What to do with small private pensions

Pete_Somerset

Morning, any advice on the following would be appreciated...oh and i've just turned 50

Story so far..
Many years ago (in my early 20's) on advice from my bank, i opted out of my company pension and ended up with two private pensions, one containing the transfer from my company pension of about £3k and a new one as suggested by the bank, both of which were set up for retirement at 50

After a few years I decided to move back to my company scheme as it was now 'final salary'..some time later the bank agreed that they had miss sold me a private pension and compensated me by adding funds into the private pension they set up for me.
Im paying a sizable amount into my company scheme which im very happy with.

My question is:-
What to do with the two other pensions.
the £3k one is now down to about £2600 as the admin fees often exceed any increase it makes each year.

the Second one had about £50k in it but has reduced year on year since I moved back to my company one.

I don't want to pay more into either of them but the pensions im being quoted from the £3k one is tiny ..

Alas the change in the law to 55 is a pain as id love to get some cash out of them as today id get a better return on an ISA.

Have been looking at all the 'cash in your pension' sites and while i know its risky (but legal?) it dose seem tempting

Any suggestions appreciated.

dunstonh

Alas the change in the law to 55 is a pain as id love to get some cash out of them as today id get a better return on an ISA.

ISA and pensions share virtually the same investments. So, you dont get a better return on ISA compared to pension.

Have been looking at all the 'cash in your pension' sites and while i know its risky (but legal?) it dose seem tempting

Its also stupid, especially when you know it is unlawful and HMRC are going to fine you a few years down the road and require you to put it back.

It would make sense to review the pensions and if necessary, consolidate them into a modern plan with investments of your choice. It may be that your understanding of your pensions is wrong (charges shouldnt erode the value year on year for example and values shouldnt drop every year).

Linton

As Dunstonh says, your pensions should not be dropping year on year. They may well have lost a lot in 2007/2008 but the markets have recovered since then. One possibility I guess is that as old pensions they may not be the standard fund investments you get now but could be With Profits and/or include guarantees which may change the picture.

You say that the pensions were set up to pay out at 50, which you now are. Have you received any information from your pension provider as to what happens now?

I suggest that you consult an IFA to assess the old pensions and advise whether it is sensible to consolidate them in a new pension. The advice will cost you but could be very worthwhile. Another option could be to transfer them into your current FS pension to buy extra years. You would need to ask your employer pensions people whether this would be allowed.

The worst thing you could do is to try and get cash for the old pensions from one of the companies your find on the net. If you arent scammed (or even if you are) you would leave yourself open to a punitive tax bill when HMRC find out, as they will.

wallpaperman

Linton wrote: »

You say that the pensions were set up to pay out at 50, which you now are. Have you received any information from your pension provider as to what happens now?

Very likely that these would have been set up with a retirement date of 50 at the time, but the policies will now have a minimum age of 55 before they can be vested, in line with the changes in legislation from April 2010.

Pete_Somerset

Thank you for the advice, perhaps i was being to pessimistic regarding the slightly larger pension performance. Just checked and as an example, from when it was with Norwich Union back in 2007 to the latest Aviva statement the 'total fund value' has increased by approx £3500... With a transfer value of £500 more than the 2007 fund value.
So apologies, it hasn't dropped each year... but equally to my simplistic brain it doesn't seem to have performed particularly well either..?

Both were initially set up for retirement at 50, and i cant currently find any correspondence from Aviva regarding the change to 55 other than a change in date on a previous yearly statement.

dunstonh

but equally to my simplistic brain it doesn't seem to have performed particularly well either..?

Investments will zig zag in value. You get good years, bad years and nothing years. An economic cycle is typically around 10 years. So, unless you look at the whole economic cycle, you cant judge performance as you could be only looking at the recessionary years or the growth years and not an average of the two. You know what some of the last 5 years have been like (although not each one has been bad, one of those years had record gains on the stockmarket).

Both were initially set up for retirement at 50, and i cant currently find any correspondence from Aviva regarding the change to 55 other than a change in date on a previous yearly statement.

It happened back in 2006. Providers typically put a leaflet/flyer in the statements in that period to explain the key changes.

Pete_Somerset

Investments will zig zag in value. You get good years, bad years and nothing years. An economic cycle is typically around 10 years. So, unless you look at the whole economic cycle, you cant judge performance as you could be only looking at the recessionary years or the growth years and not an average of the two. You know what some of the last 5 years have been like (although not each one has been bad, one of those years had record gains on the stockmarket).

Just for info..I have just checked back to the original start date of 1990 (feeling very old now) and it appears to have increased by just under £8.5k over the last 23 years...as you say. some years were far better than others, and some where it dropped significantly.. but many appear almost static.
Fortunate indeed that im not reliant on this for my retirement.

dunstonh

Pete_Somerset wrote: »

Just for info..I have just checked back to the original start date of 1990 (feeling very old now) and it appears to have increased by just under £8.5k over the last 23 years...as you say. some years were far better than others, and some where it dropped significantly.. but many appear almost static.
Fortunate indeed that im not reliant on this for my retirement.

If you dont pay into it in the bad years then you miss out on the growth that follows. Also, the type of investment you have (with profits going by earlier posts) is largely obsolete. It is not going to set the world on fire. Some are near cash alternatives in terms of return. The early 2000s killed off many of the WP funds due to the FSA forcing providers to focus on solvency as the priority rather than rate of return. Had the FSA not done that, we would have seen insurers fail during the credit crunch. However, it does mean the return since then has typically been poor bar a few exceptions. You wouldnt invest new money in that now.

atush

dunstonh wrote: »

If you dont pay into it in the bad years then you miss out on the growth that follows. Also, the type of investment you have (with profits going by earlier posts) is largely obsolete. It is not going to set the world on fire. Some are near cash alternatives in terms of return. The early 2000s killed off many of the WP funds due to the FSA forcing providers to focus on solvency as the priority rather than rate of return. Had the FSA not done that, we would have seen insurers fail during the credit crunch. However, it does mean the return since then has typically been poor bar a few exceptions. You wouldnt invest new money in that now.

The above cannot be stressed enough. when bad times come, and you still invest, these turn out to be the golden times. When you bought low and selling is only a distant dream ;-)

The bad bear years are the time to put money in, not when the Bulls are running at their peak.

gadgetmind

atush wrote: »

The above cannot be stressed enough. when bad times come, and you still invest, these turn out to be the golden times.

Over the last 18 months, I moved a fair bit of cash into equities and preference shares. I went for some steady blue chips at great prices but also bought shares in banks, property companies, European companies, property companies and banks in Europe, dodgy financial instruments of banks and property companies, many of them in Europe, well you get the picture.

The bigger the whiff things are giving off, the better the opportunities IMO.

I'm a Yorkshireman and "where there's muck there's brass" could almost be my motto!

When things are all shiny and happy, I tend to end up with cash accumulating and waiting for opportunities as things that smell of roses usually have thorns.

atush

I am feeling all James Herriot all of a sudden lol.

you'll be going on about a good bacon pig in moment ;-)