How an adviser can help you find the best pension company

If you’re setting up a personal pension, or you run a business and want to set up a workplace pension for your employees, then a key question is which pension provider to use.

There are many providers with numerous options, pros, and cons, so it’s worth asking a financial adviser.

However, it’s useful to know the factors involved in choosing a pension provider so you can work closely with your financial adviser to make the right choice.

Here are the things to consider and factors your financial adviser will take into account when helping you decide to find the best pension provider for you.

What is a pension company?

A pension company, or pension provider, is a commercial organisation that manages pensions – which may be either personal or workplace pension schemes, and either defined contribution or defined benefit.

AJ Bell, Hargreaves Lansdown, and Aegon are some of the big names associated with providing pension schemes. But what do they and their peers do?

What do pension companies do?

A pension company is often also an insurance company, bank, or building society, but it may specialise exclusively in pensions.

Each month, pension scheme members (and possibly employers) pay contributions to the pension company, which invests the money on the member’s behalf into the particular fund(s) the member or employer has chosen.

When the member reaches age 55 (this may rise in the future), they can access their pension, and the provider will then offer them a range of options for taking the money out.

Note that members of defined benefit (final salary) pension schemes may have to wait longer until they reach their scheme’s ‘normal retirement age,’ usually around 60 or 65.

What should I look for when choosing a pension company?

If you’re setting up a pension either for yourself or your employees, taking independent advice is essential.

Here are the factors that you should consider with the help of your specialist pension adviser:

1. A good reputation

Your chosen provider must be approved by The Pensions Regulator, but you should also check out its broader reputation among those who use it.

An online search of member reviews is a good starting point, but your financial adviser will most likely know much more and will also be able to offer an expert view.

In particular, they’ll know the main pros and cons of each provider and how well-suited they might be to your particular requirements.

2. A range of funds

You’ll need to find a pension company that offers the investment options you’re looking for.

Look for a provider with a wide variety of funds, so that you have more choice based on your goals and risk appetite.

One thing in particular to look for may be a dynamically managed fund, that changes your asset allocation according to how close you are to retirement. Your IFA can tell you more about this.

3. Service levels

If retirement planning is new to you, it’s helpful to have a provider that can support you in the process.

Look for providers that offer clear information on your options, transparent updates on fund performance, and who offer an easy way for you to monitor your contributions and pension pot, such as online tools.

What makes a good pension scheme?

Pension companies offer a variety of schemes to suit a range of different customers and their priorities.

For example, a workplace pension scheme for a small startup will have very different requirements from one designed for the senior management of a multinational.

Your scheme will therefore need to be suited to your circumstances – notwithstanding that these may change significantly over time. You therefore need to think carefully about the future as well as considering the present.

When comparing different schemes, here are the main factors to weigh against each other.

1. Contributions

Look at the minimum and maximum levels of contributions allowed.

You’ll need to make sure you can afford the minimum contribution, but also have the option of investing more to boost your pension pot.

Ask if you’re allowed to pay in lump sums as well as regular contributions, so that you can invest extra savings if you want to.

2. Management fees

Pension providers charge an annual admin fee for managing your pension scheme.

This can be a flat fee or a percentage of the value of your pension pot, and pension providers must state them upfront.

However, paying fees over the long term adds up and reduces your savings, so it’s important to select a fee that’s fair and that you’re comfortable with.

Find out exactly what your scheme charges and when the fees are collected.

Ask about any other hidden fees you may be charged too, like entry, exit or transfer fees, underlying fund fees, and inactivity fees.

3. Ability to select investment options

Pension schemes, especially the newer ones, often let you choose the specific funds you want to invest in.

Sometimes, however, schemes might have a default fund. It’s usually better to have the option, and work with your IFA to select the right funds and investments for you.

4. Additional benefits

Often, pension schemes offer additional perks, including death in service benefits, ill health retirement pensions and tax-free lump sum withdrawals etc.

When shopping around, ask each provider what they offer and see where you can get the benefits you need to create the retirement you want.

5. Penalties and tax implications

Ask your provider about any potential penalties on your scheme.

For example, what are your options if you ever want to pause your contributions, or transfer your pension pot to another provider?

It’s also important to find out what the terms and tax relief arrangements are.

Tax implications can be complex and will vary depending on your personal situation.

Who are the biggest pension companies in the UK?

When trying to find the best pension provider, it's good to know who the major players are.

Here's some of the most well-known UK pension companies:

Interactive Investor

Interactive investor is a flat-fee investment platform that manages pensions, individual savings accounts (ISAs), and investments.

They have over £50 billion of assets under administration and 420,000 customers.

PensionBee

PensionBee is an online pension provider founded in 2014.

Investment options are managed by leading asset managers including State Street Global Advisors, HSBC, BlackRock and Legal & General.

Learn more: Vanguard vs Blackrock

AJ Bell

AJ Bell provides online investment platforms and stockbroker services, with £83.7 billion assets under management.

Their Youinvest product has been rated as the best SIPP provider from many industry awards and allows you to invest in a wide range of shares, unit trusts and investment trusts.

Hargreaves Lansdown

Based in Bristol, Hargreaves Lansdown is known as one the UK’s largest online investment platforms, with 1.8 million customers and £155 billion assets under management.

It’s listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Aegon

Based in Scotland and around since 1831, Aegon is a financial services provider specialising in pensions, investments and insurance.

It offers personal and workplace pension schemes.

Aviva

A multinational insurance company, Aviva has around 19.5 million customers and offers a variety of pension policies.

Fidelity

Fidelity International provides retirement solutions to businesses and individuals.

They operate across Europe, Asia Pacific, the Middle East, South America and Canada, with 51.5 million clients and they manage £14.1 trillion of client assets.

Royal London

Royal London is one the largest mutual life, pensions and investment companies, offering personal and workplace pensions.

The Group has around £169 billion funds under management and 8.5 million policies in force.

How can an IFA help me to pick the best pension company for me?

As you can see, there’s no shortage of pension companies to choose from – and each one has its own different schemes, features and benefits.

Knowing where to start and who offers the best value can be overwhelming.

Although there are comparison websites available to help you weigh up their offerings, these websites don’t know your individual circumstances – and can’t explain all the benefits and drawbacks in detail.

An IFA, however, will take the time to advise you on the best pension company and scheme based on your needs, goals and budget.

They’ll carefully explain the pros and cons of all your options, so that you can make an informed choice.

Once you’ve made your selection, they’ll also help you review your pension pot performance each year, ensuring your retirement savings are always right on track.

Get expert financial advice

Choosing the right pension provider can be complex and overwhelming, but with a financial adviser's guidance, you can confidently navigate your options.

They will tailor their advice to your specific needs and ensure the pension scheme you select aligns with your financial goals and future plans.

By working closely with an adviser, you can make an informed decision supporting your long-term retirement objectives.

Unbiased can quickly match you with a financial adviser for expert financial advice tailored to your unique needs and goals, helping you make the best decisions for your financial future.