700. The highest value pensions are in the age group nearing retirement, with an average pension pot of over £107,000 for 55-64 years olds. Young adults have saved almost £3,000, on average, rising to over £9,000 for 25-34 year olds. A £100,000 pension pot could currently buy an annual income of around £7,500 at age 65 (based on a single life level annuity with no guarantee).

How much can be paid into a personal pension each year?

Individuals can pay 100% of their earnings into a personal pension each tax year, subject to the annual allowance (£60,000 in the 2023/24 tax year). The annual allowance is reduced by £1 for every £2 of ‘adjusted income’ (which includes bonuses) above £260,000, subject to a minimum allowance of £10,000 for people earning over £200,000 a year. Individuals also have the option to carry forward unused annual allowances from the last three tax years, subject to certain conditions. Tax-relief is received on pension contributions, depending on the highest rate of income tax paid by an individual.

Who offers personal pensions?

Self-invested personal pensions (SIPPs) are offered by mainstream investment platforms, such as Hargreaves Lansdown, AJ Bell, interactive investor, and Bestinvest. Large insurance companies, such as Legal & General, Pru, Standard Life, and Aegon, also offer personal pensions. Robo-adviser platforms, such as Nutmeg and Wealthify, choose an investment portfolio for individuals based on their financial goals and attitude to risk.

What fees are charged on personal pensions?

Personal pensions are subject to various types of fees, including platform fees, fund fees, and other fees.

Platform fee

This is an annual fee charged for holding investments in a personal pension. Most providers charge a percentage, typically 0.2% to 0.4%, of the value of a portfolio, although this may be capped at a maximum amount per year.

Fund fee

This is charged by the manager of the ready-made portfolios, funds, investment trusts, and exchange-traded funds. It typically varies from around 0.1% to 0.3% for passively-managed portfolios to 0.5% to 1.0% for actively-managed portfolios.

Other fees

Some providers charge other fees, including fees for transferring pensions between providers and fees for trading by telephone. Providers may charge a foreign exchange fee for individuals who buy or sell shares denominated in a currency other than pounds sterling.

Why do fees matter?

Fees may seem insignificant, but they can add up to a considerable amount of money over the life of a pension. For example, an individual who transfers a lump-sum of £100,000 into a personal pension and contributes a further £5,000 per year for 25 years, with the pension pot increasing in value by 8% each year, would have a pension pot worth

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