Pension need to knows Official MSE Guide Discussion

Retyre

Cash

If you have a Self Invested Personal Pension (Sipp) and decide to hold the money as cash, you are normally covered under the standard £85,000 cover per person per institution, the same as normal savings get.

How come when I contacted Cavendish re their online FundSupermarket pension they told me:

Your funds are held by Fidelity FundsNetwork and are covered by the
FCSC compensation scheme up to £50,000. ??

Is the cover reduced from £85K to £50K if you are in funds rather than cash?

jamesd

The cover you get depends on how the money is held. For investments in general the cover limit is £50,000. If money is held on deposit (not merely in cash, but with a licensed deposit-taker) then it would have the £85,000 cash limit instead.

The primary protection for pension and ISA investments isn't the FSCS, it's the trust or similar arrangements that keep the investor money separate from the company money. Firms are required to do things like keeping customer money in specifically designated client money accounts so that there is never any doubt about whether the money is at risk from a failure of the company or not.

Retyre

Many thanks James, in which case IMO the guide would be clearer if it mentioned this. Those not studying hard could have the impression a Sipp was covered up to £85K.

SandLake

Does anyone know when the updated MSE Annuities Guide will be available, I have a small pension maturing next April and would like to read it in preparation for that?

pinstrypsoldier

Hi all,

Just so you are all aware - I know absolutely nothing about pensions. They have always just been "another junk letter" from my current workplace (wherever I have been working at the time). Always just signed it, sent it back. Or signed it, picked a percentage and sent it back. Then they send me more "junk" on information about the pension blah blah blah.

Im getting to the point where im starting to think more and more about pensions and how naiive and foolishly dissmissive i have been in the past. There are a few things i would love to know:

Say i have been working at Company1 for 5 years and have been contributing to a pension with that employer (i have never sought out my own pension or anything - remember - never cared in the past), what happens to that money when i change jobs? Do i still get the money when i retire or is it lost in the ether, or do i need to somehow let someone know etc? Do i need to do anything at all??

Also, I use to be in the army many moons ago for around 5 years. I told one of my colleagues that im moving jobs and they said "Make sure you transfer your ex-army pension!! I have a mate that was in the army for 9 years, then worked in the police for 20 years - if he had transferred over his ex-army pension when he started with the police, he would be retiring now! He's kicking himself."
Err, what? Transfer?? What does he mean? How do i do it? Why would his mate be able to retire next year, if the army would've given him the money when he retires anyway?? WOULD they have even done that?

Again, i know nothing. Im 29. Thanks

jem16

pinstrypsoldier wrote: »

Say i have been working at Company1 for 5 years and have been contributing to a pension with that employer (i have never sought out my own pension or anything - remember - never cared in the past), what happens to that money when i change jobs? Do i still get the money when i retire or is it lost in the ether, or do i need to somehow let someone know etc? Do i need to do anything at all??

It will not be lost. Depending on the type of pension it will either stay there until retirement date or you can transfer it to another pension.

Just make sure to keep them up to date with you address.

Also, I use to be in the army many moons ago for around 5 years. I told one of my colleagues that im moving jobs and they said "Make sure you transfer your ex-army pension!!

Very stupid advice as in most cases it would be best to leave it where it is. I believe you can access an army pension much earlier.

In some cases it will be a good idea to transfer it if it's another Defined Benefit pension scheme but you need to look at the details.

I have a mate that was in the army for 9 years, then worked in the police for 20 years - if he had transferred over his ex-army pension when he started with the police, he would be retiring now! He's kicking himself."

Transferring his army pension to the police pension would not have made his retirement date any earlier. All it would have done was increased the number of years service with the police pension.

When he reaches retirement age for both schemes he will have both pensions.

Don't listen to the mate down the pub for pension advice!

Find out which army scheme you were in and when the normal retirement date is.

jamesd

SandLake wrote: »

Does anyone know when the updated MSE Annuities Guide will be available, I have a small pension maturing next April and would like to read it in preparation for that?

I don't know but what any decent guide should say about that is easy: don't buy a standard annuity with a small pension pot because that is the rip off bad value end of the annuity market.

Instead you could use the new from 6 April 2015 options of an uncrystallised funds pension lump sum (UFPLS) or flexi-access drawdown to withdraw the money as needed. Or for efficiency, as rapidly as tax considerations make sensible, then moving he excess above need into an ISA to reduce costs.

The UFPLS option provides a lump sum that is 25% tax free and 75% taxable income. You can take any portion of the pot this way so you'd normally pick amounts that either are all tax free or not beyond basic rate.

Flexi-access drawdown offers even more flexibility with the ability to do things like take out more tax free lump sum early on and more taxable income later.

What people consider small varies but in the context of annuities under £10,000 is clearly small and even up to £30,000 can be small enough to make an annuity a bad deal. Much higher levels than that can be a bad annuity deal because of the option to defer the state pension.

If a guaranteed income is wanted then deferring the state pension will beat standard annuities. This will pay out10.8% extra on the state pension for each year of deferring for those who reach state pension age before the flat rate system comes in, 5.8% for those after that. Both inflation-linked. For those in normal good health this is such a good deal that it makes standard annuities redundant even up to quite high pot levels: just spend the pot to defer and then collect the higher income after purchasing the desired amount of extra income by deferring.

One exception to this to be aware of is for those with reduced life expectancies. In such cases an enhanced annuity could pay enough extra above a standard annuity to be a good deal.

So in general: enhanced annuity worth considering, standard annuity probably not, at normal retirement ages, because the state pension deferral tends to beat the alternatives.

jamesd

pinstrypsoldier wrote: »

Say i have been working at Company1 for 5 years and have been contributing to a pension with that employer (i have never sought out my own pension or anything - remember - never cared in the past), what happens to that money when i change jobs? Do i still get the money when i retire or is it lost in the ether, or do i need to somehow let someone know etc? Do i need to do anything at all??

The money sticks around and you get it later. When you get it depends on the type of pension.

Army pensions have their set rules, other similar types of defined benefit pension like final salary types have their rules on when. For these types you pretty much just have to leave them where they are when you change job.

The modern alternative outside the public sector for new employees is the defined contribution pension. With these you and your employer pay in some money each month and it's invested. You can normally pick which investments from a range of choices, how many depends on the particular pension. If people don't make a choice there's a default fund used, usually a not great performer for young people and it should be changed to get better growth. the default is OK for those close to retirement. I'm assuming that the default is a balanced managed fund, which it usually is. For these types it tends to be good to transfer when you change jobs, either to the new job version or to one you set up for yourself that is independent of all of your jobs. These types are first available from age 55 under current rules though it'll probably be increased to 58 or 59 when you get there, since a plan to change to a higher age in 2028 has been announced.

pinstrypsoldier wrote: »

Also, I use to be in the army many moons ago for around 5 years. I told one of my colleagues that im moving jobs and they said "Make sure you transfer your ex-army pension!! I have a mate that was in the army for 9 years, then worked in the police for 20 years - if he had transferred over his ex-army pension when he started with the police, he would be retiring now! He's kicking himself."
Err, what? Transfer?? What does he mean? How do i do it? Why would his mate be able to retire next year, if the army would've given him the money when he retires anyway?? WOULD they have even done that?

I don't know the transfer rules for army pensions but someone who knows will probably be along. In general it'd be a bad idea to transfer it out to anything but a public or private sector defined benefit pension. The option to transfer any unfunded public sector pension scheme like the army one is likely to end in April 2015 because the government has announced that it plans to ban such transfers.

Litup65

Ref: Zent,dunstonh,Aegis and provider fees.
Pension pot growth and value are two entirely different things.Growth is really about the number of units earned by a fund annually. Value is about the amount of pound notes you would get when you trade in or sell these units at any given date.If you sell when the unit price is depressed as it was a few years back then your pot value could decline dramatically. It can also increase dramatically. This is the nature of the stock market and to predict an assumed 7% "Growth" rate is misleading.
In my own pension pot, with pay in payments ceased 6 years ago, I received 16 extra units annually from 2009. In monetary terms this amounted to an average £25 per year(unit selling price times number of units).The provider charged 1% fees.At present this would amount to about £500.This amount is taken from my pot in the form of units (about 280 units).The true growth to me is 16 units with a value of £25.
These figures are taken from my annual statements.

Tino_2

I have what is probably a very stupid question but I'm going to ask anyway.

I have a small pension pot (c.£2k) with Aegon that was from a previous employer. I would like to use that money to do a little bit of trading in shares - do I have to transfer that money to a SIPP or can I transfer it to a stocks and investments ISA?

Thanks in advance