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Any pension experts out there?

edited June 2011 in Not Sports Related
Recently left my old job and I had a pension there for 4 years, I don't have a pension scheme at the new place yet as I'm only on a fixed term contract but will probably get one after 12 months. Anyone know what I should do with the money or where I can go for information? Had a look on various sites but pensions hurt my head. I can leave it where it is and have my old work manage it for a fee but is it better to move it somewhere else?

Any info will be much appreciated
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Comments

  • Not an expert, no, but that's never stopped me commenting in the past!  Obviously what I'm saying is what I would consider if it was me, not what is necessarily best for you.
    First, you don't give anywhere near enough info to allow an expert to provide input.  Pension advice is THE most complex of all financial advice and individuals who give advice on occupational pension schemes are required by the FSA to have special qualifications.  It is therefore extraordinarily unlikely that you will get professional (but unpaid) help on a football forum.  Not least because without very detailed input from yourself, a pensions adviser would leave themselves wide open to potential future action by the regulators for giving inappropriate advice and they are not going to risk their jobs for a few throw away comments here.
    But in any event the first thing I would do, if I didn't know what it was, is write to the administrators of the existing plan and ask them to provide a transfer valuation.  Then I'd know how much money i was dealing with.
    Anyway, let's assume we are talking about a money purchase scheme.  That is, a scheme that has regular contributions which are invested and which build up a personal pot of money which can be used to fund an individual's retirement.  (The rules on the use of the money on retirement have recently changed but this isn't the place to go into that.)
    In any event, as you describe, there is nowhere to transfer the money to because the new scheme won't start for a year.  (I guess that will be a money purchase scheme too?)
    So, aren't there only two options:  first leave the money where it is until your new scheme starts and then consider whether to amalgamate the two pots by transferring the old pot to the new one;  or, second, start up a self invested personal pension (SIPP) and transfer the pot into that.  If you want more information on SIPPs have a look on the Hargreaves Lansdown website at http://www.hl.co.uk/pensions/sipp/what-is-a-sipp

    Three more points.  One, why are your ex-employers charging you a fee to manage your pension?  Is that on top of whatever the fund management company are taking?  If so, that sounds like a rip-off to me and will have a dramatic effect on the valuation over the years.  Two, if it was me, I'd want to keep things as simple as possible and not end up on retirement with god knows how many small pots of money languishing (and probably underperforming) in a variety of pension schemes.  Much easier to keep an eye on things in just one or two plans.  Three, HMRC's current maximum figure for the notional value of all your pension plans is, I think, £1.8mn.  After that it starts getting messy tax-wise.  Now, £1.8mn sounds like a very large sum of money but at the moment for a 60 year old male, every £100,000 of a pension pot will only provide an index-linked single life pension of around £3.5k.  That's why extracting the maximum performance from your pension plan with the smallest possible charges is so important.  Makes you think doesn't it.
     
  • In the old days it was always best to hang onto any company pension scheme, but a few years back things changed when it became law for companies to provide a pension 'facility'. All this really meant was that employers were just obliged to collect via payroll, an employees pension contributions without putting anything in themselves - basically something that you could just as easily do yourself. So if your pension is one of the traditional types (I have a couple from old employers) then I guess it would depend on how much they want to manage it (and I certainly don't pay anything to my old employers pension fund although they could be just deducting it from the fund itself), and like cafcfan says, it's a complex thing - since transferring it to another fund that charge less could just mean putting it into a poorer performing fund.

    Personally, aside from the couple of small pensions that I have accumulated from previous employers (and a short lived private one when I was about 21), I've not bothered with pension schemes for ages - preferring to sink any spare cash I have into property so at least I only have myself to blame if it goes belly-up.

     

  • Many thanks for the help. I think I will probably leave it where it is. Two reasons, first, I'm lazy! And second, it has performed quite well. 

    cafcfan, my ex-employers are the fund managers, they are a fairly large financial company and it is their own pension arm that my pension was with. So not really getting a double admin fee.

    Think I may look into a SIPP as well since I am basically putting nothing in for this year and will also help hedge against my other performing poorly. Plenty of reading for me to do I think!

    Again thanks for the help both of you, absolute minefield this pension stuff. I'm glad my line of work is much simpler than this!
  • If your pension is a final salary scheme ie it pays out a certain amount linked to your salary when you left, then you should probably leave it there, unless you think your old company would go bust, leaving no pension.
  • As an IFA I am well qualified to advise you on this..............but as cafcfan says, I would need much more info to give you specific advice on this and the FSA would have kittens if I gave ANY sort of advice on a site like this with the minimal info given.

    HOWEVER

    It it were my pension plan I would prefer to have control over it than to have it still in the hands of an ex-exployer - but then I am an expert. I would say that it is not neccessary to invest into a SIPP, which is just a glorified personal pension with higher charges..........unless you specifically want to invest directly into individual shares or commercial property. 

    Nowdays many pension providers offer decent run plans with low charges, many of which a reduced once your fund exceeds £30,000 - £50,000. and would look at Scottish Widows, Scottish Life, AXA, and Aviva.

     

    hope this helps

     

  • One further thing - perhaps Golfie would have a view?  I've often wondered about the respective merits of SIPPs vs ISAs.  Tax breaks for contributions to SIPPs of course but then you pay tax when you take the income.  Whereas no tax breaks for new money into ISAs but you get to keep all your funds and any income (and capital gains) are tax free.  I'm wondering whether long term saving of any spare cash might be better in a well-performing stocks & shares ISA these days.
  • I'm not an expert, but as a teacher I know enough to realise that I am about to get royally screwed.
  • I've been offer to join the LGPS at work ( local government pension scheme) which from what I've read here and there is pretty decent compared to most private pensions (not final salary sadly) anyone got any views on this?

    Also an option to consolidate my other pensions into it (standard life/aviva) although of course I'll look at the pitfalls when I'm aware of them if there are any in terms of loss of special benefits
  • edited March 2023
    razil said:
    I've been offer to join the LGPS at work ( local government pension scheme) which from what I've read here and there is pretty decent compared to most private pensions (not final salary sadly) anyone got any views on this?

    Also an option to consolidate my other pensions into it (standard life/aviva) although of course I'll look at the pitfalls when I'm aware of them if there are any in terms of loss of special benefits
    Would seem foolish not to take advantage of the employer contributions. From memory think it's career average and your contribution depends on salary level, between about 5.5% and 12.5% and broadly they pay in about double but does vary based on actuarial calls every few years.

    Personally I'd keep your other one as is.

    I've always had a personal pension, which is effectively all my old work one's transferred into and then my current work one. If I change jobs I transfer the old employers one into my private one and keep the new employers one and so on. Otherwise you end up with numerous pensions.
  • edited March 2023
    yeah I just wondered if tipping the old ones into this one would be more lucrative, thats the question I need answered really

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  • The lgps is now career avg rather than final salary.

    if you transfer in your old pensions then it will buy you x years in the lgps pension depending on how much you transfer in. You would have to get a quote from them on how many years /days your existing pension will buy to then work out if it’s worth transferring 

  • razil said:
    yeah I just wondered if tipping the old ones into this one would be more lucrative, thats the question I need answered really

    Not 100% my field of expertise, but generally transferring in you are buying service length, so depends on the cost, but generally they'll calculate that cost on an annual basis, says that's £30k and you have £90k to transfer in you buy 3 years.

    If it's just buying AVC's don't bother.

    @golfaddick is your man.
  • PS, this is all on the basis your past one's are defined contribution not defined benefit, which if they are the latter almost certain best left where they are.
  • Have to agree with @Rob7Lee on this. Doesn't sound like your existing ones are DB schemes if they are with Standard Life & Aviva and you would have to get a quote from LGPS about how much they would give you in exchange for your old DC schemes. 

    However, what I always say to my clients is that the trade off is more around access & flexibility than cost & returns. By keeping your old schemes as they are you have control over how & when you take them. Ultimately they will form part of your retirement "planning" but currently you have access to them from age 55 onwards (soon to be age 57) and you could use them to go part time before retirement or you may want to access the tax-free cash for kids weddings/uni fees/house purchase. Transfer them into the LGPS and then you can only have the benefits at the schemes retirement date (age 65/67 ?) - or take it earlier and you are penalised. 

    Advice is your friend -my door is always open  :)


  • my main and only concern is that I have enough pension tbh
  • @golfaddick When does the age limit go up from 55 to 57 please. My wife (who is almost 53) wants to retire at 55, and I wasn't aware of this potential issue...
  • edited March 2023
    I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!). I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even.  Now, I know I am not one of life's optimists but that seems to be pushing it.  Why wouldn't I take the money as a lump sum (again) and pay my own income.  Or spend it on drugs sanatogen and fast cars mobility scooters?
  • Pedro45 said:
    @golfaddick When does the age limit go up from 55 to 57 please. My wife (who is almost 53) wants to retire at 55, and I wasn't aware of this potential issue...
    6 April 2028
    The NMPA will then change to age 57 from 6 April 2028. There will be a number of people directly affected by this increase. For example: Those born before 7 April 1971 will be 57 by 6 April 2028 so would not be affected by this change irrespective of whether they had taken all, part or none of their benefits by then
  • edited March 2023
    I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!).  Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even.  Now, I know I am not one of life's optimists but that seems to be pushing it.  Why wouldn't I take the money as a lump sum (again) and pay my own income.  Or spend it on drugs sanatogen and fast cars mobility scooters?
    Why did you take out all your money from your other pensions and put it into  Premium Bonds ?  Therein madness lies. 

    As for your company scheme - sounds like too much "future thinking". I prefer to deal with the here & now. What is the current value & what could that give you as an income now. Also, is it a DB scheme (final salary) or a DC scheme ?. If its a DB scheme you may well not be able to simply "take the money & run".....and even if it's a DC scheme I seriously urge you not to either !!
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  • I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!).  Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even.  Now, I know I am not one of life's optimists but that seems to be pushing it.  Why wouldn't I take the money as a lump sum (again) and pay my own income.  Or spend it on drugs sanatogen and fast cars mobility scooters?
    Tax is the main issue.
    If you (need to) transfer it out in order to draw it down only 25% is tax free.
    So if you took the whole lot in one lump sum you would presumably get smashed for 40% tax on the 75% that is taxable.
    I transferred mine out into a SIPP and as I have no other income am drawing the maximum I can yearly without paying any tax. 
  • razil said:
    my main and only concern is that I have enough pension tbh
    That's fair enough. You usually have 12 months from joining the LGPS to be able to transfer in previous pensions. 

    But as I and @Rob7Lee have commented, it may not be wise to stick all your pension monies into an employer scheme when they have fixed rules. Other things to think about - do you have a spouse or dependants? Do you want them to inherit 100% of your pension or only half ? If you are single & intend to stay that way until you die then the LGPS might be the way forward. A guaranteed income from retirement to death. 

  • edited March 2023
    razil said:
    my main and only concern is that I have enough pension tbh
    How much is enough? That's a whole other topic but I've always based on I'd like 2/3rds* of my working salary (which doesn't have to all come from pension). * so I'm looking at roughly having 16x currently salary.

    But with regards your initial 1st question - for me the questions is why would you NOT take the pension with your employer when they are probably putting in 25%+ of your annual salary (plus what you put in receives tax relief). You're likely getting 30% plus of your salary into pension at probably less than 5% cost to you.

    It's almost free money!
  • I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!). I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even.  Now, I know I am not one of life's optimists but that seems to be pushing it.  Why wouldn't I take the money as a lump sum (again) and pay my own income.  Or spend it on drugs sanatogen and fast cars mobility scooters?
    If you are buying an annuity it depends what you go for, spouse 50%, index/escalation, 10 year guarantee etc and how old when you buy it.

    At 65, 50% spouse and 3% escalation would be around £725 a year.
  • Scares me how little of this I understand 
  • I love the fact I will lose 40 quid a week for retiring at 57 because of my contributions, meaning I’ll give the tax man less in tax at Christmas when I start to receive my state pension. 
    Nine years of my life doing what I want for 40 quid a week. 👍
  • I've got a pension with my current employer which will be worth around 17k at time of retirement (I took all my pensions from various jobs over the years as lump sums and put them into premium bonds) - their "calculator" seems to imply that I will get an income of £350 PER YEAR(!).  Now I wasn't expecting to be zooming off to Costa Rica like some of you are but my calculations are that I would have to live for 48 years after reaching retirement age to break even.  Now, I know I am not one of life's optimists but that seems to be pushing it.  Why wouldn't I take the money as a lump sum (again) and pay my own income.  Or spend it on drugs sanatogen and fast cars mobility scooters?
    Tax is the main issue.
    If you (need to) transfer it out in order to draw it down only 25% is tax free.
    So if you took the whole lot in one lump sum you would presumably get smashed for 40% tax on the 75% that is taxable.
    I transferred mine out into a SIPP and as I have no other income am drawing the maximum I can yearly without paying any tax. 
    I'd get 14450 after tax. It's just a standard employee/ employer contribution pension. What I don't understand is how they can get away with paying such a low income.
  • Scares me how little of this I understand 
    Just ask questions, 
  • I have a personal pension with Standard Life and was looking at it and have it invested in 7 funds of all sorts, US tracker, Far East, FTSE and a couple of Special Situations amongst them. I have a decent understanding of risk but have always thought I don't have the time or expertise to do better than a tracker fund. I've noticed that some of the funds have performed really badly. Should I simplify the allocations into a global tracker or use one of their lifesyle profiles? I'm 54.
  • edited March 2023
    Nug said:
    I have a personal pension with Standard Life and was looking at it and have it invested in 7 funds of all sorts, US tracker, Far East, FTSE and a couple of Special Situations amongst them. I have a decent understanding of risk but have always thought I don't have the time or expertise to do better than a tracker fund. I've noticed that some of the funds have performed really badly. Should I simplify the allocations into a global tracker or use one of their lifesyle profiles? I'm 54.
    Certainly dont do a Lifestyle fund. They usually dis-invest your money out of equities & into fixed interest/cash the nearer you get to retirement. Last year Government Gilts were the worst performing asset with funds losing between 25% and 45%.  

    Trackers are cheap but they do what they say on the tin -  track the index/market/asset they are aligned to. 

    Ask @PragueAddick how his low cost Vanguard Lifestyle 20 fund did last year. 
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