help with hubbys pension

loopy_lou_6

Hi all, this forum is great and many thanks to all you wise guys who contribute your time and expertise especially dunstonh and edinvestor whose "friendly banter" just completely cracksme up!I am at the moment doing a complete overhaul of our finances and want to ask some advice about hubbys pension.He is 39 and in 1991 was self employed as afarmer and took out a small personal pension with the CIS paying in contributions of £30 a month for about 2 years then he upped it to £50 a month which he has paid ever since although he has only paid £39 into it for the last few years because of different tax laws or because he is now self employed? On the original paperwork it says he will get a cash sum of £21400 and a guaranteed pension of £80 I presume this is a month?On his last statement it says he wiil have a fund of £36,482 which will give him a yearly pension of £1,750. This includes an annual bonus attaching after bonus declaration for 2003.Rubbish I know.His policy runs to 2032. we are def going to keep this pension up.the thing is we want to either up it or start some other kind of pension vehichle for him, and also i need to start a pension. at the moment i am doing all this in bite size chunks cos i can only cope with so much jargon and facts and figures, my poor brain wont take it. I have rang the CIS and they are coming round to our house on tues to discuss it. basically I want to know what questions I should ask this guy about this pension to make it clear in my mind what his lump sum might be and what his fund will be. should we pay more into this or start a new one? Is this PP rubbish? We live quite within our means although we dnt earn loadsa money and only have a small mortgage which we already overpay into.I expect I will be posting for lots of advice over the coming months as I do my research on different options so thankyou sooooo much in advance for any advice::T

EdInvestor

Hi loopylou

Is hubby currently self employed? Is he a basic rate taxpayer?

When reviewing pension affairs and especially when smallish amounts are involved the first thing to make sure of is entitlement to the basic state pension.

Get a forecast online here

Check if both of you are up to date with contributions here, as the state pension is much cheaper to buy for a self employed person than a similar amount from a private pension.Check your own position, particular on Home responsibuilities credits if you aren't working.

Re the CIS pension, is it invested in the With profits fund?If so you are probably better to transfer it elsewhere, but first ask the salesman if there are any guarantees ( annuity rates, growth rates) attached to the pension and get an updated "transfer value".Also check if the pension contains and "protected rights" money.

Post back with this info and we can take it from there.
.

loopy_lou_6

thanx edinvestor, hubby is no longer self employed, will def check out our state pensions. I do work but hvnt always but have always received child benefit and to my knowledge I am then automatiacally covered by home responsibilities.I will ask the CIS guy those questions on tues, that is exactly the advice I wanted so I'm really grateful for your response.

loopy_lou_6

Hi EdInvestor Ive only just got all the bumph through from the CIS, it is indeed invested with the with profits fund, there are no protected rights monies and no guarantees. Except a guaranteed pension rate of £80.00, which as I now understand I think applies at retirement date when buying an annuity? The current transfer rate is £11,613.Do you think he should transfer it? I am slowly getting my head round this, but it all still seems a bit complicated

dunstonh

Do you think he should transfer it?

We cannot answer that as we dont have the data to make that decision. A TVAS check should be able to determine if its worth it or not.

EdInvestor

Except a guaranteed pension rate of £80.00, which as I now understand I think applies at retirement date when buying an annuity? The current transfer rate is £11,613.Do you think he should transfer it?

Almost certainly not.What age is he due this 80 quid?

dunstonh

I believe CIS refer to it as £80 per £1000. Meaning an 8% GAR.

EdInvestor

If the policy has an 8% guaranteed annuity rate (GAR) this means that at retirement hubby will get a return on the fund when he buys his annuity of 8%.This compares with around 6% on the open market today, but it depends on age, hence my query.

Since this is an excellent rate, it will certainly not be a good idea to transfer it. It may be better (if allowed) to contribute more to the policy.

But it is very small and the guarantee means it will not be invested so as to show substantial growth in future. It should be regarded as the 'safe' part of the savings portfolio, but with a better return than cash.

Additional money probably should be invested in something else so as to get high growth.This will be more likely to be an equity ISA than a pension, but you need to check the state pension outlook first before coming to a view.

dunstonh

timescale may have a lot to do with it as well. An 8% guarantee is nice but if the fund is low potential for growth over the long term, then despite the guarantee, it may still be worth switching. Plus some guarantees are not practical. A guarantee that is only paid annually in arrears with no guarantee or spouses option may never be convenient and a complete waste of time holding out for.

loopy_lou_6

dunstonh wrote:

A TVAS check should be able to determine if its worth it or not.

Dear dunstonh I dnt know what a TVAs check is

loopy_lou_6

EdInvestor wrote:

What age is he due this 80 quid?

2032 when hes 65