Pension Transfer after redundancy

big_mortgage

Hi All

I am currently unemployed and had been paying into my company's (money purchase) pension scheme for 17/18 months. As it is less than 2 years I have to either accept a refund of my contributions only (less tax) or find some where to transfer it to (approx £6k), within six months, from one month ago.

I have another GPP pension (a group personal pension with scot eq) again, low ish value (approx £3k). This is 'paid up' as I left the company, again through redundancy.

I have looked at personal and stakeholder pensions and I have enquired with Scot Eq and I can transfer my pension with them to a personal pension plan and transfer the pension I have just left to them.

Obviously I am looking hard for a new job and ideally I'd transfer my pension to a potential new employer's scheme.

Any advice would be appriciated. I still have time, although if I do start a new job, I guess there may be a 3 month window before I can start with their scheme, therefore leaving me with little time and a ticking clock. Also I don't really want lots of bits of pension everywhere. I am wondering if transfering the GPP into a personal scheme is a good idea in any case, leaving me to join a new employer's scheme straight up and either transfer that into or not.

Thank you for reading.

big_mortgage

Anyone?

I have been advised to take financial advice before proceeding with any transfer. I am a little reluctant as I expect it will cost a fortune. What are the pitfalls here?

I have changed the Scottish Eq GPP to an individual plan now. I also have a job offer, but the probabtion period is six months, so will be unable to start a new pension in time to transfer to them.

Loughton_Monkey

You are talking about relatively small amounts, and so there is no huge monetary issue either way in the short term. I am assuming your Scottish Equitable plan is also 'money purchase' and not 'final salary'.

As you probably know, the £9K total you have will change in value over time. This will be a function of (a) What 'funds' your money is invested in, and (b) The 'charges' applicable to funds and/or running each pension plan.

So your first action, I suggest, is to review the charges that you are currently paying on both your pensions, and also the charges of any 'new' plan you are looking at with Scottish Equitable. As a general rule, a "Stakeholder" pension will tend to have lower charges. Their fund choices are usually much more limited though. Personally, for this amount of money, I would not consider huge choices of funds to be necessary.

If you find very minor differences in charges as between both your plans and any potential new one, then maybe it's best simply to leave them where they are for the time being, concentrate on a new job and re-visit the issue once you have examined pension options with the new employer.

Either way, make sure you understand which funds your money is invested in. Look them up on Trustnet to see how they have performed in comparison to others. Fund choice is a huge and complicated subject, and there are no 'absolute' black and white rules. But having a reasonable spread, with some of it (if you are young) in reasonably more risky, but potentially high reward, funds is considered sensible.

dunstonh

I have been advised to take financial advice before proceeding with any transfer. I am a little reluctant as I expect it will cost a fortune. What are the pitfalls here?

It is unlikely to cost a fortune. Indeed, it may even save your a fortune as you havent been focusing on the important things. You want to consolidate the pots but which pension is best? One of the ones you have or a new modern plan or something else?

An IFA (dont use an FA) has to compare costs of the options available to you. They also have to be bechmarked to a stakeholder pension under FSA rule RU64. That isnt difficult to be honest as its easy for a modern pension to be cheaper than stakeholder (which are on their last legs now and looking dated in comparison).

You have choice. Do the analysis and research yourself or use an IFA.

big_mortgage

Loughton_Monkey wrote: »

You are talking about relatively small amounts, and so there is no huge monetary issue either way in the short term. I am assuming your Scottish Equitable plan is also 'money purchase' and not 'final salary'.


So your first action, I suggest, is to review the charges that you are currently paying on both your pensions, and also the charges of any 'new' plan you are looking at with Scottish Equitable. As a general rule, a "Stakeholder" pension will tend to have lower charges. Their fund choices are usually much more limited though. Personally, for this amount of money, I would not consider huge choices of funds to be necessary.

Either way, make sure you understand which funds your money is invested in. Look them up on Trustnet to see how they have performed in comparison to others. Fund choice is a huge and complicated subject, and there are no 'absolute' black and white rules. But having a reasonable spread, with some of it (if you are young) in reasonably more risky, but potentially high reward, funds is considered sensible.

Thanks a lot :j The charges for the plan I just left were covered by the employer (I believe) and the Personal Plan is the same as before (the GPP) at 1%.

I will look into fund performance, but for now I just wanted a home for the pension pot with a time limit on.

jamesd

1% isn't too bad, about twice what you can get more competitively by paying a fee to an IFA that could be as low as one to two hundred Pounds, depending on the charging model and services provided. Or less is available for some investments, like FTSE All Share Index trackers. If you're using one of those, the HSBC FTSE All Share Index Institutional tracker fund is available from Hargreaves Lansdown and has charges of under 0.3%. It's a reasonable place to park money while you find out what you're doing and their service is good to excellent.