New top pension for retirement savers!

We have another great choice for personal pension saving.

There is a new pension offering cheap prices for all, and even a fair bit of choice if you want more control of where your money is invested. 

The Low-Cost Pension Plan from insurer LV= is charging a very low administration fee of 0.25% per year (and just 0.1% for investments over £1m). 

As usual, on top of the administration fees you also pay costs for the funds you invest in. The LV= pension has brought the costs right down, with the cheapest UK index tracker fund totalling a mere 0.1%. That figure is the so-called “TER” or “total expense ratio”, and I can tell you it is extremely cheap. 

Putting the costs together, then, you could invest in a wide range of companies for roughly 0.35% per year. 

This is one of the best personal pensions available for most pension savers. Thanks to its low cost, your personal pension income in retirement could be boosted by more than 15% compared to an average pension. 

While some pensions have no admin fees whatsoever, the annual fund costs are usually far higher, wiping out the savings you've made. Keeping all the costs down should be a pension savers' biggest priority – above choosing particular fund managers or sectors. Charges of more than 1% tend to wipe out the benefits of having a good manager in the long run. 

You can choose from 130 different funds, which is a big selection for a pension plan with these low prices.

Funds include 12 investing in shares that cost less than 0.5% per year. These invest in the US, Japan, emerging markets, and all over. You also have property, cash, gilts and bonds to choose from at great prices. Gilts and bonds could be useful when you're approaching retirement to take some of the risk out. 

You can upgrade the pension to an LV= SIPP for more choice of investments, although the price or terms might not then be as competitive. 

The rubs

There are two catches. The first is that you can only get this pension through an adviser. However, Cavendish Online, probably the cheapest adviser, supplies the pension. Cavendish Online gives you an “execution-only” service, which means you receive no advice and it merely pushes the paperwork through for you. It charges a flat, one-off fee of £35. 

Secondly, you have to transfer in at least £20,000 as your first contribution. After that, you just have to contribute £25 per month or £300 per year. 

How the pension compares to others

Some pensions don't charge any administration fees whatsoever. Usually you can expect the annual fund costs to be so high with these pensions that it more than wipes out the savings you make on admin fees. 

However, one competitor to LV=, the Fidelity Personal Pension Plan, lets you in for an initial contribution of £10,000 and it has no annual admin fee.

Its cheapest fund costs just 0.3% TER, making it very slightly cheaper than the LV= plan altogether. In addition, it has more choice, with over 1,200 funds to choose from. This is not necessarily a good thing, however. It can lead you to lose your focus on keeping costs down and to get excited about bubble sectors. On average, you will lose out by straying away from a low-cost strategy. 

If you want to buy shares instead of investment funds, I think you should look to a SIPPDeal SIPP, which has no annual admin charges and costs less than £10 per trade. 

Finally, for more simple pensions with less choice, you could try a stakeholder pension such as through Aviva or Standard Life. It's best to go through Cavendish Online again. This is because, for its one-off fee of £35, it will rebate nearly half of the fund annual management charges. It's a reasonable price for a simple pension fund. 

Consider your alternatives

In addition to comparing pensions, one reader reminded me recently that you should consider other ways to save for retirement. This is certainly true: pensions are potentially a little more risky and less flexible than share ISAs, for example. 

It may be that a combination of both will be better for you, so make sure you look into all your options – but don't let that be an excuse for putting it off for another year! 

More: Compare share ISAs through lovemoney.com | Two simple ways to invest better in shares |  Six steps that will treble your pension