Some pension advice needed please.

nearlyrich

When I was 28 I started a personal pension plan which, due to the stock market dip, is currently worth around £45K. I also opted out of SERPS at the same time.

I have another small pension pot from my in-between employer of £3K and my current scheme is worth about £6K, I now pay £110 per month from salary and my employer pays a matching contribution and after almost 3 years this is now worth £6500.

I am now 42 and I have worked full time since 18 and I want to retire as soon as possible after my 2 children finish college which should be in about 5 years. I know I can't have benefit from the pensions till I am 55 but I want to maximise the amount I get out of it.

So at least another 5 years of contributions, and I am willing to transfer my "paid up" 2 pension pots into one scheme, maybe the current pension.
I also wonder about opting back into SERPS but I am not sure what the advantages are.

I will need to take some advice on the finer details but as I don't know much about pension rules I would appreciate some pointers, so if anyone can advise I would be grateful.:)

dunstonh

There is still some discussion taking place around contracting out benefits after April 2006. However, the current position is that by contracting out, you will be able to take 25% tax free lump sum and take benefits from age 55. If you contract in, those benefits cannot be taken with a tax free lump sum and you have to wait until 60.

Contracting out looks like it will be coming back into favour again with those benefits. If you ignore those benefits, it is currently cost neutral to be contracted in or out. Some consider that as its cost neutral, you should contract back in as that is the safer option. Others for the same reason think its safer to contract out as that is your pot and not in the hand of the Govt. It is important to make sure that if you are contracting out, the fund potential is there to achieve the required rate of return.

It maybe worth combining the plans. Many providers have tiered rates of charges. The more you have the less you pay. Also, when you come to use your open market option to get the best annuity rate, you usually get a better rate when there is one source and not 2 or more. HOWEVER, it would depend on the transfer penalty and exisiting scheme charges and benefits as to whether it is best to transfer or not.

nearlyrich

dunstonh wrote:

the current position is that by contracting out, you will be able to take 25% tax free lump sum and take benefits from age 55. If you contract in, those benefits cannot be taken with a tax free lump sum and you have to wait until 60.

This is just the kind of info I was looking for, thanks a lot.

It maybe worth combining the plans. Many providers have tiered rates of charges. The more you have the less you pay. Also, when you come to use your open market option to get the best annuity rate, you usually get a better rate when there is one source and not 2 or more. HOWEVER, it would depend on the transfer penalty and exisiting scheme charges and benefits as to whether it is best to transfer or not

I will find out what the transfer values are, thanks again.:cool: