Company Pension

Gemmzie

Apologies if this is a stupid question. My mother is about to change jobs and is weighing up the pro's and con's of her new company's pension scheme. I'm a bit lost when it comes to pensions so was hoping I could get some advice.

She currently has her own private pension with Prudential, which she pays £45 approx into per month.

The company one is matched as follows:
You 3% Them 5%
4% 6.5%
5% 8%
6 10%

What else is important to look at? She's 47 by the way, I think that makes a difference

EdInvestor

Better to pay the money into the company pension because

a)It will attract the extra free money she wouldn't otherwise get

and

b)Charges on company pensions are normally lower than on PPs.

45 quid a month is a pathetically small amount to be paying into a pension.So even more important that she gets the additional free money, as the end result of her own efforts is likely to be very disappointing.

Gemmzie

Thanks,

So should we keep the private pension going as well or cancel it and only do the work one?

Andy_L

yes, no ,maybe.

How much does she want to save for retirement via a pension? If it's more than 6% & the company won't let her pay in more then that then she needs a second pension scheme. If it less then just use the company sceme to maxamise the employers contributions

Transfering it into the company scheme (if allowed) may result in cheaper charges as the company may have negotiated a bulk buy discount. However it might have bonuses/guarantees where it is that would be lost by moving it.

polybear

Hi,

From recent personal experience, after paying into a pension with the Pru for the last 25 years (currently at £110 per month) the fund will be worth £62K in June and will give a Pension from the pru (after taking the max. lump sum of approx. £15K) of about £3300 per year; i.e. £275 per month LESS TAX.

This'll give you some idea of what may lay ahead.

polybear

Gemmzie

Got some more info on this Prudential one - it has a Life Cover tied into it too.

Last years summary (this years hasn't turned up yet but is due soon)...

Started in April 1999, runs for 22 years
Transfer value = £4,213.71
£40 gross per month was paid in.
There are bonuses of 6% for pre-02 payments and 6.75% for post-02 payments

The estimated pension in today's prices per year is £510.00



If she's been paying in £45 per month then that's only about £100 more than the cash in value.
So is it worth cashing it in?

polybear

Hi,

I'm no IFA etc. but personally (and assuming you don't want to continue paying in) is to find out if you can stop paying in and just let the money stay put for the full duration to accumulate growth. The downside is that the Pru' will be creaming their charges off the top every year.

The other option could be to cash it in and accept the loss of the initial charges (though at least you'll be getting back more than you paid in).
** A thought - since it's a pension then can it actually be cashed in? The transfer value is probably to another Pension Provider - not to your bank account!!**

If you can cash it in then maybe put the money in a Shares ISA and let it (hopefully) build up a nice sum over the next 14 years...

polybear