Small amount in pension but can I capitalise on it

Catbells

I didn't pay into my works pension much - as I worked sporadically and part time. My income is from investments (from sale of larger house), part time work and lodger. Eventually my pension will be from investments and state pension.

I have found out that I have a very small amount - around £500 in my pension fund from 20 years ago. Is there anything I can do to add to this, otherwise what can be done with it as it won't yield very much when I eventually retire. Its a teacher's pension.

I have been paying a small amount into a teacher's investment plan for 10 years which matures in around 5 years and will be worth around £3k. I was wondering whether I can transfer this amount into the small teacher's pension mentioned above and add to it from other investments I have.

I have another small pension scheme through an IFA and put small amount in annually.

Alternatively could I transfer the lot plus some of my savings into a Hargreaves Lansdowne SIPP which I've just read about on a current thread here.

dunstonh

Is there anything I can do to add to this, otherwise what can be done with it as it won't yield very much when I eventually retire. Its a teacher's pension.

Yes you can. Although you will probably need to consolidate onto a newer pension as plans today are typically better than old ones unless there are guarantees or something unusual (protected lump sums etc) which make it worth keeping.

I was wondering whether I can transfer this amount into the small teacher's pension mentioned above and add to it from other investments I have.

You only have one year on joining the teachers pension scheme to transfer any other pensions to that scheme.

I have another small pension scheme through an IFA and put small amount in annually.

You could use that one.

Alternatively could I transfer the lot plus some of my savings into a Hargreaves Lansdowne SIPP which I've just read about on a current thread here.

You could but HL's SIPP is probably more expensive than the scheme arranged by your IFA or the same cost if the IFA is using unit trust/OEIC funds.

Is there any reason why you would want to have three pension schemes running? (teacher, one via your IFA and another one)

Catbells

Thank you.

There's no reason to have 3 pensions but I thought that since I am restricted to the amount I can pay into the one through my IFA, having another would mean I could contribute more. I think though there might be a ceiling to the amount I can pay into pensions overall.

The IFA told me I can only pay around (from memory) £3500 pa if I am not working and more if I am working. On what I am earning I cant afford to pay more than this at the moment. However I will be earning a bit more over the coming few years and may be able to increase this amount.


The one through the teachers pension scheme which I just discovered recently I will transfer to the one my IFA has set up for me as you suggested.

jem16

Catbells wrote: »

Thank you.

There's no reason to have 3 pensions but I thought that since I am restricted to the amount I can pay into the one through my IFA, having another would mean I could contribute more. I think though there might be a ceiling to the amount I can pay into pensions overall.

The amount you can pay into a pension AND GAIN TAX RELIEF is limited to 100% of your earnings or £3600 gross if you are not working. You can contribute more but you would not gain tax relief.

The one through the teachers pension scheme which I just discovered recently I will transfer to the one my IFA has set up for me as you suggested.

Hold on a minute. Your teacher's pension scheme is a final salary pension which 9 times out of 10 would be foolish to transfer out of. I doubt dunstonh was suggesting that you do this.

As you are no longer in teaching you are a deferred member of the pension scheme. You can no longer contribute to it and cannot trasnfer any other pension into it. Basically it will just sit there growing in line with CPI until retirement age.

You said the teacher's pension scheme was £500. Is this the amount you will get each year or is it the transfer value?

dunstonh

Sorry, the "found" scheme I assumed was a money purchase scheme as you said it was worth £500. The teachers scheme is a defined benefit scheme and doesn't have a value in the same way.

Catbells

Jem - I only have £500 in my teachers pension so not worth anything significant which is why dunstonh suggested to move it to the one I have through the IFA. So £500 is its transfer value.

Useful to know that you can't transfer any other pension into the teacher's pension - thanks.

Catbells

dunstonh wrote: »

Sorry, the "found" scheme I assumed was a money purchase scheme as you said it was worth £500. The teachers scheme is a defined benefit scheme and doesn't have a value in the same way.

Sorry but am not sure what found, money purchase or defined benefit schemes are. I paid into this pension scheme at the beginning of my teaching career - that's all I know.

I think you are saying that the value of my teacher's pension is a benefit scheme and I may not be able to transfer it???

jem16

Catbells wrote: »

Jem - I only have £500 in my teachers pension so not worth anything significant which is why dunstonh suggested to move it to the one I have through the IFA.

No he didn't - read his reply below mine.

So £500 is its transfer value.

The Teacher's Pension scheme is a defined benefit scheme - i.e. final salary. The benefits are based on your length of service and final salary. Any pension statement will show the amount of pension you will receive - it doesn't show a transfer value.

How long were you a member of the scheme and where are you getting the £500 from?

Useful to know that you can't transfer any other pension into the teacher's pension - thanks.

That's not what we said. You can transfer into the Teacher's pension scheme but you must be an active member to do so. You are not an active member - you are a deferred member.

jem16

Catbells wrote: »

Sorry but am not sure what found, money purchase or defined benefit schemes are. I paid into this pension scheme at the beginning of my teaching career - that's all I know.

Found - as in you said in your first post that you "found out". It's not a pension.

Money purchase is a pension where you purchase funds and the money grows or falls as per market conditions. It's subject to investment risk.

Defined benefit is where the benfits are known and calculated on the number of years service and your final salary. The teacher's pension scheme is a final salary scheme - i.e. a defined benefit scheme.

I think you are saying that the value of my teacher's pension is a benefit scheme and I may not be able to transfer it???

What we are both saying is that a final salary scheme is unlikely to be in your best interests to transfer as rarely can it be beaten.

Catbells

Thanks for clarification to both.

Just to clarify - should I leave the £500 in the teachers pension scheme? If I don't have any further contributions going into it as a teacher (unlikely) then can I assume it will stay there until I retire at which point I will get it in a lump sum or paid a miniscule amount of pension each year from it.

Jem - I was a member of the scheme for 2 years or so (its actually 30 years ago) and then had children. I opted out of the pension scheme when I went back part time 20 years ago and instead looked to my house for my pension.

Catbells

jem16 wrote: »

Any pension statement will show the amount of pension you will receive - it doesn't show a transfer value.

Just re read this. My pension statement showed the amount of £500 so this must be the amount of pension I will receive. I will double check this.