Abundance launches first ever peer-to-peer pension

Abundance launches the UK's first peer-to-peer SIPP, with no fees at all for the first year. How well does this 'eco-pension' stack up?

If you are looking for a big return on your pension savings, and to help the planet in the process, then there's a new pension to consider.

Investment platform Abundance, which specialises in 'green' investments, has launched the Abundance Pension, which it claims is the world's first ever peer-to-peer pension.

Let's take a closer look at how it works, and whether it's right for you?

What is a SIPP?

As the name suggests, a SIPP means that you are the one who decides where your pension savings are invested, rather than relying on the fund managers at your pension firm to make those decisions.

Once upon a time SIPPs were the exclusive preserve of well-off investors, but in recent years numerous cheaper options have been launched, meaning that almost all of us can opt to take a more hands-on approach to where our pension money goes.

Read How to start a SIPP.

How does the Abundance Pension work?

Abundance promotes social, ethical and environmental ventures in the UK that "produce a positive social or environmental impact". Previous projects have included installing windfarms and solar panels across the UK.

Its investments take the form of tradable debentures from individual UK businesses, largely from producing renewable energy. These debentures provide regular payments (usually twice a year), and have produced returns of between 6% and 9% so far. With the Abundance Pension, you can invest in all current open projects, and any future Abundance projects too.

As these debentures return cash to the Abundance Pension, this cash is then reinvested in further debentures, creating a concentrated build-up of debenture holdings. 

In order to attract investors to the Abundance Pension, it has agreed to permanently waive all setup and transfer-in fees for investors. In addition, Abundance will charge no yearly fees in the first year, followed by a low annual management charge (AMC) of 0.3% of assets after year one.

The AMC is capped at a minimum fee of £100 a year, making this SIPP uncompetitive for smaller pension pots. In addition, the minimum investment in the Abundance Pension is £5,000 in the first year, either via lump sums or by investing, say, £416.67 a month for 12 months.

Take control of your pension with a SIPP

How Abundance's charges stack up

Clearly, with no charges at all in its first year, the Abundance Pension is the lowest-cost SIPP available from anyone, anywhere, for the first 12 months. Here's how its ongoing annual management charge adds up in later years:

As you can see, the minimum ongoing yearly charge of £100 equates to 2% of a £5,000 pension pot, making the Abundance Pension very expensive at the lower end of this scale. Likewise, on a pot worth £10,000, the £100 minimum equates to 1% a year, which is still pricey.

However, once a pot is worth over £33,333, the AMC becomes a flat 0.3%. For pots worth, say, £50,000, the Abundance Pension is highly competitive indeed and its £150 yearly charge easily beats low-cost SIPPs on offer from these 11 leading SIPP providers.

Source: The Lang Cat consultancy

Is this really the first peer-to-peer pension?

Earlier this year, loveMONEY wrote about Assetz Capital and RateSetter moving into the pension market with SIPP tie-ups. So is this really a world first, as Abundance claims?

There is a very clear difference between the Abundance pension offering and those marketed by the likes of RateSetter and Assetz.

With the latter firms, they have essentially partnered with a SIPP provider to allow them to include peer-to-peer loans within a SIPP. But you can also include all sorts of other investments, like funds, bonds or individual shares in that SIPP too. 

But the Abundance Pension is essentially a "single-asset SIPP", as the only investment you can place within it are the debentures offered on Abundance projects, making it the first dedicated peer-to-peer pension ever offered.

The Abundance Pension isn't for everyone

Clearly, the Abundance SIPP is highly competitive on price and, with zero charges in the first year, is obviously number one in this respect. But it won't be for everyone. If you only have a smaller pension pot, the effective AMC will be punishing.

And it's important to bear in mind that these debenture investments are highly specialised and illiquid, meaning that they are very difficult to buy and sell easily. That won't appeal to everyone.

Take control of your pension with a SIPP

Enjoy a more comfortable retirement!

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