Thoughts on an old dormant pension pot

Devon_Sailor

Good morning Forumites,

My situation:

I have a dormant Standard Life pension with a current value (well, as of Jan 2012 - still waiting for this year's statement) of £11,411, from a former job. It is made up of 3 SL funds (Managed Pension Fund, Stock Exchange Pension Fund and GLobal Equity 50:50 Pension Fund).

I transferred into the regular Armed Forces in Jan 2010. Due to the pay office categorically stating (incorrectly!) on three seperate occasions that I could not transfer in this old pension and buy extra years, I missed the deadline to transfer. This purchase of extra AFPS years would have been by FAR the best option financially. However, spilt milk and all that...! :mad:

Anyhoo, time to reassess options.

Would it be possible to move this SL pension into something more profitable? I currently do not have much in the way of spare income to add to it at present, but that may change, even if it is a token amounbt or lump sum every now and again.

What are my options? Im a regular reader of this board, but would still very much appreciate a bit of advice from 'The Knowledge' on here!

For background, im a 31yo male, hopefully going to remain employed until 55 (or 65 under the new AFPS guidelines..) with the Forces, so this would be an additional pot rather than my main pension, and will probably draw it down under the lump sum rule rather than touch my AFP.

Right, touch paper lit, time to sit back and watch the show :rotfl:

Many thanks indeed,

D_S

dunstonh

Pensions do not go dormant. That only applies to deposits.

Would it be possible to move this SL pension into something more profitable?

What do you class as more profitable?

What are my options?

Keep it where it is or transfer it to something else.

At the moment, you seem to want to transfer it but its hard to see why. You appear to believe it is dormant but that isnt possible with pensions. So, why do you want to transfer it? What is wrong with the Std Life scheme that makes you feel that way?

Devon_Sailor

dunstonh wrote: »

Pensions do not go dormant. That only applies to deposits.



What do you class as more profitable?



Keep it where it is or transfer it to something else.

At the moment, you seem to want to transfer it but its hard to see why. You appear to believe it is dormant but that isnt possible with pensions. So, why do you want to transfer it? What is wrong with the Std Life scheme that makes you feel that way?

Good morning Dunstonh,

Apologies, dormant was a poor choice of wording on my part. However, it is 'dormant' in the sense that I am not adding to it, although I appreciate that it continues to grow in my absence.

I am not set on transferring per se, I just feel l ike I could be making more of it; now, whether that is sitting back and just regarding it as a Brucey Bonus when I hit retirement, or taking a more active involvement in its growth is the dilemma.

My big question I suppose, is what I could transfer it to - I have quite a few years left until retirement and like the idea of getting 'hands on' through some sort of self-administered portfolio (eg H&L etc) - would that be possible?

I would like to think that with potentially 25 years minimum to play with, I could use it a vehicle to take more of a financial risk with in an attempt to better the £500pa predicted return at 65yo as currently stands.

Thanks for taking the time to reply - much appreciated!

D_S

Linton

Your current investments look sensible. They seem to be reasonably safe, broadly based and unexciting which is what many people want from a pension. SL have a wide range of funds including some more lively ones if that is what you are after - do you have access to these from your pension?

Any chance of you getting special permission to move the money into your armed forces pension on the basis of the incorrect advice?

Devon_Sailor

Hi Linton,

Due to the current review of Armed Forces Pensions, they(or at least, my service) are not accepting any more transfers in at present, although you are correct - if they were, I would certainly be putting in a representation to see if it was possible. Buying even a couple more 'years of reckonable service' can make a huge deal. And it is about as gold plated as you get in the current climate.

You are probably right - the simplest way of adjusting things may well be to alter my portfolio balance/funds from within the SL 'stable' (if allowed).

I will ask them when my new statement comes through.

D_S

dunstonh

I have quite a few years left until retirement and like the idea of getting 'hands on' through some sort of self-administered portfolio (eg H&L etc) - would that be possible?

We have seen people on this board transfer out of personal pensions into HL only to use funds that are more expensive than what they had before and a worse performance record. Yet they thought HL was cheaper and better. Are the investments you would use in a SIPP "better" than those that Std life can offer you?

A SIPP is an experienced investor product. There is more scope for investment selection but that is only of use if you are going to take advantage of that. if you end up using the wrong sort of investments or investments that are better handled in a personal pension then it could end up an expensive folly. If you start buying more advanced investment options or single sector/focused funds then you need to be more in control of your investments and that means regularly reviewing them, rebalancing them etc. Is that your plan? If so, then its all looking like good reasons to consider alternatives (although Std Life may still be suitable for that). If it isnt your plan then a SIPP is not looking like a good option.

jamesd

SL will ofer more investment options than those, though I do think that you can find better options outside SL. First decide what you want to invest in. Then compared costs and service at the various places where you can hold those investments.

SIPPs are mainly required if you want to directly own shares or some other things, not just funds. Some SIPPs can be fairly competitive with other personal pensions but that's not necessarily so.

My own view on your investments is that they area bit light on the global aspect given your age. I'd be looking to have less UK and more global involvement, perhaps also upping the risk (volatility) level as well. But that assumes you can handle greater ups and downs of value and many people can't handle the downs even though long term they increase the expected growth rate. What sort of drop could you deal with emotionally in a bad year for investments? 45-50% for the UK main stock market? Less? More?

torbrex

I may be wrong (I usually am) but if you transfer the pot into another fund then the 25% tax-free lump sum of that portion of your total fund is no longer available should you need it at some point.

I have a number of pension funds that are no longer receiving contributions and that aspect of the information about possible amalgamation of funds was the first thing that caught my eye and I decided just to leave things as they are.

Linton

torbrex wrote: »

I may be wrong (I usually am) but if you transfer the pot into another fund then the 25% tax-free lump sum of that portion of your total fund is no longer available should you need it at some point.

I have a number of pension funds that are no longer receiving contributions and that aspect of the information about possible amalgamation of funds was the first thing that caught my eye and I decided just to leave things as they are.

You are wrong. The 25% tax free from a defined contribution scheme becomes available when you are 55 wherever the pot is invested. Whether it is a good idea to take it at 55 is another matter - you can only take it once from any pot so you lose out on the 25% of further growth.

gadgetmind

Linton wrote: »

you can only take it once from any pot

You can use phased retirement to crystalise the pot in stages, but IMO this makes things mighty complicated later on if you decide to use drawdown.

so you lose out on the 25% of further growth.

True, but you can invest the money outside of a pension (ISA,unwrapped, whatever) to avoid being taxed on it as you are when drawing on a pension.

jamesd

You don't lose out on the 25% of further growth. You can invest in exactly the same things outside the pension, say inside a S&S ISA to generate tax free ongoing income from the tax free lump sum.