Cash or start new pension?

murphydog999

My husband has just finished a 9 month employment and now has 2 options concerning his pension contributions with that company for that time.

Cash £1400, or transfer to another fund £4200. He has an army pension and hasn't felt the need to open another pension fund, but this is quite a considerable sum compared to the cash, so it has got us thinking.

As he is 49yrs old, he presumably would have to put loads in to make it worth while? Another thought would be to put it into my PP, but not sure if that would be allowed?

Can anyone shed any light on the matter that might help us decide?

Many thanks

yangptangkipperbang

I have a Navy Pension, but have also "collected" 2 more pensions from my post Navy employment - plus my state pension.
I certainly would be struggling on just my Navy + State pensions compared to my present standard of living if I hadn't taken every penny that my employers offered me for free for my pensions pot.

I aimed for a 50% of my salary as a pension, I have exceeded that - and retired at 60 as well !

I know what I would do if I were in your position.................

Lokolo

You can take 25% tax free on retirement anyway, so from 55 you can take £1,050 (assuming value has not changed) and still get regular income from the rest (although on £3k it will be pittance).

tescobabe69

Lokolo wrote: »

You can take 25% tax free on retirement anyway, so from 55 you can take £1,050 (assuming value has not changed) and still get regular income from the rest (although on £3k it will be pittance).

I'm guessing the £1400 is taxable ? So a £3150 pot for (£1400- 280 - 1050) £70 ? I've not checked annuity rates but I reckon that pays back in less than a year.

kidmugsy

Since he's only 6 years away from getting 25% tax free if he wants to, it would be mad not to transfer it into a personal pension of some kind.

You can't put it into your PP, alas.

murphydog999

tescobabe69 wrote: »

I'm guessing the £1400 is taxable ? So a £3150 pot for (£1400- 280 - 1050) £70 ? I've not checked annuity rates but I reckon that pays back in less than a year.

Hi, no both amounts are quoted after tax.

tescobabe69

murphydog999 wrote: »

Hi, no both amounts are quoted after tax.

OK so it will cost £350 for a £3150 pot. Check the open market annuity for that amount, male @55 - around 3% escalating = £90 pa.

kidmugsy

"OK so it will cost £350 for a £3150 pot. Check the open market annuity for that amount, male @55 - around 3% escalating = £90 pa."

But who on earth would buy an annuity at 55? And why go for an expensive escalating annuity?

tescobabe69

kidmugsy wrote: »

"OK so it will cost £350 for a £3150 pot. Check the open market annuity for that amount, male @55 - around 3% escalating = £90 pa."

But who on earth would buy an annuity at 55? And why go for an expensive escalating annuity?

It was to show the benefit of hanging onto the pension, of course there are alternatives (and six years to explore them) but even in the example I describe the value of the pension is evident.(I hope)

Debt_Free_Chick

murphydog999 wrote: »

My husband has just finished a 9 month employment and now has 2 options concerning his pension contributions with that company for that time.

Cash £1400, or transfer to another fund £4200.

It sounds as though he's been offered a refund of his own, personal contributions or a transfer of all the contributions - including the employer's - to another plan.

If so, then the refund would simply put him back in the position he would have been in, had he never joined this plan. He just gets his own contributions back, less tax (BTW there's no tax to pay on the transfer).

The transfer would see him get the benefit of the employer's contributions - so "money for nothing""!

To me, it's a no brainer - take the transfer.

Also, consider whether the Army pension is going to be enough to enjoy retirement. Chances are, you/he will need a top-up to this amount anyway.

murphydog999

Hmm yes, beginning to realise turning the extra £3k-ish down would be a bit daft, thanks all