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Smart Pension scheme

richfool
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Smart Pension scheme

#460945

Postby richfool » November 25th, 2021, 7:36 pm

What do members know of, or have any experience of, "Smart Pension" scheme, which my step-daughter seems to have arbitrarily put into by her fairly new employer.

She's been having pension deductions taken from her salary since last April and it has taken until now to get details of the scheme from her Employer. The details consist of an introductory letter attached to an email, containing scant generic information and a link to the Smart Pension website (link below).

Going to the Smart Pension website, I find lots of vague information about what a pension is and how they invest wisely for your future, but no detailed specifics, no details of funds or investments into which your contributions are directed. There is mention of a total pension contribution figure of 8%, which they say comes from a combination of the employer's contribution, the employees contribution and tax relief, but with no breakdown of what percentage comes from whom/which.

https://www.smartpension.co.uk/about-us/our-story

I note the link refers to: "our investors include...", and mentions Legal & General, JP Morgan, Link Group, amongst others, which sounds like those companies invest in Smart Pension, though I suspect it might well mean that Smart Pension invests in those companies. The above, coupled with the fact that the introductory letter, directing my step-daughter to their website has 2 misspellings in her name and errors in her address, all of which doesn't inspire me with much confidence.

PhaseThree

Re: Smart Pension scheme

#460947

Postby PhaseThree » November 25th, 2021, 8:09 pm

Looks similar to the NEST pension I have been trying to avoid for the last few years.
Full details of the funds are available under the governance section.
https://www.smartpension.co.uk/governan ... nformation

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Re: Smart Pension scheme

#460952

Postby Alaric » November 25th, 2021, 9:15 pm

richfool wrote:I note the link refers to: "our investors include...", and mentions Legal & General, JP Morgan, Link Group, amongst others, which sounds like those companies invest in Smart Pension, though I suspect it might well mean that Smart Pension invests in those companies.


Also in the next paragraph.
We’re one of the largest pension scheme providers in the UK, running a master trust scheme for hundreds of thousands of members.


"master trust scheme" is the key piece of jargon. It's a legal framework for running defined contribution pension schemes. It's different from SIPPs but can work in broadly the same way. In other words employees put in money as do employers as does the government in the form of tax relief. This is invested and builds up an individual pot of wealth for each individual which can be withdrawn under whatever the rules are when the employee is sufficiently old,

Where it talks about its investors, I would imagine it means those who have put in seed and solvency capital and who would receive a cut of whatever profit it makes.

I also noticed they say this
Most people don’t know where their pension contributions go when they pay them each month


Unlike a SIPP where it's usually obvious, their website was not a lot of help. There's a lot of waffle about sustainability but nothing about the nuts and bolts that if you had a list of shares, ITs or OEICs that you wanted to invest in, or even not to invest in, as to how you would do it. Perhaps all is revealed to those who are able to sign up in person rather than casual internet browsers.

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Re: Smart Pension scheme

#460955

Postby Alaric » November 25th, 2021, 9:43 pm

I managed to wade through the verbiage and eventually discovered that it's a front for Legal & General. Like Nest there is potentially investment choice provided that choice is something offered by LGIM which I'm assuming stands for Legal & General Investment Management. Title to the assets is through an insurance policy issued by Legal & General so it's a different framework to SIPPs, OEICs, ITs etc.

https://assets-global.website-files.com ... June21.pdf

Go to page 26 (of 37)

richfool
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Re: Smart Pension scheme

#460974

Postby richfool » November 25th, 2021, 10:38 pm

Thanks for the info and links.

Yes, the funds do look a lot like a "L&G index funds fest".

It's a shame they end up making these things so complicated that the man in street has no chance of understanding them, the options available, or indeed which option is appropriate at what point in his journey to retirement.

I can see my daughter following my wife's example and contributing into an ISA instead of a second pension, and foregoing the employer's contribution and tax relief, primarily for the simplicity, clarity, control, and freedom to take the funds as and when, tax free.

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Re: Smart Pension scheme

#461036

Postby Boots » November 26th, 2021, 8:56 am

I had a quick look, and the scheme looked OK on the face of it - reasonable costs and a good range (sixteen, if I recall) of funds to choose from.

The key success factors for your step-daughter would probably be: to think about her contribution levels; and to consciously choose the funds, rather than be dumped into a default which may not be appropriate.

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Re: Smart Pension scheme

#461098

Postby richfool » November 26th, 2021, 11:12 am

I was wondering if they (daughter and wife) could do their own pensions through an Investment Trust, one which would allow them to buy a couple of other IT's in addition to the one running the pension plan? I recollect Alliance used to do something along those lines, but never took much notice as I had no interest or need at the time.

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Re: Smart Pension scheme

#461212

Postby gryffron » November 26th, 2021, 3:49 pm

richfool wrote:There is mention of a total pension contribution figure of 8%, which they say comes from a combination of the employer's contribution, the employees contribution and tax relief, but with no breakdown of what percentage comes from whom/which.

The payments will be 5% employEE, 3% employER. Which is the statutory minimum now. https://www.thepensionsregulator.gov.uk ... nd-funding
Effectively 5% and 3% of your gross wage. Sometimes deducted gross, and sometimes net-plus-tax-refund. But however they calculate it the effect is the same.
If you're a higher rate taxpayer you might have to reclaim it yourself. And certainly will if you're using non-employer private Pension schemes.

richfool wrote:I was wondering if they (daughter and wife) could do their own pensions through an Investment Trust, one which would allow them to buy a couple of other IT's in addition to the one running the pension plan?

As long as the fees aren't too onerous, employer/NEST Pensions are a pretty good deal due to the 60% employer boost. You'd be crazy to give that up just to get a bigger choice of funds. It's free money, and will take a lot of investing to make up.

Options:
You always have the choice of using a private pension instead of the company one, or in addition. You can have as many separate Pensions as you like.
Some employers will let you redirect the employer 3% boost into a private scheme. Some won't. They don't have to, and it does mean more complicated admin for them. So you might lose the employer's 3% - bad idea!
A Self-Invested-Pension-Plan (SIPP) is a share/fund trading account wrapped in a pension wrapper. Allows you complete choice of investments, shares and funds. It has the same tax benefits as a Pension, and the same age lockin. Which makes it much less flexible than an ISA.
Or, it MAY be possible to simply pay in to the company scheme then do a transfer out every couple of years, or when you change job, to a SIPP.
Or you can put additional money into an ISA (or LISA). Which is more flexible. Allows you to take out money to buy a house etc. The flexibility is good if you are a disciplined saver, and bad if you are not. Pensions give a significant boost if you are a high rate taxpayer, or if your employer will pay for it! And the other difference to be aware of - Pensions are protected from bankruptcy, ISAs are not.

Whatever you do, don't discourage your daughter from saving ;)

Gryff


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