Join company pension?

dunstonh

If you work with a company for 2years and go else where you have a pension fund with 2years worth of contributions. It's not going to buy a lot.

Correct. So, you then transfer it. The way people move around today with employment, you could forever be putting off doing anything. 20 pensions of 2 years of contributions each is the same as 1 pension of 40 years of contributions. God help the admin on the 20 if you dont transfer them though

Certainly when talking with the pensions advisors here I was told that I could not transfer an existing pension into the company fund and that if I left it was unlikely that I would be able to transfer the contents of this pension into the next company fund.

Advisers or administrators? Remember if administrator, they wont know all the options available. If an adviser, if tied to that provider they will only know the options that provider has. They are not going to tell you the alternatives that others may offer.

Also, there is a difference between being able to transfer and it being best advice to transfer. Many schemes are not worth transferring as the benefits are better than the alternatives. Yours however sounds like a money purchase scheme (as you mention funds and annuity purchase). In which case there should be no restriction on you being able to transfer out to another provider.

Well what other options are there than annuity? Generally.
Again, I got the impression that you take a "wage" from a pension based on you purchasing an annuity with your fund when it's time to retire.
I'd personally rather have the lump sum (all of it...), but I guess that's the catch and they have to make money somewhere.

You have unsecured pension which leaves the money invested whilst you draw an income (and 25% lump sum). You can do this until 75 when you are required at the moment to buy an annuity (although there is an option that can avoid that but its not mainstream).

As for having your own money, then yes. It would be nice to get access to the whole pot but you have to look at how much you are paying in each case and what you are getting from it. If the employer is making contributions then that is money you wouldnt have with any other option. So, its not really money lost.

TFC = Tax Free Contibution?

Tax free cash. Also known as pension commencement lump sum.

Surely you cannot say that for 40+ years ??

Of course not but the rates have been lowered to a level that are sensible. The same would apply to any other option though. So, its not a pension issue.

But you're only going to actually see 25% of that in your purchase at the end (going by above)?

Correct. However, if the employer has paid 3/4 of the money in the first place, then had tax free growth on the whole pot and then take 1/4 of that back again then its basically cost you nothing.

Remember pensions are for income provision. Not capital growth. ISAs wont beat a pension for income provision. They will beat a pension normally for capital growth.

I can indeed take it with me, but with the understanding that the new company allows me to transfer the fund into theirs.

Or any other personal arrangement. I thought you said that you were told you couldnt transfer it? Although reading again, it appears you are saying you couldnt transfer a fund you already have into your current one (?) - that is more likely a limitation of the administrator or adviser rather than the scheme (Again on the basis that yours is money purchase). If your previous sceheme is defined benefits, then they may choose not to take it on the assumption it is bad to do so. The FSA take the view that final salary scheme transfers are bad advice unless proven otherwise.

Any

EdInvestor wrote: »

For a basic rate taxpayer, the tax relief is much less important, as the pension income will be taxable in retirement, and thus the relief is clawed back (apart from the 25% tax free cash). The relief is much more valuable for the higher rate taxpayer who will pay basic rate tax in retirement and gets a net freebie of 20% (often cash in hand now).

EdInvestor wrote: »

I don't think that the tax relief is less important as basically you are earning money on £10 rather then on £8 (£10 less 20% tax) for XY years (40 in my case) so it allows you to grow your pot much quicker. After you get taxed on your income, but 25% is tax free lump sum and then you buy the annuity for the income. So looking at it from this side I think I end up paying actually less tax then if I took normal wages.
If I did go for the ISA which I also considered, I would be able to put in only that £8 out of my "earned" £10 and my employer wouldn't contribute. I wouldn't pay tax on the end for what I take out but I would have earned much less monies in interest over the period of time.
I think I will also have an ISA though as soon as I can afford to fill the pot. At the moment I am only using my ISA as a savings account as there is no point paying tax on my savings if I am not able to put away the full amount of my annual allowance.
Hopefuly one day I will be earning so much that I will be able to put away enough money for my retirement in few different ways just in case something goes wrong with one of them..:rotfl:
I hope I got the basic meaning right. At least that is my understanding of the pensions and ISAs. I was really just worried about the fact that the pension fund manager might go bonkers and loose all my money...:eek:

dunstonh

I was really just worried about the fact that the pension fund manager might go bonkers and loose all my money...

You get a choice of funds and you spread your money over the fund sectors (regions and types. i.e. fixed interest, property, UK equity, European etc) and average out the amounts into each so the overall matches your risk profile. A decent sector allocated spread would typically see less than 1% invested in any one company. To lose all your money would require a complete breakdown of all the economies of the world. If that did happen, then the pension would be the last of your worries.

Any

dunstonh wrote: »

You get a choice of funds and you spread your money over the fund sectors (regions and types. i.e. fixed interest, property, UK equity, European etc) and average out the amounts into each so the overall matches your risk profile. A decent sector allocated spread would typically see less than 1% invested in any one company.

I've put 80% into Balanced Managed fund and 20% into Adveturous Managed fund (I thought I am young and so can take a bit of a risk with this one).
Do you think I should spread it more?

leviathan

dunstonh wrote: »

Correct. So, you then transfer it. The way people move around today with employment, you could forever be putting off doing anything. 20 pensions of 2 years of contributions each is the same as 1 pension of 40 years of contributions. God help the admin on the 20 if you dont transfer them though

I have provision for a pension fund in ISA's at the moment. Historically I've not had the same job for more than 18months (seems everytime I joined a new place they were entering difficult periods). This appears to be changing for the better now as I'm hitting 2years in the current place.

Advisers or administrators? Remember if administrator, they wont know all the options available. If an adviser, if tied to that provider they will only know the options that provider has. They are not going to tell you the alternatives that others may offer.

Good question. Certainly they were employed by the company administering the fund. I've noticed the person in HR seems to be working for that company now as well. Pehaps reading more into that than there is.

Also, there is a difference between being able to transfer and it being best advice to transfer. Many schemes are not worth transferring as the benefits are better than the alternatives. Yours however sounds like a money purchase scheme (as you mention funds and annuity purchase). In which case there should be no restriction on you being able to transfer out to another provider.

Reading over it, the three options presented all include purchase with a potential lump sum.

You have unsecured pension which leaves the money invested whilst you draw an income (and 25% lump sum). You can do this until 75 when you are required at the moment to buy an annuity (although there is an option that can avoid that but its not mainstream).

Had no idea the fund could remain invested. Was indicated that one would have to purchase an annuity right away!

Remember pensions are for income provision. Not capital growth. ISAs wont beat a pension for income provision. They will beat a pension normally for capital growth.

My disillusion with the country at the moment puts me off staying now never mind till retirement!
I suppose currently I'm looking to save massively then invest and take the returns from that later on.
More thought as ever is probably needed.

Or any other personal arrangement. I thought you said that you were told you couldnt transfer it? Although reading again, it appears you are saying you couldnt transfer a fund you already have into your current one (?)

Sorry.
This scheme does state that it can be transferred. The problem is, will the next pension scheme allow me to add to it in that way.
I think it's a lack of understanding on my part as to how you transfer the fund in. ie: cash in and pay in, or more taking over the whole pot with no penalty incurred?

If your previous sceheme is defined benefits, then they may choose not to take it on the assumption it is bad to do so. The FSA take the view that final salary scheme transfers are bad advice unless proven otherwise.

No finally salary here. Missed that boat !!

Thanks for the advice! Much better than it would seem I've been told so far.

McKneff

phew, it was all getting a bit too deep for me, but i learned a little anyway.
i just pay up and smile at the end of the mont. Thanks guys,

Any

anniehanlon wrote: »

phew, it was all getting a bit too deep for me, but i learned a little anyway.
i just pay up and smile at the end of the mont. Thanks guys,

:T :beer:
I know, you have to have special kind of brain to understand all these things.
That is why it's so great having sites like these where the people who do have them can help you out.