Lloyds Bank has become the first high-street bank to launch a ‘one of its kind’ ready-made pension service, which lets savers combine up to 10 pension pots and open a new pension with Scottish Widows.
The service, named Ready-Made Pension, has launched following new research from Lloyds revealing around 42% of adults don’t know how to contribute more to their pension pot. The data also shows that a banking app would encourage 50% more savers to engage with their pension more frequently.
While most pensioners receive the state pension, it’s not enough if you’re hoping for a comfortable retirement. According to the Pension and Lifetime Savings Association (PLSA), a couple will need an annual retirement income of £59,000 to enjoy a comfortable retirement.
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With the high cost of living and frozen income tax thresholds dragging people into paying more tax, it’s worth boosting your private pension to increase your overall retirement nest egg.
Find out how the Lloyds Bank pensions service works, if you can open one and how its offering compares to the rest of the market.
How does the Lloyds Bank pension work?
The new pension service will allow savers to combine up to 10 separate pension pots that were accumulated through different workplace pension schemes and personal pension pots.
Or, if you’re looking to open a new pension, you can do so with Lloyds' own pension provider, Scottish Widows, via the new service. Whether you’re opening a new pension or consolidating pots, Lloyds says it takes your age and retirement planning into account and tailors your pension accordingly. So if you have a good number of years until retirement, the bank says it will “invest to give you the best chance of growth”. Whereas if you’re close to retirement, it will move your portfolio into low-risk investments.
To open a ready-made pension with Lloyds, you will need a minimum deposit of £5,000 or pay at least £150 a month into your pot. If you’re looking to transfer funds from an existing pension, the transfer amount needs to be at least £10,000.
The pensions service can be accessed via Lloyds online banking or via its internet banking app. The banking giant claims Ready-Made Pension is a “digital-first product”.
Are you eligible for the pension?
Lloyds Ready-Made Pension will initially only be available to customers who bank with Lloyds Bank, Halifax or Bank of Scotland.
The banking giant says it has 21.5 million customers who regularly using online banking, and around 7 million of them already check their pension using their banking app every week.
What are the fees on the Lloyds Bank ready-made pension?
The Lloyds Ready-Made Pension account is subject to a 0.3% annual account fee (minimum of £5 a month).
There is a 0.14% transaction fee of the value of your pension pot and an ongoing investment charge of up to 0.24%. There is no exit fee should you want to transfer to a different provider.
While Lloyds doesn’t impose an exit fee, you should check with your existing pension provider if you want to move your money to the new pension, as they might charge an exit fee.
How does the pension compare to the rest of the market?
Even though Lloyds is the first high-street bank to launch a ready-made pension, it’s not the only ready-made pension out there.
Here’s how its fees compare to pension providers already on the market.
| Provider | Annual account fee | Transaction fee | Investment management fee | Exit fee |
|---|---|---|---|---|
| Lloyds Bank | 0.3% or £5 a month | 0.14% | Up to 0.24% | No fee |
| PensionBee | Between 0.5% and 0.95% depending on the plan you go for. The fee on savings over £100,000 is halved. | 0.04% | No fee | No fee |
| Wealthify | 0.16% for original plans and 0.7% for ethical plans. | No fee | 0.6% | No fee |
| Nutmeg (based on a fully managed pension) | 0.75% on up to £100k. 0.35% on savings above £100k. | No fee | 0.22% | No fee |
The Lloyds annual account fee seems to sit in the middle of the market between Wealthify, which on one end of the spectrum charges a low fee of 0.16%, and Nutmeg, which charges 0.75% on pots with up to £100,000.
PensionBee looks favourable as it doesn’t charge an investment management fee. There are no exit fees.
If you bank with Lloyds Bank and prefer to have your banking and pension in one place, this new service could be suitable.
It’s also worth looking at which pension providers offer a bonus when you switch to them, and of course, making sure it's a right fit for you in terms of fees, investment options and customer service.
Currently, Wealthify is offering up to £1,000 when you open or transfer a pension to them.
Cheapest SIPPs on the market
If you prefer to manage your pension yourself, a DIY pension such as self-invested personal pensions (SIPPs) might suit your needs better where you can pick your own investments.
SIPPs are similar to standard personal pension pots, but they offer more flexibility with the investments you can opt for. For example, with a SIPP you can invest in global company shares, investment trusts and property or land, but not residential.
If you don’t feel comfortable managing your own SIPP, you can also use a financial adviser to do this on your behalf. Compared to a standard pension, with a SIPP you can make changes as often as you want.
But, don’t forget about the fees. SIPPs are subject to platform charges, transaction fees and buying or selling funds charges.
To have a SIPP, you need to go through an investment platform. These are five of the cheapest on the market:
| Investment platform | Platform fee | Online buying/ selling fees | Transfer fee |
|---|---|---|---|
| Vanguard | 0.15% (maximum £375 a year) | No fee. Charges £7.50 for immediate trades. | No fee |
| AJ Bell | Funds: 0%-0.25% Shares: 0.25% (maximum £10 a month) | Funds: £1.50 Shares: £5 (£3.50 if over 10 trades in previous month) | Up to £5 |
| Hargreaves Lansdown | Funds: 0.1%-0.45% Shares: 0.45% (maximum £200 a year) | Funds: no fee Shares: £11.95 (£8.95 if over 10 trades in previous month or £5.95 of over 20 trades) | No fee |
| Fidelity | Funds: 0.2%-0.35% Shares: £7.50 (maximum £7.50 a month) | Funds: no fee Shares: £10 or £1.50 if regular savings plan chosen | No fee |
| Interactive Investor | £5.99 to £12.99 a month | £3.99 a trade. Free regular investing | No fee |
Read more on the most popular SIPP investments.
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