Pension: Stay or Move

I have recently left my previous employer of 7 years and as such need to make a decision concerning my pension.

Until my departure I had been paying into the companies group personal pension scheme with Norwich Union (With-Profits). I have now received a letter from Norwich Union stating my options.

1. "Your benefits could remain within the plan."

2. "You could transfer your benefits to another approved arrangement."

The current value of the plan is about £7000.

I will be starting new employment within the next month or two and am not sure of the pension options with new employer. I intend to take out a pension through my new employer or a new personal pension.

Can anybody offer some basic advice as to what I should do with the Norwich Union Plan.
If it is not worth transferring to another plan, is it worth changing IFA's to save commission.

Should I contact the companies IFA who arranged the policy to ask his advice.
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Replies

  • GalstonianGalstonian Forumite
    1.3K Posts
    First of all you need to have "another approved arrangement" if you want to transfer anywhere. Basically another pension. Have you joined a scheme with your current employer or made other arrangements?
    I'd ask the provider of the scheme you plan to transfer to what the value of the transferred fund would be and decide from that.

    I'm sure it is not always the case but it seems to be rare that moving your pension gains anything more than consolidation but it often loses value in the process. Anyone gained anything from this process?
  • I am not an expert as many on this site are, but it seems to me that moving your pension will almost certainly incur costs, plus looking at the financial market at the moment and the problems with equitable life doesn't it make sense not to consolidate ( put all your eggs in one basket ) but to spread the 'risk' of doing well or not so well. Only my opinion, as I say I'm no expert.
  • Another thought,again if I'm wrong some-one please correct me. Half a brain cell and I'm going mad but none of us know what the future hold, either financial or personal so if you have more than one pension plan and circumstances are such that you need to purchase an annuity and get a lump sum in cash you can use one (part) of your pension and the other can be kept to be used later. I hope I make sense.
  • dguppydguppy Forumite
    40 Posts
    Good responses as usual. I think I might keep the plan as it is.
    I am a believer in spreading the risk with investments so it would make sense, unless anybody knows of a reason why the value of a paid up plan (not sure of the correct terminology) would perform less well than a plan in which I was still contributing.
  • PalPal Forumite
    2.1K Posts
    Silverlady - Mad you may be, but your answer is correct! ;D If the two are kept separate then you do have more flexibility. It is however possible that you will not get as good an annuity rate though, so you need to make sure that you discuss it with your chosen annuity provider to find out whether you would lose out by not merging them at the point of your retirement.

    Prior to that you can do what you like, and if manager diversity is an objective then this is a reasonable way to achieve it.

    Galstonian - the rule on not transferring generally only applies to final salary schemes and with-profits money purchase pension funds. If you have a unit linked money purchase scheme then you have to treat it just like any other investment (e.g. an equity ISA). If someone thinks they have somewhere better to move to then they may gain from transferring if they are correct. That said, Arbshark is in a with-profits fund so.....

    Arbshark - I would tend to suggest leaving the pension alone, mainly because the with-profits transfer is likely to have a penalty (Market Value Adjustment). Check this with Norwich Union (it should be on your statement).

    It is still worth asking your new employer what they would offer for the transfer, but it is unlikely that it will be advantageous. When you have found out come back to the board and let us know.
  • PalPal Forumite
    2.1K Posts
    There is no reason why one would perform better than the other, but one of them will! Not knowing which one is presumably why you want to diversify.

    That said, look into your new employers scheme - you may find you prefer their options than your existing one and so it may be worth transferring. Look out for the surrender penalty though.
  • Hi, i have a simlar problem & wonder if anyone could advise me what to do.

    I am 37 and have a pension plan with the Pru, i opted out years ago & still pay my contributions into. I also have a final salary pension started by a previous employer who i left 4 years ago. i have not paid into it since. This pension is with Scotish Equitable (worth 1k, transfer value £350) and if i dont pay any more in it will aparently give me a pension of £0. Gone in fees i suppose. It seems to get less each year!!

    My question is, should i transfer this value to the Pru or could i start repayments into it and have it as a final value pension. I have heard that these have been stopped now. Or should i even start a stake holder & put it into that.

    Im very confused.

    Thanks for any ideas. ???
  • PalPal Forumite
    2.1K Posts
    Im very confused.

    So am I !

    What did you opt-out of? The state schemes or an employers occupational scheme?

    If it is the state schemes you opted out of then I suggest you opt back in. It just isn't worth the risk any more - the rebates the Government gives you just are not worth it unless you want to take a lot of investment risk.

    If it was an occupational scheme you opted out of then slap yourself around the head a bit and come back and tell us how daft you have been... ;)

    "I also have a final salary pension started by a previous employer who I left 4 years ago."

    Ok....

    "i have not paid into it since."

    You can't. You cannot contribute to a final salary plan unless you are employed by the company that runs it.

    Now this is the really confusing bit....

    "This pension is with Scotish Equitable (worth 1k, transfer value £350) and if i dont pay any more in it will aparently give me a pension of £0. Gone in fees i suppose. It seems to get less each year!!"

    Now I am really confused. Final salary plan worth £1k (presumably at retirement date), transfer value £350 (sounds about right given your age).... pension of £0 :o.

    It is illegal for a final salary scheme to charge you fees. They have to preserve your pension until you retire and then pay it to you. The only way that the pension could be zero is if your numbers are mixed up and your final pension is likely to be less than £260 per year, in which case they would offer you a cash lump sum instead.

    I think that your figures are wrong somewhere or you are mixing up what type of pensions you have. However as some general advice:

    - It is very rarely worth transferring out of a final salary scheme. The transfer value is calculated taking into account the future performance of stocks and shares, meaning that your investments have to outperform stocks and shares to make it worthwhile transferring. Fairly risky.

    - If you are transferring from a money purchase scheme (e.g. like the Pru) then you can treat it just like any other investment e.g. an equity ISA. Transfer it if you can find somewhere better to put the money i.e. you think that company x's investments will outperform where you currently have the money invested.

    - transferring from a personal pension to a stakeholder may be beneficial but it depends on what transfer value you get out of the personal pension compared to the amount if you leave it behind. Some personal pensions have penalties that make it very expensive to transfer out.

    Dare I suggest you speak to a financial adviser...?
  • SystemSystem Forumite, Community Admin
    177.9K Posts
    10,000 Posts Name Dropper
    Forumite
    I have never really understood pensions and over the last 12 years both my husband and I have had several pensions we have paid into, albeit a small amount, due to our various jobs.

    What on earth can be do with them now they are all frozen. Should we just start a new personal pension each and stick with that in the future? Can we transfer anything we have paid into the others or is our money just gone?

    Hope there is an expert out there who can point me in the right direction and finally answer are pensions really worth paying into? With the various risks and uncertain future should we just put as much money as possible into a good savings plan for our future?
  • Hi Pal,

    thanks for the info so far, but even more confused ???

    I opted out of the state scheme into the Pru pension - can i now move this back in? - is this a stakeholder pension?

    You where right about the Scotish Equitable figures - I read them wrong - not hard in all that small type ::)

    The pension has 1K in it, transfer value £350, but "assuming no further contributions" the % final salary pension will be £0.

    But i have now seen "The pension you might receive could be less than £120 per year"

    So can i now take it that i cannot pay any more into this scheme and the best thing to do with it would be to leave it alone and collect a small lump sum from it when i retire?

    I would also like to start contributing some extra money from my wages - which would be the best pension for it? - my existing Pru, or a new stakeholder or ?? ??? ???

    I had considered IFA, but at £90 - £200 per hour, my pension could "provide in todays prices" 1.5 hours info gulp.

    thanks again for your time.
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