Old contracted out pensions

Marine_life

Both my wife and I have old contracted pension schemes (we contacted out around 1987). We stopped paying into the schemes at different points (me when I joined my employers scheme in 1996 and my wife when we left England in 1999). We recently received statements showing currently fund value of around 35,000 each.

To be honest I have never really looked at the schemes and I am wondering now whether we should do anything about them (transfer to another provider, change the structure of the investments etc).

Any thoughts?

atush

What type of schemes? Definedcontribution/Money purchase? Or Defined benefit/final salary ones?

If MP/DC what has the performance been like? Charges? Funds available?

Marine_life

atush wrote: »

What type of schemes? Definedcontribution/Money purchase? Or Defined benefit/final salary ones?

If MP/DC what has the performance been like? Charges? Funds available?

Its a defined contribution scheme. I have no idea what the performance has been or the charges or indeed the funds available :eek:. I have only just begun looking at the account - I have applied for an access code so I can play around with it - I guess I will have to come back when I know more about it.

Marine_life

ok, so the funds are managed by Friends life.

The performance of the funds and the available funds is listed here:

http://www.friendslife.co.uk/common/layouts/subSectionLayout.jhtml?pageId=ifa%2FSitePageSimple%3Afunds.performance.pension

I choose the investments from the Friends Life managed funds when I took out the scheme all those years ago and split my investment between fixed interest, property and pacific basis. Both the property fund and the fixed interest fund are up by almost 100% since 1999 which seems ok to me.

atush

So now you need to look at the charges per year (this means your increase underlying performance of funds is reduced by this).

Then you need to look at alternatives. We can't tell you that as yo have told us nothing of your current situation form residence for tax, future residence, opther savings investments etc.

I am unsure abt your current situation and how you are providing for retirement now or in the future. Some of that could affect where you might transfer any funds. You haven't said where you are, or where you will end up in retirement so we cannot help you any further as you want to keep things vague.

Marine_life

Thanks

I will take a look at the charges.

As far as current situation we live in Germany (and have sone since 1999) but will likely come back to the UK when we retire.

Pension schemes are as follows:

1. I have a frozen final salary scheme in the UK which per my last statement would be worth around 10,500 in today's money. That will start paying when I am 62.

2. I have a non-contributory pension scheme with my current employer which is worth about 18,000 per annum in todays money. Again, available at 62.

3. I have a salary deferral scheme (which is legal in Germany) which lets you put part of your earnings aside to be taken as taxable income later in life (actually from age 60). My fund is currently worth about 450,000 (future value).

4. I am guessing the above funds will be worth a pension of 3-4,000 per annum in todays money.

5. We should be entitled to a full state pension.

So there are some good foundations to my pension plans so I am happy to be a little more adventurous with the contracted out bits.

I am 47 (my wife is 49) and I am contemplating retiring in three years. We will not have a mortgage and will aim to live off our savings until the pensions kick in.

As you can see I've been trying to work out where we stand in order to be sure that if I decide to retire I don't get a nasty shock!

jamesd

You'll need to find out how Germany treats UK pension schemes. I don't know and it's possible that they are not a valid tax wrapper for German residents. I also don't know how the UK treats German salary deferral schemes when you ultimately retire to the UK. Be sure that you know so you can change your planning if the answer is "badly".

You will not normally be able to take any UK pension income until you're 55 unless you have some form of preserved benefits that allows age 50.

Your UK state pension age is a bit uncertain but probably is going to be 68, check it with the online checker.

You don't seem to have any pension income available to you to support retirement at age 50. Hopefully you have other sources of income available to support your plans.

Marine_life

jamesd wrote: »

You'll need to find out how Germany treats UK pension schemes. I don't know and it's possible that they are not a valid tax wrapper for German residents. I also don't know how the UK treats German salary deferral schemes when you ultimately retire to the UK. Be sure that you know so you can change your planning if the answer is "badly".

You will not normally be able to take any UK pension income until you're 55 unless you have some form of preserved benefits that allows age 50.

Your UK state pension age is a bit uncertain but probably is going to be 68, check it with the online checker.

You don't seem to have any pension income available to you to support retirement at age 50. Hopefully you have other sources of income available to support your plans.

Thanks.

Your comment about the salary deferral scheme is a good point that I need to check. To be honest I had assumed it would simply become taxable income in the country in which I am resident when it is paid out. But I will certainly need to make sure.

From age 50 we aim to live off savings and I am hoping we will have enough to generate an income in the region of 35-40,000 with a fairly conservative set of assumptions (I am really starting to look at that now). We may need more than that but I don't mind eating into the capital a bit. Its also possible we will take on some part time work but the objective is not to do anything!

jamesd

£40,000 with a conservative assumption of 4% of capital as income would take a million Pounds to generate without drawing on capital. With some risk of capital loss and not keeping up with inflation, but a possibility of keeping up or getting ahead as well, you might take 6% income from suitable investments, requiring £668,000 in capital.

You probably can easily draw on capital to hit a target income, given the other incomes that will start at known future dates with certain values.

Marine_life

jamesd wrote: »

£40,000 with a conservative assumption of 4% of capital as income would take a million Pounds to generate without drawing on capital. With some risk of capital loss and not keeping up with inflation, but a possibility of keeping up or getting ahead as well, you might take 6% income from suitable investments, requiring £668,000 in capital.

You probably can easily draw on capital to hit a target income, given the other incomes that will start at known future dates with certain values.

That's about the range of savings we expect to have but it depends on a) Exchange rates b) How much we can sell our house for here v. what it costs to buy a house in the UK c) How well our business performs / how high my bonus is! d) How my investments perform.

I suspect that if we don't achieve our target savings I will simply continue working for another year or two.

jamesd

With that amount of money you might usefully discuss exchange rate risk hedging options with a specialist in money transfers. Future contracts are available that will fix the rates for transfers and you could also consider options on exchange rates to cover losses due to adverse moves.