Advice on boosting pension

jonnyb1978

Im writing on behalf of my partner who is nearly 34. Her pension has recently been changed by her company from Friends Provident to Scottish equitable. Basically it was either this or have no pension scheme. She only works 3 days a week at present due to child committments. But in 2 years time will be going back full time.
At present upon joining both employer and employee contributions add up to £48.00 a month. Her contribution is 3% of salary (£9500) plus £5.00 in tax relief.
According to a generated growth of 5% per year she will recieve a predicted £2450 a year.

Before this the friends provident pension according to last statement in February has a fund of around £4300 and have charge £50 for the year in managment fees which will eat away at the fund.
This is expected to return around £1500 a year. All assuming no lump sum is taken.
So a predicted £4000 a year.
It my eyes its pretty poor. If she dies they will just return her fund in a lump sum. Thats a meagre £4350 in total over both schemes. Is this normal? With my pension its four times my salary.

Things should improve when she goes full time but not by much as its only an extra two days work. Has anyone any advice?
Is it wise to transfer friendsprovident over to existing one.
Its also opted in still to S2P.
Its a group personal pension plan (not stakeholder).

Or is the bottom line to just try and increase contributions as much as possible.

dunstonh

It my eyes its pretty poor.

why?

If she dies they will just return her fund in a lump sum.

Not quite. Its paid to the nominated beneficiary or at trustees discretion. The fund value includes tax relief and employer contribution. Its not "just" returning her money but all the rest as well plus what its made.

Thats a meagre £4350 in total over both schemes. Is this normal?

What did you have in mind considering the meagre contribution that is being made?

With my pension its four times my salary.

No its not. The 4x is death in service cover and is in addition to your pension. Its not in place of it. Although DIS is usually linked to being in the scheme.

Is it wise to transfer friendsprovident over to existing one.

Does she have a choice in the matter? (i.e. is the employer forcing it). Is it better than the other?

Its a group personal pension plan (not stakeholder).

Most group schemes are personal pension but include the stakeholder funds at stakeholder cost as well a range of external.

jamesd

To expand a little on what dunstonh wrote, if you check your scheme you'll probably find that it returns the pension contributions and in addition offers a death in service insurance benefit as part of the package. That death in service bit is not part of the pension and isn't something a pension provider is required to offer, it's just something extra that your employer does.

Given the contribution values the projected pension income and fund values seem reasonable. The investment return used for the projection can vary so it isn't surprising if two different pension companies use different assumptions. Assuming 5% after inflation growth is moderately cautious and there's a fair to good chance of doing better, depending on just which funds she uses.

Contracting out of S2P doesn't seem sensible at the income level involved here. S2P is structured to give lower earners greater benefits and she's well in the area where she's gaining from that. It's mostly of interest if she might want to retire early but since the ability to contract out is scheduled to be withdrawn anyway in a few years it doesn't seem worth adding the complexity of another pension pot to track for her now anyway.

To see whether it's worth moving the money, check the charges of holding the same type of investment in each and compare the performance of those investments. If the performance is similar and the charges in the new one are lower than it would be worth moving the money. Look for "reduction in yield" numbers for each individual investment fund. Individual funds would be something like "UK FTSE all-share tracker" that both would offer under some name.

jonnyb1978

Thanks guys.

Well my assumption it was pretty poor was thinking of being able to live on that amount a year. If she dies and returning the lump sum i guess i should of worded that better but do understand they return whats been made and at the discretion of the trustees. On my statement or online etc it states the DIS and the money that will be available to any beneficiaries. I can not see anything like this with her pension except the plan includes Life cover which states ' if you die before your retirement age, will will return the value of your fund'. Should this be taken that there is no DIS benefit?

She had no choice when it came to changing pension. It was either that or opt out of company pension scheme. So the original one has now stopped and will remain dormant. So was wondering would it be better to transfer over.

I will check the performance of them both. The annual managment charge for the new pension is 1.5% whereas the old is 1.0%.

She hasnt really bothered with dealing with her pension so trying to get a picture myself on whats what. Dont want her falling short on retirement.

If she wanted to up her contributions, could she as the 3% figure has been given by the company or would see have to set up an additional pension?

jamesd

Yes, no death in service benefit. Return of contributions is normal, though.

3% is probably the minimum, not a maximum. Check with the company. If that's also a maximum she could start one of her own independent of the company.

She should also get a state pension forecast to check expected income from that, though the additional state pension part will be quite unreliable because it strongly depends on the earnings she gives and assumes that those will continue for life, increasing with inflation.

After getting the state pension forecast and adding the current pension forecast she can compare that to her desired after tax income and work out how much more she should be putting in to get to that income level using a pension calculator. Target income in that one is the income from just the extra pension contributions being considered. It doesn't include the state pension or work pensions so she should deduct those from the target income. She can assume that up to 10,000 a year will be tax free, for any more she'll need to allow for income tax at say 20% being deducted and raise the income needed accordingly.

jonnyb1978

Hi
Another issue arose regarding the above posts with my partners pension plan.
Yesterday a letter arrives saying ' thank you for transfering in money'. My partner has no idea of what this money is. This is with her new plan Scottish Equitable ( Universal lifestyle fund) she has only been with a couple of months if that. The sum to be transfered in is £948.

They have sent a summary of what she will get back when she retires etc but its seperate to her normal pension although states it will be invested in same fund etc and for this part alone will get £120 a year retirement fund etc assuming 5% growth.

Anyway my main concern is what is this money and where from? My initial thoughts are from her pension plan before her company forced to change pension companies. However from a February 2009 statement the original plan with Friends Provident was said to be of the value £4300. So does the transfer amount of £948 sound about right? Is it worth transfering.
As mentioned above she only works part time and pays around £50 a month in to pension so getting £4300 has took a bit of a time and dont want to lose it just for transfering it over.
Ive told her to ring to ask what the money is but if it is her old pension i not sure whether its best to transfer or not as there is a 30 day cancel option with it.

Any help appreciated

jamesd

Best to wait until she can phone them and ask.

A transfer value of 948 from a plan with a value of 4300 in February doesn't sound right.

bendix

jonnyb1978 wrote: »

Well my assumption it was pretty poor was thinking of being able to live on that amount a year. ?

Of course it's too little to live on, but that's not a result of the pension being poor. It's a result of your partner putting too little in. What can you expect for £50 a month contribution? A pension is not some magic box which turns a £600 annual contribution into a £30,000 annual pension.

dunstonh

Yesterday a letter arrives saying ' thank you for transfering in money'. My partner has no idea of what this money is. This is with her new plan Scottish Equitable ( Universal lifestyle fund) she has only been with a couple of months if that. The sum to be transfered in is £948.

Did she transfer a pension to this "new" plan? Was she contracted out on the old one?

Delayed transfers could be because there was a property fund on the old plan or she was contracted out on the old plan and the rebate was sent to the old provider and they have transferred it to the new one. Scot Eq will tell you.

jonnyb1978

dunstonh wrote: »

Did she transfer a pension to this "new" plan? Was she contracted out on the old one?

Delayed transfers could be because there was a property fund on the old plan or she was contracted out on the old plan and the rebate was sent to the old provider and they have transferred it to the new one. Scot Eq will tell you.

Thanks,

She was told it is from contracting out. She only told me this so im guessing like you said above, its a rebate. I know its something to do with the second state pension, but what exactly. Has she been paying towards it, but now doesnt so she gets it back.