Pension: Stay or Move

Pal

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

It will say on the documentation you have from them.  It is either a personal pension or a stakeholder.  No, you cannot move it back into the state schemes, but I suggest you phone the Pru and ask them to cancel future contracting out.  From memory I think you have to contract out for a tax year at a time so you might have to contract back into the state scheme from next April.  The Pru will be able to tell you.

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

I still don't understand the £1k bit.  If it is a final salary scheme you should be given a transfer value, an estimate of the pension now and possibly an estimate of the possible value at retirement age.

"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? "

Probably, although it would need an IFA to advise for sure.  Depends whether you could do something better with the money or not.

"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 ??    "

Assuming that the Pru is a personal pension you should almost certainly take out a new stakeholder.  Martin wrote an article on this.  L&G are usually a good bet as long as you only choose their index tracking funds, not their actively managed funds. For active fund management or bond funds you are on your own (or ask an IFA).

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

Thats because your pension savings are small, not because the IFAs are expensive!  If you want to contribute more to a pension then a couple of hours spent with an IFA now could make you a lot of money when you retire.  Think of it as an investment in its own right.  Selecting a decent stakeholder should be a piece of cake for a fee based IFA and they will also help you decide how much to contribute.

"thanks again for your time. "

You're welcome.   ;D

Pal

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?

Irrespective of what you do with your existing pensions, it would be sensible to save something towards your retirement as any kind of saving for retirement is worthwhile. Do you want to live on state benefits when you retire or do you want to enjoy yourself?

Whether you choose pensions, ISAs or property is up to you. I tend to favour pensions because they lock the money away to stop you spending it and they force you to buy an annuity which means that if you live for longer than you expect you always have an income. Of course many people see these things as disadvantages!
Pensions do have some very valuable tax advantages compared to other savings plans that are worth taking advantage of. ISAs are currently fairly similar but I personally do not trust the Government not to change the tax rules on them.

As for your past pensions. It depends on what type of pensions they are. Please read the three bullet points in my third post in this thread. Unless you were paid a refund of your contributions from the pension plans you should still have some money left in them. I suggest you read the documents that were sent to you carefully.

money_ninja_2

Hi Pal,

i think im getting there now.

The Pru is a Personal Pension Plan with "protected" & "other" pension benefits.

The Scotish Equitable one is a final salary :

Transfer value £350, Value now £1K and "possible pension value of "less than £120 PA".

So i think from what you have said the best thing to do would be -

1. Leave the Scotish Equitable pension alone - unless i can find a better use for the £350 transfer value.

2. Stop contracting out into the Pru - go back into the state scheme.

3. Start a new stake holder for extra contributions.

(should i move the Pru pension, after ive opted back in, into this stake holder?)

This would give me (i think):

1. A small lump sum from Scotish equitable.
2. A pension from the state
3. A pension from the new Satke holder
And possibly
4. A pension from the Pru (if i dont move it to new stake holder)

Few ::) - i hope ive made that clear for both of us ;D

I take you point about IFA, and will now consider it in the terms that you have said.

Many thanks again - this has been bugging me for ages and now i feel that i may be getting on top of it thanks to you.

Pal

"The Pru is a Personal Pension Plan with "protected" & "other" pension benefits."

The "other" bit suggests that you have made some additional contributions to this plan at some point in the past. All state rebates should be called "Protected Rights."

"The Scotish Equitable one is a final salary :

Transfer value £350, Value now £1K and "possible pension value of "less than £120 PA"."

I still don't get the bit about £1k ???. For a final salary scheme it should say something like:

Pension at date of leaving service: £20 p.a. (for example)
Transfer value = £350
Estimated pension at Normal Retirement Age = £200 p.a.

The estimated figure at retirement age MUST be more than the figure at date of leaving service - anything else is illegal. It is really difficult to advise without seeing the statement! If you can scan the statement into a PDF or similar file then PM me and I'll give you an e-mail address to send it to.

"So i think from what you have said the best thing to do would be -

1. Leave the Scotish Equitable pension alone - unless i can find a better use for the £350 transfer value."

Yes but check out the £1k figure first.

"2. Stop contracting out into the Pru - go back into the state scheme. "

Yes.

"3. Start a new stake holder for extra contributions. "

Yes

"(should i move the Pru pension, after ive opted back in, into this stake holder?)    "

Talk to the Pru and find out what the transfer value would be compared to the current value of the investment. Assuming that there are no serious surrender penalties then you might want to consider moving it if:

- the investments in the new stakeholder look better than the Pru investments;
- and the charges in the new stakeholder are lower.

The first of the above two points is by far the most important!

money_ninja_2

Top marks Pal,

looking at the Scotish Equitable pension i now see that it says, Personal Pension Plan, but it does mension salary & final salary alot.

should i now move this to the stakeholder too?

Cheers ;D ;D

Pal

If it is currently worth £350 and is being reduced by charges, probably yes. If it is worth £1000 at the moment and the transfer value is £350 then no!

money_ninja_2

Hi Pal,

the value now is £1000 and the transfer value is £350 as you said. So id be best to leave that alone and take it as a lump sum? I think you said earlier that if it is worth less that £250 per anum, they usually offer you a lump sum. This policy says less than £120.

Ive had a closer look and they take out
£3.45 Per month - member charge
0.96% of fund per year - member charge
1.00% for Mixed contributions per year - fund management fee

Wont this eat into its value?

The value seems to have gone down from £1350 to £810 in Feb 2003, now upto £1000 July 2003.

Getting confused again!! ???

Pal

I am guessing that the reason it is going up and down is because you are invested in an equity or balanced/managed fund of some kind.

If those charges are correct they are obscene! I would definitely not put any more money into this policy when you can get a stakeholder than will charge you a maximum of 1% of your fund a year and possibly less.

Basically your fund will reduce by 1.96% a year plus another £41.40 a year! On £1,000 thats a fee of 6.1% a year! You need to make 6.1% a year in investment terms just to break even, which is why they are projecting a very small pension at retirement.

Of course had you contributed more to the policy the percentage charge would be a lot less because most of it is a fixed fee, but even the 1.96% management charges are too high.

I suggest that you write to the Pru stating that you are considering contributing further to the policy but that the level of the charges is ridiculous. Ask if they can convert this policy into a Stakeholder plan without you suffering the reduction from £1000 to £350.

If they can then great (but you still might want to contribute elsewhere). If they cannot then take the £350 and transfer it to a decent stakeholder.

money_ninja_2

Pal,
i think ive got it now, once again many thanks for your time in sorting this out. ;D ;D

ANNALR22

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