Redundancy - what should I do with my old pension fund?

SapphireFlames

I was made redundant from my previous employer and I left them last month. I've already started a new full time job. I've just received a letter from my ex-employer, asking what I want to do with the pension fund that I've built up. It says that I can either let my benefits remain within the scheme, or I can transfer my benefits to another pension arrangement (ie my new employer's pension fund).

I'm not 100% sure what to do, although my first instinct would be to let my benefits remain within the scheme. My old employer's pension scheme was more generous than my new employer's scheme. With my old employer, I contributed 8% and they contributed 14%, making a total of 22%. With my new employer, I contribute 7% and they contribute 7%, making a total of 14%.

Given that, would it be best if I leave my old pension plan in its place, as the old scheme was better anyway?

Debt_Free_Chick

The old pension - what kind is it? Do you have a savings account with a pot of money in it (called a Money Purchase or Defined Contribution scheme)? Or do you have a deferred pension, with a specific amount of pension promised at retirement (called a Final Salary or Defined Benefit scheme)?

jimmyboy420

It sounds to me, from the details that Sapphireflame has provided in the second paragraph, that both old and new pensions are defined contribution.

Since they are defined contribution, the actual details of the contributions madeto the old scheme don't really matter any more - after al, neither of you are contributing to that pension any longer.

There may be a board consensus on what's best (so wait for other than just mine!), but I'd suggest transferring. This is what I've done in the past as it means it's easier to assess and understand your pension pot as it's all in one place.

James

jh2009

I don't agree with the "its best to have it all in one place" view is always the best approach.

You would need to look at a few things such as if there are any penalties for transferring. If your old scheme has any guaranteed annuity rates is also another thing to consider. Also in terms of your new job, is this a long term job, or will you be in another job in 2 years time? Transferring is not usually a great idea if you keep doing it every few years.

The letter you have from your old scheme is a standard one that they have to send with your options. You don't have to make an immediate decision. If you do nothing any benefits will be left there, and you will retain the right to transfer out at any time, though some schemes wont let you transfer when you are within one year of retirement.

dickydonkin

Depending on the age of the OP, there may be the option of taking the money now. This is very topical as the rules are changing this year that requires members will need to be 55 before being allowed access to their funds (currently 50).

SapphireFlames - obtaining peoples views and experiences regarding financial matters on these forums is fine, but I would strongly urge you seek professional advice if you are really undecided. Pensions are a bl00dy minefield.