Moving from Private to Public Sector - What to do with old pensions?

pinkteapot

Next month I start a job at a university and will be joining the USS. I will be earning £30k and the employee contribution is 6.5%. Employer contribution is 16% but I don't quite understand the relevance of that as it's a defined benefit scheme. Coming from the private sector, I'm used to DC pensions so this is all new to me!

I have the following pensions that are no longer being paid into, from previous employments:

1) Scottish Widows Personal Pension (group personal pension until I left), value £23,108

2) Friends Life Group Stakeholder Pension, value £2,946

3) Legal & General WorkSave Pension Plan, value £3,822

I have read in the USS information that it is possible to transfer other pensions into it (assuming the providers allow transfer-out). Firstly, how would I go about deciding whether it is a good idea to do that with the pensions I currently have?

If that's a terrible idea, how do I go about deciding whether I should consolidate the three accounts listed above? I know that you lose money in fees when you transfer out a pension. If I wanted to consolidate, is it a case of looking at the fees charged by each provider above and comparing them, both ongoing fees and transfer fees? In case you're wondering, the reason I'm thinking about consolidating is primarily to reduce my enormous pile of pension paperwork, and limit the risk of losing track of my accounts in the future.

Tancred

pinkteapot wrote: »

Next month I start a job at a university and will be joining the USS. I will be earning £30k and the employee contribution is 6.5%. Employer contribution is 16% but I don't quite understand the relevance of that as it's a defined benefit scheme. Coming from the private sector, I'm used to DC pensions so this is all new to me!

I have the following pensions that are no longer being paid into, from previous employments:

1) Scottish Widows Personal Pension (group personal pension until I left), value £23,108

2) Friends Life Group Stakeholder Pension, value £2,946

3) Legal & General WorkSave Pension Plan, value £3,822

I have read in the USS information that it is possible to transfer other pensions into it (assuming the providers allow transfer-out). Firstly, how would I go about deciding whether it is a good idea to do that with the pensions I currently have?

If that's a terrible idea, how do I go about deciding whether I should consolidate the three accounts listed above? I know that you lose money in fees when you transfer out a pension. If I wanted to consolidate, is it a case of looking at the fees charged by each provider above and comparing them, both ongoing fees and transfer fees? In case you're wondering, the reason I'm thinking about consolidating is primarily to reduce my enormous pile of pension paperwork, and limit the risk of losing track of my accounts in the future.

If they let you buy added years of service I would strongly advise that you use your existing pots to do just that. You cannot really lose out.

pinkteapot

I don't fully understand what happens if I transfer in.

I'm going into the Career Revalued Benefits version of the USS (final salary finished for new entrants in 2011). My pension will be 1/80th of each year's salary. Each year's pension is added together and revalued by the rise in official pensions (capped at 5%).

Their documentation explains the types of pension you can transfer from, and then says:

By transferring pension benefits from such schemes, you will receive a pension credit in the USS Career Revalued Benefits section. In other words, based on the transfer value, we will work out how much extra pension you can receive. This amount of pension will then simply be added to the amount of pension you have already built up in the Career Revalued Benefits section of USS. After the transfer has been received, the additional pension is increased in exactly the same way as your main benefits. USS will match increases in official pensions paid to public sector employees like teachers, civil servants or NHS employees for the first 5%. USS will match half the difference to a maximum of 10%. So if, for example, official pensions increased by 15%, the USS increase would be 10% in that year.

I might just be missing something, but that doesn't really seem to tell me exactly what transferring in my pot of £29k will get me (?).

I would be saved the hassle of worrying about asset allocations etc in my "normal" pensions, but there is a feeling of loss of control. I like being able to see what I'm invested in and changing it if I want to. I then understand that I get a pot worth £x at retirement with which to buy an annuity. With a DB pension, I could pay in a fortune and the rules about what I get could change on me.

Tancred

pinkteapot wrote: »

I don't fully understand what happens if I transfer in.

I'm going into the Career Revalued Benefits version of the USS (final salary finished for new entrants in 2011). My pension will be 1/80th of each year's salary. Each year's pension is added together and revalued by the rise in official pensions (capped at 5%).

Their documentation explains the types of pension you can transfer from, and then says:



I might just be missing something, but that doesn't really seem to tell me exactly what transferring in my pot of £29k will get me (?).

I would be saved the hassle of worrying about asset allocations etc in my "normal" pensions, but there is a feeling of loss of control. I like being able to see what I'm invested in and changing it if I want to. I then understand that I get a pot worth £x at retirement with which to buy an annuity. With a DB pension, I could pay in a fortune and the rules about what I get could change on me.

You need to contact your pensions office and request a quotation of what the transfer would get you as an additional pension. There are various actuarial calculations that they need to take into consideration, so that's why there isn't an available ready reckoner. My strong belief is that even a 'watered down' defined benefit scheme like the USS one is still much better than shouldering the investment risk with a money purchase scheme. The increases you'll get are basically CPI, with a ceiling of 5% a year and half of any additional CPI above that. It's a little worse than public sector schemes, which have no such ceiling, but the likelihood of CPI going above 5% in the future is pretty low, barring some catastrophe like world war, dictatorship, etc.

pinkteapot

Tancred wrote: »

You need to contact your pensions office and request a quotation of what the transfer would get you as an additional pension.

Thanks. I'll do this after I've started there.

Tancred wrote: »

My strong belief is that even a 'watered down' defined benefit scheme like the USS one is still much better than shouldering the investment risk with a money purchase scheme. The increases you'll get are basically CPI, with a ceiling of 5% a year and half of any additional CPI above that.

Thanks again. Getting a bit clearer now.

Tancred wrote: »

It's a little worse than public sector schemes, which have no such ceiling, but the likelihood of CPI going above 5% in the future is pretty low, barring some catastrophe like world war, dictatorship, etc.

I spent the last few years working for a Chinese company. I'm not ruling out any such catastrophes. :rotfl:

atush

Basically, putting in your old pensions will buy you a number of extra years in the scheme. AS it you had stared there x years ago.

The question is, how many extra years.

It will probably be a good thing to do, but you can come back here once you know

Jack_Griffin

Tancred wrote: »

the likelihood of CPI going above 5% in the future is pretty low, barring some catastrophe like world war, dictatorship, etc.

May I remind you about the 70's and the oil production embargo that resulted in 24% inflation in 1975.. admittedly over the last 30 years inflation has been a more modest average 5% and before the 70's going back to the 50's inflation wasn't too terrible.

I think inflation has been unusually steady in recent years, I rather think there will be a few upsets along the way.

So I think you are spouting nonsense Tancred, no one should make a statement like that, basically keep your fingers crossed & prepare for a few bad years.

There is an inflation table going back to the mid 18th century here
http://safalra.com/other/historical-uk-inflation-price-conversion/

kidmugsy

pinkteapot wrote: »

Employer contribution is 16% but I don't quite understand the relevance of that as it's a defined benefit scheme.

It's purpose is probably just to remind the staff that their pension won't be coming from the tooth-fairy (a lesson that some posters here could do with).

hyubh

kidmugsy wrote: »

It's purpose is probably just to remind the staff that their pension won't be coming from the tooth-fairy

If by 'probably' you mean 'not at all', then yes. Unless of course you mean the employer won't in fact be paying 16% of the employee's pensionable pay to the pension fund every month - or as you might put it, will be paying but only to the 'tooth-fairy'.

kidmugsy

hyubh wrote: »

If by 'probably' you mean 'not at all', then yes. Unless of course you mean the employer won't in fact be paying 16% of the employee's pensionable pay to the pension fund every month - or as you might put it, will be paying but only to the 'tooth-fairy'.

What on earth are you on about? Currently the employer pays 16% - if that proves not to be enough then in future years he will have to pay more. All that is bleedin' obvious. The question is why bother telling the employees that the current employer payment is 16%, since they will be indifferent as to whether it's 14%, 16%, 18% or whatever. My proposed explanation is that it's to remind the employee that .... oh, surely you must be only pretending to be stupid?