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
Comments
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.
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
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
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.
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
If it's just buying AVC's don't bother.
@golfaddick is your man.
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
:-)
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 !!
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.
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.
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!
At 65, 50% spouse and 3% escalation would be around £725 a year.
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.