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Pension need to knows Official MSE Guide Discussion

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  • jamesd
    jamesd Posts: 26,103 Forumite
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    You should also use care to say what you mean by "don't really want to risk the lump sum" because that will have a major effect on how high your eventual pension income can be if you are not very close to retiring.

    You can't really lose it all in any credible way using mainstream investments and an IFA. But investments go up and down in value, a bit like a rollercoaster in reverse, up overall but lots of dips along the way. The size of these dips is often called risk, or volatility. If you say you want no risk, your money cannot be invested, just put into savings accounts and things close to that, where it will lose value due to inflation. If you were instead to accept the main UK stock market's level of risk, it has on average grown by 5.2% plus inflation (about 8-9 total) a year over the last hundred plus years. But every two or three years there is a drop of 20% or so and every five to ten a drop of 40-45%. With gains in between.

    The risk comes if you needed to take the money out during one of those dips. That risk is dealt with by adjusting the investments used in the years coming up to the time when you might want to take the money out. By taking money out, I meant taking a 25% tax free lump sum and/or taking an income from the pension pot, which could be by buying an annuity.

    Part of the job of an IFA is to explain these things to you, so no need to worry if it's not clear immediately. :)
  • Drp8713
    Drp8713 Posts: 902 Forumite
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    cazza1972 wrote: »
    I currently have a pension through my employer but they will not accept a pension share from my ex husbands pension provider. Im new to all this pension finding malarky and would really like some advice as to what to look for when starting a new pension. I dont really want to risk the lump sum that will be put in. Any advice anyone :o

    Can't you have an internal transfer and retain the benefits in his pension scheme?

    I only briefly worked in private sector pensions and although most of the schemes preference was to transfer it out usually there was room for manoeuvre if the spouse could not find a scheme that would accept it
  • kgs290680
    kgs290680 Posts: 12 Forumite
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    I have opened up a SIPP as in my new company there is no company pension set-up and my employer does not need to pay into it. One of my previous employers was a Defined Benefit Scheme but i dont know if i should move this across to my SIPP. Can you please advise?

    Thanks
  • JoeCrystal
    JoeCrystal Posts: 3,046 Forumite
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    kgs290680 wrote: »
    I have opened up a SIPP as in my new company there is no company pension set-up and my employer does not need to pay into it. One of my previous employers was a Defined Benefit Scheme but i dont know if i should move this across to my SIPP. Can you please advise?

    Thanks

    Don't be stupid. No IFA will approve the transfer from Defined Benefit Scheme and only in very rare case. Leave it alone and be happy when it pay out the amount you know that it will. No worries at all for you.

    Cheers,
    Joe
  • foreverleeds
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    Help!!! I am 59 and have just got a new job working for the council. They have sent me loads of forms about their pension scheme. Am I right to think at my age its not worth bothering with. I aren't already in any pension scheme so it would be starting from scratch. I earn £14,400 a year and they want me to pay 5.8% of my earnings. My retirement age is now 66 so would only be paying in for 7 years. Any advice please. I think its too late now to join.
  • Andy_L
    Andy_L Posts: 12,825 Forumite
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    Help!!! I am 59 and have just got a new job working for the council. They have sent me loads of forms about their pension scheme. Am I right to think at my age its not worth bothering with. I aren't already in any pension scheme so it would be starting from scratch. I earn £14,400 a year and they want me to pay 5.8% of my earnings. My retirement age is now 66 so would only be paying in for 7 years. Any advice please. I think its too late now to join.

    As a (council) tax payer I would love you to not join the pension scheme ;)

    Your employer is paying in somewhere between 2 & 4 times your 5.8% contribution. Why would that not be worth bothering with?
  • jem16
    jem16 Posts: 19,404 Forumite
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    Any advice please. I think its too late now to join.

    Join now! You would be mad not to.
  • foreverleeds
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    Is it really worth it for just 7 years contributions? how much pension would I get from it.
  • jem16
    jem16 Posts: 19,404 Forumite
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    edited 24 October 2013 at 6:51PM
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    Is it really worth it for just 7 years contributions? how much pension would I get from it.

    Perhaps have a read at this and see if it's worth it.

    http://www.lgps.org.uk/lge/aio/17364756

    Rough guide would be around £1500/£1600pa but probably more.

    Basically by not taking it you are throwing away around 15%/20% at least of your pay.
  • hugheskevi
    hugheskevi Posts: 3,917 Forumite
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    edited 24 October 2013 at 6:57PM
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    Am I right to think at my age its not worth bothering with.

    Never understood this mentality. Surely if you are destined to have a very low income in retirement, then any opportunity to increase it slightly will be of great value?

    If you have a pension income of £800 p/w, then an extra £15 isn't going to make much difference, but if you are destined for the £144 p/w then the extra £15 is a 10% improvement to your future living standards.

    The less you have, the more important it is to save and plan.

    Fortunately, defined benefit pensions are of most value to those close to retirement so no, you are totally incorrect to think it is not worth bothering with.
    Is it really worth it for just 7 years contributions? how much pension would I get from it.

    Based on the new LGPS scheme, about £2,000 p/a (£14,400 * (1/49) * 7)

    That would be worth about £50,000 if you were to get the same income from a defined contribution scheme using an annuity.

    As you say you have no other pension, then if we assume you will get £144 p/w from State Pension, that is an improvement on living standards of 27% across the whole of your retirement (which you should expect to be about 20 years unless there are unknown factors).
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