Pension Robo Advisors

If you're looking to grow your pension fund with a robo advisor, you'll have to wait a while as they are not currently available. But rest assured, they are coming and the leading robo advisors below will be the first to offer pensions as part of their services. 

- Broker Rating Fees Pros -
1
IronFX UK
99/100 User Rating
Fees: 2%

Higher fees, but superior performance

  • UK FCA Regulated
  • Reputable company
  • Cutting edge technology
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  • UK FCA Regulated
  • Reputable company
  • Cutting edge technology
2
Schwab Intelligent Portfolios
95/100 User Rating
Fees: 0%

Charges no management fees

  • Leader in robo advisory
  • No fees
  • Trusted brand
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  • Leader in robo advisory
  • No fees
  • Trusted brand
3
Munnypot
94/100 User Rating
Fees: 42p p/m

Depends on investment amount

  • Very low fees
  • Very low capital requirement
  • Easy to use site
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  • Very low fees
  • Very low capital requirement
  • Easy to use site
4
Moneyfarm
95/100 User Rating
Fees: 0%

Tiered, 0.4 to 0.70%

  • No minimum capital requirement
  • Fees beyond £1000 are low
  • Intelligent portfolio rebalancing
Invest
  • No minimum capital requirement
  • Fees beyond £1000 are low
  • Intelligent portfolio rebalancing
5
Scalable.Capital
90/100 User Rating
Fees: 0.75%

Flat fee regardless of account size. Fully managed only

  • Low fees for a managed service
  • Monitored risk management
  • No hidden fees
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  • Low fees for a managed service
  • Monitored risk management
  • No hidden fees
6
MarketRiders
90/100 User Rating
Fees: 0.25%

0.45% up to $50,000

  • Very low fees
  • Great for bigger accounts
  • Well-established and trusted
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  • Very low fees
  • Great for bigger accounts
  • Well-established and trusted
7
Growney
85/100 User Rating
Fees: 0.39%

Start at 0.99% for smaller accounts

  • No minimum investment
  • Easy to understand risk profiles
  • Low fees for larger accounts
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  • No minimum investment
  • Easy to understand risk profiles
  • Low fees for larger accounts
8
Invest.com
95/100 User Rating
Fees: 0.99%

For accounts over $10,000

  • Beautiful platform
  • Alternative investments
  • Managed service available
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  • Beautiful platform
  • Alternative investments
  • Managed service available
9
Nutmeg
85/100 User Rating
Fees: 0.45%

Fully managed portfolio is 0.75%

  • Low fees for fixed allocation
  • Established UK robo advisor
  • Excellent customer service
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  • Low fees for fixed allocation
  • Established UK robo advisor
  • Excellent customer service
10
Vanguard
85/100 User Rating
Fees: 0.30%

Flat fee for all account sizes

  • Cheap hybrid management
  • Established investment giant
  • Low 0.30% fees
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  • Cheap hybrid management
  • Established investment giant
  • Low 0.30% fees
11
Ginmon
80/100 User Rating
Fees: 0.39%
  • Low fees
  • Low investment requirement
  • Leader in German market
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  • Low fees
  • Low investment requirement
  • Leader in German market
12
Hedgeable
76/100 User Rating
Fees: 0.35%

0.75% for smaller accounts

  • Invest with just $1
  • Sophisticated portfolios
  • Socially responsible investing
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  • Invest with just $1
  • Sophisticated portfolios
  • Socially responsible investing
13
Whitebox
75/100 User Rating
Fees: 0.35%

0.95% below €30,000

  • Partly managed service
  • Superior risk/reward profile
  • Diverse asset allocation
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  • Partly managed service
  • Superior risk/reward profile
  • Diverse asset allocation
14
Easyfolio
73/100 User Rating
Fees: 0.96%

Flex account is 1.36%

  • €100 minimum investment
  • Easy to understand products
  • 3 risk profiles
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  • €100 minimum investment
  • Easy to understand products
  • 3 risk profiles

Unfortunately, there are not a lot of options available for pension robo advisors. Since robo advisors are relatively new when it comes to investment management, many of them either cannot, or have not determined how to provide pension plan accounts as part of their services.

This is in part due to the fact that many forms of pension plans in the UK are heavily regulated and can only be offered by well established and large firms with the financial resources available to manage all the of the assets within the various pension plans.

At RoboAdvisors.com, we are constantly monitoring the robo advisor marketplace and are eagerly anticipating when they will be able to provide accounts for pension plans. The most likely scenario is that pension robo advisors like Nutmeg and Scaleable Capital will figure out how to allow investors to open up Self Invested Personal Pension (SIPP) plans. With these personal pension accounts, you will be able to use robo advisors to fully automate your investments into a well diversified and well structured portfolio.

That said, even if not all pension plans are available through robo advisors, it is still important to understand how pensions work and the various type of pension plans that may be available to you. This article will provide that overview so you have the knowledge you need to be a more successful investor.

Pension Plans as Part of an Overall Retirement Plan

Retirement planning, and determining how you will fund your retirement, usually depends on three different retirement funding sources. This chart from RetirementAdvisor.ca that talks about Canadian pension presents this well. Although it is Canadian based, the concepts still apply to the United Kingdom and other countries that have company pensions and some form of government pension.


Robo advisor retirement plan

An individual’s retirement income typically comes from these three segments. Company pensions are either defined benefit or defined contribution pension plans that are set up for employees to provide either a set income or an accumulation of money that can be used to draw an income from. Government pensions provide income based on a lifetime of contributions through payroll deductions.

Finally, personal savings plans are simply individual accounts that money can be deposited into and invested until retirement. These can include the Stocks and Shares Individual Savings Account (ISA) or the Lifetime Individual Savings Account (LISA), or simply just a General Investment Account. These are not company pension plans or government pensions, but do offer government provided tax relief which increases the value of your contributions.

A properly designed retirement plan will utilise all three of these types of pensions and/or accounts. Robo advisors are especially suited to the personal savings accounts. For the purposes of this article, we are going to look more closely at the different types of pension plans that investors usually have some for of access to.

Two Types of Pension Plans

When examining all the different types of pension plans available, they all can be bucketed into two general categories. The first is a defined benefit pension plan and the second is the defined contribution benefit plan.

Defined Benefit Pension Scheme: In a Defined Benefit pension plan, an employer or sponsor promises to pay the pension plan member a specific pension payment or lump-sum payment (or a combination of the both) after retirement. The actual amount received as a pension payment is determined by a formula that is based on the employee's earnings history, length of service and age at retirement. Defined Benefit pension plans are become more and more rare, as they are very expensive for companies to maintain, and the company is liable for all future pension payments which can be a major issue if there is a pension shortfall (i.e. not enough money in the pension to pay all the required pension payments to its members).

Defined Contribution or Money Purchase Pension Scheme: In a Defined Contribution or Money Purchase pension scheme an employee, employer, or both make regular contributions into an individual’s personal account on a regular basis (i.e. every pay period). It is different from a defined benefit plan in that there is no guaranteed amount of pension payment paid out. The amount of income provided by the money purchase pension scheme is determined by how much money is in the account at retirement, and that will depend solely on how much money is contributed over time and the growth rate of the investments inside of the account. In other words, future benefits paid out from the plan will fluctuate depending on the amount of contributions and the investment earnings.

As stated above, the money purchase pension plan is becoming more and more common as the defined benefit plans are phased out or no longer offered. Here is proof of that trend, as researched and analysed by compensation consulting firm Towers Watson. You can clearly see the percentage of assets in defined benefit is steadily decreasing as he defined contribution plan is increasing.

If you are lucky enough to be part of a defined benefit plan, cherish it as the value that comes from a future guaranteed income is massive.


Robo advisors defined benefit chart

An Overview of Different Pension Plans in the UK

There are a number of different pension types available in the United Kingdom. In fact, it can be argued that the UK has a disproportionate number of pension plan types comparted to many other countries!The following table highlights a few of the more common, and popular pension plans available. To help with your analysis, the table has been divided into the money purchase pension schemes and the defined benefit pension schemes. Unfortunately, there are no pension robo advisors available at this time. However, as will be discussed later, they are working on it and Investoo will let you know as soon as they become available.

Type Description

  • Self Invested Personal Pension (SIPP) • A SIPP is a type of personal pension plan that allows you to put money away until you are ready to retire
  • You choose how you want the money in the pension to be invested; there is no pension committee that determines how to invest the contributions
  • Participants receives tax relief on contributions; taxes paid on money used to contribute to the plan is given back to the contributor in the form of additional contributions

The amount of income provided in retirement is determined by:

  1. The amount of contributions made into the SIPP
  2. The length of time and the growth rate of the investments made within the SIPP
  3. The amount of fees paid to administer the SIPP
  4. Final Salary Schemes offered by employers

Becoming more and more rare as these plans are expensive and risky for companies to offer

Provides plan members a guaranteed income in retirement based on a proportion of your “final salary”


Small Self-Administered Schemes (SSAS)

  • Set up to provide retirement benefits for a company’s directors and/or senior or key staff
  • The prime benefit of a SSAS is the increased flexibility on where the scheme’s assets can be invested. For example, the businesses location can be purchased within the SSAS and leased back to the company
  • The retirement benefits paid will depend on how much has been paid into the scheme on the member’s behalf, the length of time the contribution has been invested, the investment growth, and the amount of fees paid to administer the pension Career Average Revalued Earnings (CARE) 
  • Offered by employers
  •  Similar to a Final Salary Scheme but differs in how the pensionable earnings are calculated
  • Guarantees a retirement income in based on a proportion of the average earnings, after adjusting for inflation, over the whole period of membership of the CARE scheme

Stakeholder Pension

  •  Intended to encourage more long-term saving for retirement, particularly among those on low to moderate earnings
  • The government enforces a cap on fees, low minimum contributions, and the ability to easily start and stop contributions
  • May be replaced by Personal Accounts

Robo pensions table

Contributions Are Still King

With the steady demise of the defined benefit plan, and the increased reliance on defined contribution or money purchase plans, it is more critical than ever that individual investors direct as much of their take home pay into the various pension plans available to them.

Even the best run pension robo advisors will not be able to help you if you do not contribute enough money into your money purchase pension plans.

What is especially troubling is that UK residents are not contributing enough money. It is a well-researched “rule of thumb” that investors should be putting away 15 to 20 percent in order to have a hope of retirement with a high enough income to live comfortable. The reality is that most UK residents are only saving a measly 2 percent.

Have a look at the following chart, prepared by NEST:


Robo advisor contributions chart

It is clear that higher contributions have a profound impact on the final value of a retirement account. A $400 per month contribution will be worth $116,849 more than a $100 per month contribution. Even a difference of $100 per month ($200 versus $100 per month) more than doubles the final value of the retirement account.

So regardless of what type of pension or savings account you have access to, the key is to contribute as much as you can as early as you can to give yourself the best possible chance of retirement success.


Potential Pension Robo Advisors

Although there are not a lot of options available for people to use robo advisors with their pension plans, we know that they may be coming soon. For example, both MoneyFarm and Scalable Capital both have SIPP sections on their websites, however both of them are only taking names of people who want to be notified when they roll out their SIPP accounts.

Moneyfarm robo advisor pension

With that in mind, you should still keep an eye on the robo advisors within the United Kingdom. Even if they don’t offer pensions yet, you can still sign up and utilize their other accounts to maximize your contributions and hit that recommended 15 to 20 percent contribution level.

Here are some of the robo advisor options that UK residents have available to them today:

Nutmeg: The UK's biggest robo-advised investment service that offers hassle-free ISAs. Nutmeg offers Stock and Shares ISA using their proprietary investment technology to build efficient portfolios. Nutmeg also offers a Lifetime ISA option.

Scalable Captial: Europe's fastest growing digital wealth manager that offers personalised, globally diversified and fully managed portfolios. They optimise portfolios and monitor risk based on the latest quantitative research. Scalable Captial offers a full Stock and Shares ISA.

Moneyfarm: An an online investment advisor and one of the largest digital wealth management companies in Europe. The Moneyfarm Stocks and Shares ISA allows you to grow your medium-term savings tax-free, with the flexibility to withdraw or transfer funds whenever you want.

Munnypot: An online financial advice service that automatically selects the products and funds given the investor’s chosen risk level. They then monitor and rebalance your pot directly to your goal objective. They will take advantage of the annual Stocks & Shares ISA allowance where possible for tax efficiency and the best potential returns.

If you are an investor with a smaller account (less that £500,000), are comfortable with technology and online services, want some help with setting up your portfolio with the right asset allocation, want that portfolio to be automatically rebalanced and managed, and have a long time horizon (at least five or more years until retirement) then robo advisors are definitely a place to start.