The Best Private Pension Providers

Why do I need a private pension and which is the best private pension provider?

Updated: January 17, 2024
Matt Crabtree

Written By

Matt Crabtree

|
Rebecca Goodman

Edited By

Rebecca Goodman

 

DISCLAIMER: Examples are given in this article of pension schemes offered by a number of providers. This is provided for information purposes only and not advice. It is also not intended to act as an endorsement of the pension schemes offered by the companies listed. The value of any investment can fall as well as rise.

Which is the best private pension provider?

A private pension is your way of putting aside money for your retirement. If you work for an employer, you will be automatically opted-in to a workplace private pension, and your employer will make contributions to the pot. You can always set up your own private pension.

It’s impossible to know exactly which provider, and which investment strategy, will give you the best returns as investments can rise and fall, however, the important things to consider are:

  • What are the provider’s charges? All providers charge some sort of annual fee, and fees might be applied for annual management, fund management, fund switches, and missed payments. Fees are deducted directly from your pension pot so, the higher the fee, the more your final retirement income will be eroded.
  • Investment options: How wide is the range of investment options offered by that provider and what companies, countries, or areas do they invest in? Do they match your own ethical considerations, if you only want to invest in firms that help the environment, for example, does the pension provider also invest in fossil fuels?
  • Does it allow easy online access to manage your plan?
  • Is it quick and easy to increase or decrease your contributions, change your investment mix, or stop contributions altogether?
  • What is the provider’s general reputation for customer service and administration?
  • How many pension-related complaints does the provider receive? You may be able to find information about this on the websites of the regulator, the Financial Conduct Authority (FCA), or the independent complaints adjudicator, the Financial Ombudsman Service (FOS).

You can make use of a price comparison site to help you choose the right private pension scheme, or you could consult a professional financial adviser, who will research the market on your behalf and recommend the best scheme for your individual circumstances.

They can also help identify investment funds that are in line with your attitude to risk. But financial advisers will charge advice fees, whether this is a fixed fee, an hourly rate or a percentage of your investment.

Here are some details of the main pension providers in the UK:

Specialist pension providersMinimum lump sum contributionMinimum monthly contributionChargesApproximate number of funds offered
Hargreaves Lansdown£100£250.1 – 0.45% p.a.2,500
Penfold£10£100.4 – 0.88% p.a. (maximum 0.53% for pots valued at £100,000 or more)4
Dentons Pensions£50,000No minimum£350 initially plus £444 – £612 p.a.Essentially unlimited
Interactive InvestorNo minimumNo minimum£12.99/month3,000
AJ Bell£25£250.1 – 0.25% p.a.2,000
Insurance company providersMinimum lump sum contributionMinimum monthly contribution
Charges
Approximate number of funds offered
Standard Life£16£16Up to 1% p.a.300
Aviva£20£20Up to 0.7% p.a.600
Aegon£1£1Up to 0.5% p.a.4,500
Legal & GeneralNo minimumNo minimumService charge of 0.25% p.a. and management charge of 0.31% p.a.140
Royal London£2,500£1000.35 – 0.9% p.a.190

Pros and cons of specific private providers

Here we look at some of the specific advantages and disadvantages of some of the UK’s pension providers.

Specialist pension providers

1. Hargreaves Lansdown

Pros

✔️ Hargreaves Lansdown is possibly the largest wealth management company in the UK. Across its pension and investment offerings, it has almost one million customers.

✔️ Hargreaves Lansdown is the UK’s must popular provider of self-invested personal pensions (SIPPs)

✔️ Readers of What Investment voted it the UK’s best SIPP provider for ten years running

✔️ Less experienced investors can choose from a range of simpler investments where Hargreaves Lansdown make the investment decisions on your behalf

✔️ Hargreaves Lansdown has its own in-house financial advisory team

✔️ You can place trading instructions with Hargreaves Lansdown (review) online, via the app, by post or via telephone

✔️ The company also offers an innovative Junior SIPP, where you can make pension contributions on behalf of a child, for them to access when they reach retirement age

Cons

❌ With 2,500 funds and so many different investment options, this might not be the right provider for an inexperienced investor seeking a simple, easy to understand pension arrangement

❌ Hargreaves Lansdown only offers a SIPP and not a mainstream personal pension

❌ For some investment options, their fees can certainly be higher than the industry average

2. Penfold

Pros

✔️ If you choose Penfold’s Lifetime option, your investment mix is automatically adjusted as you get closer to retirement age

✔️ Penfold describe themselves as specialists in pension provision for the self-employed

✔️ They offer dedicated Sharia and environmentally sustainable investment pension options amongst their four ready-made investment strategies

✔️ They offer a significant reduction in fees for anyone with a fund worth more than £100,000

✔️ It’s possible to pay into a Penfold pension via a limited company that you own

✔️ The company’s offering was voted Best Pension 2022 and their mobile app has also won awards

Cons

❌ There are only four investment options with Penfold

❌ They may be a great provider for their specialist niches, such as the self-employed, customers seeking Sharia investment and those seeking environmentally friendly investment options. They may, however, not offer as much to the average employed pension saver.

3. Dentons Pensions

Pros

✔️ Dentons is a family firm which has earned considerable praise for its customer service

✔️ The company has more than 40 years’ experience in the pensions market and more than 20 years’ experience of providing SIPPs

✔️ In practice, the investment choice is unlimited with Dentons, as you can invest in unit trusts, OEICs, listed and unlisted shares

✔️ They also offer niche investment options, such as Unregulated Collective Investment Schemes (UCIS)

Cons

❌ You need to have a fund of at least £50,000 to open a Dentons plan

❌ Some of their investment options, such as UCIS, are very high risk and are only suitable for sophisticated investors

4. Interactive Investor

Pros

✔️ You can manage your pension via the company’s mobile app, which uses face and touch identity verification, for your security

✔️ With 3,000 funds and access to 40,000 stocks from across the world, the investment choice here is considerable

✔️ At the time of writing, II was promising up to £5,000 cashback for new SIPP customers (until 31 January)

✔️ Interactive Investor only offers a SIPP and not a mainstream personal pension

✔️ The company has won awards for its newsletter that keeps customers informed of the latest news in the pensions market

Cons

❌ Independent reviewers have suggested that the company often imposes charges for extra services, such as postage

❌ 3,000 funds may be overkill for anyone seeking a simpler pension arrangement

❌ Interactive Investor only offers a SIPP and not a mainstream personal pension

5. AJ Bell

Pros

✔️ AJ Bell only entered the market in 1995, but has quickly become one of the UK’s most respected SIPP providers

✔️ It was the first company to offer an online SIPP

✔️ As well as its standard SIPP, it offers a Platinum SIPP, where you can appoint any UK authorised investment manager to run the plan on your behalf

✔️ The company won as many as 12 industry awards in 2022 alone

Cons

❌ AJ Bell only offers a SIPP and not a mainstream personal pension

Insurance company providers

1. Standard Life

Pros

✔️ Standard Life give you the option of investing in one of their Lifestyle Portfolios, where your investment mix is automatically adjusted as you get closer to retirement age

✔️ Having 300 funds, this might be the ideal halfway house. It’s enough funds to give you a decent choice at the outset, and to give you reasonable options when seeking to switch funds, but it’s also a sufficiently small number of funds where you won’t be bewildered by the choice on offer.

✔️ The company offers a Stakeholder Pension and a Self Invested Personal Pensions (SIPP) as well as a standard Personal Pension

✔️ The company offers free retirement webinars to its pension customers, which can help you navigate a complex technical landscape and stay up to date with the latest developments

✔️ A report by Yodelar, while criticising the performance of some of its in-house funds (see below) found that the company still had some of the top performing funds in the sector

Cons

❌ Some of their in-house pension funds have performed worse than the industry average of late, according to the Yodelar report

❌ Its fees are relatively high compared to some other providers

2. Aviva

Pros

✔️ Pension saving with Aviva is very flexible – you can start, stop and resume contributions at any time, without penalty

✔️ The company offers a Stakeholder Pension and a SIPP as well as a standard Personal Pension

✔️ With 600 funds, it should provide all the investment choice you need

✔️ Aviva has an excellent online portal where you can manage your pension

✔️ They also offer technical support via telephone

✔️ The company claims that you can register with them online in just five minutes

Cons

❌ A choice of 600 funds may be more than some people want and you might prefer a provider that offers just a few investment options

3. Aegon

Pros

✔️ Aegon has almost four million pension customers

✔️ The company was founded in 1831 and has been supporting people with their pensions ever since

✔️ With 4,500 funds, it has a massive choice of investment strategies and enormous potential for fund switching

✔️ The most recent Yodelar report says that 72% of its ‘lifepath’ funds – those where the asset mix is adjusted as the customer nears retirement – are amongst the top 25% performing funds in their sector

✔️ Its customers speak highly of its online portal

✔️ The company website also has an excellent financial wellbeing hub, where you can get many practical tips on how best to manage your money

Cons

❌ The sheer size of the funds list could be off putting for some

Pros

✔️ As Legal & General offers five ready-made solutions that cover five different investor risk profiles, this could be an ideal simple solution if you might feel bewildered by the fund choice offered by other companies

✔️ The company does not have a minimum contribution level, so you can contribute as much or as little as you wish

✔️ A report by Yodelar, while criticising the performance of some of its funds (see below), found that the company still had some of the top performing funds in the sector, such as the UK Gilt Fund, which was rated the best of its type

Cons

❌ The lack of investment choice will not suit everyone, especially as there is only one ready-made investment strategy for each risk profile and switching investment strategies may not therefore be a viable option

❌ At the time of writing, L&G does not offer the facility to manage your pensions via a mobile app

❌ 94 of their 140 funds are classed as ‘poor performing’ according to the Yodelar report

5. Royal London

Pros

✔️ Royal London has one of the industry’s most highly regarded mobile apps to help you manage your pension

✔️ It has frequently been voted the UK’s best pension provider by the nation’s financial advisers

✔️ Many people will be attracted to Royal London as they are a mutual company, i.e., they are owned by their policyholders and not shareholders

Cons

❌ Royal London’s products are only available via financial advisers. This means that you can’t apply to them directly and you would need to book an appointment with an adviser, and pay their fees, to get a Royal London pension.

❌ The most recent Yodelar report says that 72.5% of Royal London pension funds have consistently displayed inferior performance compared to similar funds

What are SIPPs?

SIPP stands for a Self Invested Personal Pension. SIPPs are a special type of personal pension that can provide greater choice over where your pension contributions are invested. Most private pension schemes offer a range of investment funds.

A SIPP, however, typically allows you to invest in other ways, such as placing your contributions into an investment trust, or using them to purchase individual company shares, land and commercial property.

Hargreaves Lansdown and AJ Bell are just some of the major players in the UK SIPP marketplace.

Before taking out a SIPP, think carefully about whether you need the additional investment choice. Even those products that describe themselves as a ‘low cost’ SIPP may well have higher charges than standard personal pensions.

So, if you’re just going to make use of investment options that are available with any personal pension, such as unit trusts and OEICS, then you may end up paying higher SIPP charges for no reason.

What are stakeholder pensions?

A stakeholder pension is another form of personal pension. To be a stakeholder pension, a scheme must:

  • Have charges that don’t exceed 1.5% of the value of the pension pot in the first ten years, and don’t exceed 1% thereafter
  • Allow you to switch between different funds free of charge
  • Permit you to stop and start contributions without penalty
  • Accept contributions of as low as £20
  • Have a default investment fund in which all contributions are invested unless you specify otherwise

Stakeholder pensions can be a good option for anyone wanting a simpler private pension scheme, but they may be less suitable if you want a wider choice of investment options.

Why not just use your workplace scheme?

Some of you might be thinking that you don’t need to worry about selecting a pension provider because you have been automatically enrolled into a workplace pension.

It’s true that if you are aged between 22 and State Pension Age, earn at least £10,000 per year, have been with your company for at least three months and work on an employed basis (as opposed to self-employed), then you should have been automatically enrolled in a pension plan by your employer. The system of auto-enrolment has been in place for over 10 years now as a way to boost pension savings.

However, many workplace pensions are really quite basic arrangements. Very few of us – outside the public sector at least – are members of final salary pension schemes.

These have been described as ‘gold-plated’ pension schemes because they really are very generous indeed, allowing you to retire with an income of up to two-thirds of your salary at retirement age, provided you have completed the necessary years of service.

For most people, however, their eventual retirement income is determined simply by the amount you pay in across your working life, and by how much these contributions grow when they are invested in the stock market.

Everyone should join a workplace pension, if one is available. This is because employers are legally obliged to contribute at least 3% of your earnings to the plan. Your own minimum contribution level is 5% of earnings.

If you don’t know all of the details already, then make sure you read the small print of your workplace pension documentation. Will your employer make contributions of greater than 3% if you were to pay more than 5% of earnings yourself? If so, then that’s a very good reason for using your workplace scheme should you feel able to make additional contributions over and above the minimum 5%.

Many employers, however, will just pay in the legal minimum of 3% regardless of whether you make additional contributions. This means that you are free to find another pension scheme of your choice for any additional amounts you wish to pay in.

Using a private pension scheme will almost inevitably mean that you have a much wider choice regarding where your contributions are invested. Again, you should read the small print of your workplace pension documents, but it may well be the case that your 5% contribution and your employer’s 3% contribution are invested in a very generic type of investment fund, which might be known as a Managed Fund or similar.

There may well be little or no choice as to where these contributions are invested, which is a very good reason to make use of a private pension scheme alongside your workplace scheme.

Consider this example:

  • You earn £24,000 per annum, or £2,000 per month
  • This means that you are required to pay at least £100 per month (5% of salary) to your workplace pension (although £20 of this £100 is paid by the Government in tax relief)
  • Your employer is required to pay at least £60 (3%)
  • Any additional amounts that you feel you can contribute over and above this can then be made to any private pension scheme of your choice

So, to summarise, a private pension scheme might be used by:

  • A self-employed person who has no workplace pension
  • An employee who does not qualify for a workplace pension
  • A member of a workplace pension who wants to make additional provision for retirement

Is the Lifetime ISA another retirement savings option?

The government allows you to open a Lifetime ISA if you are aged between 18 and 39 and you can then continue contributing until age 50.

The maximum contribution is £4,000 per tax year. Whatever you contribute, the government will add another 25%, so if you pay in £4,000, they will add £1,000. This effectively mirrors the tax relief offered on private pension contributions.

Withdrawals are permitted when you reach age 60, or when you are buying your first home. This means that a young adult can make contributions to a lifetime ISA and decide later whether to use the funds to save for retirement or to get on the housing ladder.

Be aware, however, that if you decide to use the funds entirely to fund a deposit on a home, then you won’t be left with anything to support your retirement and there are also restrictions on the value of the property. This all means that one potential advantage of a private pension is that you are forced to use the pot to provide income and capital in retirement, and there’s no temptation to access the funds prior to age 55 as this simply isn’t permitted.

Why do I need a private pension?

The main reasons why you should save for your retirement are:

  • We all want to continue to enjoy a good standard of living in retirement, allowing us to continue with the things we love, such as hobbies and travel.
  • The UK state pension is really only intended to cover basic expenses. At the time of writing, the state retirement income is just £185.15 per week, or £9,627.80 per annum. Even then, not everyone will get this amount if they haven’t been paying National Insurance throughout their adult life.
  • The age at which you can get your state pension is increasing all the time as the average age of the UK population increases. At time of writing, state pension age is 66, but there are plans in place to raise that to 68 by 2039. With a private pension, you can access your retirement savings from an earlier age. At time of writing, you can start drawing your pension at age 55, although the minimum age will rise to 57 by 2028.
  • Even making the minimum contributions to a workplace pension (5% of your earnings) is unlikely to be enough to really enjoy your retirement.
  • You can get tax relief on your contributions. This means that, for a basic rate taxpayer, the government will add 20p for every 80p you contribute to a pension scheme. So, if your net pension contribution is £240 per month, the total amount invested in the scheme will actually be £300. If you pay higher rate income tax, you can claim additional tax relief via your tax return. No other form of savings plan (except for the Lifetime ISA explained below) offers this generous level of state support.

Who offers private pensions?

The UK private pension market is very competitive and there are a large number of companies active in this sector.

Many of the biggest players in the market are well known as insurance providers, such as:

  • Aegon
  • Aviva
  • Legal & General
  • Royal London
  • Standard Life

There are also a number of specialist niche providers, such as:

You should note that, regardless of who your provider is, you are still likely to have access to a wide range of different investment funds.

If, for example, your provider is Aviva then, at time of writing, you can choose funds offered by leading investment managers such as Abrdn, Artemis, BlackRock, Fidelity, Invesco, Jupiter and M&G.

You aren’t just restricted to Aviva’s own range of investments, and a similar choice is likely to be available whichever provider you choose.

How do private pension schemes work?

A private pension is a specialised savings scheme designed to provide an income in retirement that will supplement your state pension. You contribute as much as you feel you can afford, and then these contributions are invested into your retirement fund, and the value of this will hopefully grow over time, leaving you with a comfortable income when you access the funds in later life.

Many people make pension contributions on a monthly basis, after identifying what proportion of their regular income they feel they can afford to contribute. However, it’s also possible to make single contributions, so if you have managed to accumulate a significant sum in savings, you might consider transferring some of this into your pension.

It’s theoretically possible to contribute 100% of your annual earnings into a pension, and still obtain tax relief, as explained above. For example, if you earn £30,000 per annum, you might decide to put 10% of this into the pension via monthly contributions. However, if you also have £27,000 worth of savings, you could also make a lump sum contribution of this amount.

If you contribute more than £40,000 in a tax year, you have exceeded your ‘annual allowance’ and will be liable for tax.

Private pension schemes usually allow you to choose from a range of investments, including:

  • Cash funds – your contributions are invested in cash deposits, similar to bank savings accounts
  • Fixed interest funds – your contributions are invested in corporate and government bonds and similar vehicles, and then you get back your initial capital plus a fixed rate of interest
  • Property funds – the contributions made by everyone who chooses the trust are pooled and then the fund manager invests them in commercial property or in property companies
  • Unit trusts and open-ended investment companies (OEICs) – these are stock market-based investments. The contributions made by everyone who chooses the trust are pooled and then the fund manager decides how to invest them for maximum returns. You can choose trusts that invest in a specific geographical area (e.g., UK, USA, Europe, Far East) or in specific business sectors (e.g., technology, environmentally sustainable companies)

Some of these options are riskier than others, e.g., with a unit trust there is a much greater chance of losing money than in a cash fund. With increased risk, however, comes increased potential for growth, so it’s important to identify your own attitude to risk and to decide how risky you want your investment portfolio to be.

Some people opt for a balanced portfolio, with some of their monies in safe investments with a low growth potential, and some in higher risk areas. By choosing a range of different investment funds, the overall risk is also reduced, as you would be very unlucky if you chose a wide range of funds and then all of them fell in value.

Some people feel it is prudent to move their pension pot to a lower risk area as their retirement draws closer, as if you suffered an investment loss just prior to retirement age, there may be no time to make good your losses.

When you reach the minimum age for accessing your pension pot, you then have complete freedom over what to do with it. You can withdraw cash lump sums, convert the pot into a regular income via an annuity or leave it invested while drawing down the amounts you need.

Where can I find out more?

The Times picks its best ready-made personal pensions

Citizens Advice guides you through the main considerations when selecting a pension provider

Consumer organisation Which?’s detailed guide to the personal pensions market

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