Pension options - new job

bjorn_toby_wilde

Wonder if anyone can advise me on a pensions query relating to a new job?

I was made redundant at the end of January but luckily have just managed to secure a new job. The role is a 6-12 month contract (covering a MAT leave) and I'm not eligible for the company pension scheme for 6 months.

My last company covered pension contributions until the end of April but I didn't want to augment that pension with my redundancy because the scheme has big reductions for early retirement after leaving.

I don't want any gaps in my pension and would like to use some of my redundancy money to compensate for this 6 months without contributions. I've already used my cash ISA allowance for the year so can anyone suggest an alternative home for the money?

Debt_Free_Chick

Either set up a personal pension plan - it would be available for other contributions in the future.

Or just hold on to it and then pay it in to the next company plan you join, whenever that might be.

kidmugsy

Debt_Free_Chick wrote: »

Or just hold on to it and then pay it in to the next company plan you join, whenever that might be.

Yes, there's likely to be an advantage in storing up that money until you have access to contributions that bring an employer's contribution with them.

bjorn_toby_wilde

Thanks for the advice

I guess those are the two most obvious options for me. Are there any advantages to either one? I was thinking that the company scheme might not be a good idea if I only stay with them for a short time.

Also, is an IFA the best route to go to find a personal pension or are there any comparison sites?

bjorn_toby_wilde

kidmugsy wrote: »

Yes, there's likely to be an advantage in storing up that money until you have access to contributions that bring an employer's contribution with them.

So if I bring money into a company scheme do they have to match it or does it depend on the scheme?

Daniel_Elkington

If the new company is final salary then try to buy added years.

If the new company is defined contribution or even a group personal pension plan then there is unlikely to be any benefit over paying a lump sum into a personal pension.

You may want to consider investment ISA's as they allow you access to the money. You also need to ensure that all personal debts are paid off as you are unlikely to be getting more growth than personal loans charge.

Additionally you need to look at emergency funds and see if you have enough readily available cash in easy access cash ISA's to cover a loss of earnings for 3-6 months.

Then any over that can be invested, theoretically, if you are comfortable with it!

If the new scheme is a definied contribution or GPP, then they are very unlikely that they will match lump sum transfers in. You could go to an IFA and see what they think, find one that does the first appointment for free and make sure you have your box of stuff ready. I find it really handy if people have their 'finance box' there and ready so I can just dive in!

atush

One disadvantage of waiting for the next pension, is that you are missing an opportunity to buy shares when they have had recent falls, and pound cost averaging (buying shares or units in smaller amts over time) means you have less chance of investing a lump sum just before a market correction and therefore losing a wodge of money. But also the reverse could happen in that the market could have a bigger correction and then a lump sum invested later would be better.

No one knows the future, so you take a chance.

Also, opening a private pension gives you a place to put future contribs from an employer's scheme.

Should you join the new one in 6 months, and be terminated at 12 months- some employer's schemes ask that you transfer out of their scheme of you have put in less than 2 years. So you would have a place already set up for it to go to. Have a look at some of the online platforms such as Cavendish and HL.

kidmugsy

bjorn_toby_wilde wrote: »

So if I bring money into a company scheme do they have to match it or does it depend on the scheme?

At the moment it depends on the scheme. But that will change over the next few years as the NEST scheme is introduced.

kidmugsy

atush wrote: »

One disadvantage of waiting for the next pension, is that you are missing an opportunity to buy shares when they have had recent falls, ....

True, but the OP could, if he wanted too, invest in shares in a Stocks and Shares ISA now and then later contribute the capital to a pension that lets him capture an employer's contribution.

Debt_Free_Chick

kidmugsy wrote: »

At the moment it depends on the scheme. But that will change over the next few years as the NEST scheme is introduced.

I'm afraid it won't. Neither NEST nor the Auto-Enrolment regulations require matching contributions. Yes, employers will have to contribute to a pension plan for (eligible) employees, but they do not have match employee contributions.

bjorn_toby_wilde

Thanks for all the advice.

I have cleared all my debts (and the plus side of the redundancy is that I'm mortgage free :j). I have enough in emergency funds to cover the 3-6 months gap so I'll look at the other investment options. The rest of my redundancy pot is sitting in a high interest account. I like the idea of ISAs because they avoid locking away the money.

I've avoided stocks and shares ISAs so far because I'm fairly 'risk averse'. I'll take a look at what's out there. Are there any investment ISAs which are lower risk than others?