Pension Options After Leaving Company

Richdm8

Hi guys, I'm after some opinions on what the best option is for my fiancee after she recently left her job. Here's the situation:

She left her company in August 2011 after around 22 months of service. The company had a final salary scheme which she joined when she started, and contributed 5% (I believe) of her salary. The scheme was a 1/60 type (not that this is likely to be relevant to this post).

After she left, she assumed that the pensions would then be frozen and she would therefore take a pension of X/60 upon retirement.

She's just received a letter from the company stating that because her service is less than 2 years then she MUST either take a refund of her contributions, or transfer the value to another scheme. Neither of these are very desirable given our assumptions.

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These are the figures and the offers:

Refund Value

Gross Pensions Cont + Interest: £2165
Less cost of buying back into SSP: £636.61
Less tax (20%): £305.76
Interest for late payment (no idea what this is!): £12.32

NET REFUND: £1235.36

Transfer Value

£3686.44

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Now I'm "reasonably" clued up on pensions and understand that neither of these is a patch on the 2/60 x £26k salary of roughly £866 per year that she could have opted for had she hung on for another couple of months and got over the 2 year service that she apparently needs to retain the final salary benefits.

The problem is, she no longer contributes to a pension at present because she is in the process of changing career to teaching, and therefore has no scheme to transfer the value into. Given the small sums involved I'm guessing that there's no point setting up a pension scheme to transfer the money into if she doesn't intend to contribute further to this (she will be paying into a teachers pension from September).

Also, is there any way I can pay the lump sum into my own
company pension (a stakeholder pension run by Scottish Widows)?

Thanks for any help you may be able to offer.......

McKneff

I wouldnt think so, but one of the pension people will be along soon to confirm.

No reason why she cant just set another pension up and pay into that till she is ready to start the teachers pension.

atush

set up a stakeholder or PP and transfer.

While she is training and not earning she can contribute 2880 per annum( which is grossed up to 3600 by tax rel) as well. After that, her best option will be the teacher's pension and to save outside of pensions into ISAs.

jem16

Richdm8 wrote: »

Given the small sums involved I'm guessing that there's no point setting up a pension scheme to transfer the money into if she doesn't intend to contribute further to this (she will be paying into a teachers pension from September).

Go to a discount broker like Cavendish Online and set up a stakeholder or personal pension to transfer the amount into. There is no point in losing almost a third by taking a refund.

Once she has joined the Teachers' pension Scheme she can look into a possible transfer into that depending on how many years it would buy.

Also, is there any way I can pay the lump sum into my own
company pension (a stakeholder pension run by Scottish Widows)?

No. Pensions are for the individual only.

Richdm8

Thanks everyone for your responses - very useful. I think it seems like the best option will be to set up a stakeholder pension (I'm looking at Cavendish Online at the moment - thanks Jem16), transfer the fund in and then just pay a token £50 a month in until she begins her teachers pension. Then we can re-assess whether we can transfer the pension across and hence buy up extra years if that option is available.

Another quick question, if I (I say "I", I mean "she" but I tend to be in charge of finances....!!) were to set up a stakeholder pension for now, is it relatively straight forward to transfer this to a PP as and when I become a bit more knowledgable/confident to select my own funds etc?

jem16

Richdm8 wrote: »

Another quick question, if I (I say "I", I mean "she" but I tend to be in charge of finances....!!) were to set up a stakeholder pension for now, is it relatively straight forward to transfer this to a PP as and when I become a bit more knowledgable/confident to select my own funds etc?

Shouldn't be a problem.

However why not just set up a personal pension now and choose one of the internal funds that you would have chosen in a stakeholder pension? When you feel more confident you can branch out into the external funds.