company pension or sipp

paulant18

Hi Everyone

I have a 48k state second pension that i no longer contribute to.
I am 48 and have have no other pensions.
My company are about to introduce a Scottish Widows pension scheme with a minimun 3% contribution, with the company matching the 3%. There are no penalties to transfer my current fund.
What i am asking is does that sound ok or would it be worth looking at a SIPP alternative or both? My friend has just invested 30k into a company called Adimus, who invest in a company called Premier Children Services LTD, with a guaranteed 9% return over 5 years, but it seems a very new idea with no financial history.
I would obviously like the best returns like everyone else with a medium risk, but have no real experience. What to do !!!!
Some advice for a novice would be greatly appreciated.
Thanks

jamesd

Do not copy your friend. A single company investment is automatically high risk because so much money depends on how just one company does. Because of the type of investment it's also prohibited to promote their investments to people unless they have high net worth (millions) or are highly experienced investors, typically meaning those who have worked in the financial markets. Adimus itself appears not to be authorised to give investment advice.

I hope that your friend has invested less than 5% of their money and has a net worth of a couple of million Pounds or more.

The pension pot you have accumulated from contracting out could be transferred into the work scheme. Whether you should do that depends on the range of investments and charges to hold them. If you can get the same investments at lower cost in the work scheme then it'll be better to transfer.

dunstonh

My friend has just invested 30k into a company called Adimus, who invest in a company called Premier Children Services LTD, with a guaranteed 9% return over 5 years, but it seems a very new idea with no financial history.

Oh dear. I hope your friend isnt relying on his pension as his only source of income in retirement.

I would obviously like the best returns like everyone else with a medium risk, but have no real experience. What to do !!!!

Your friend has used a highly speculative option that is unregulated in the UK and has no consumer protection when it goes under. These sorts of schemes are only suitable for high net worth individuals having a dabble with a very small amount of their funds that they can afford to lose 100%.

It is not suitable for the normal retail consumer market.

FatherAbraham

paulant18 wrote: »

I have a 48k state second pension that i no longer contribute to.
I am 48 and have have no other pensions.

I'm not sure that's a state second pension. It sounds more like a pension from a previous job, whether occupational, or some kind of money-purchase scheme.

Is the £48,000 a transfer value, or a fund value? Is it a defined-benefit scheme, or a defined-contribution scheme?

paulant18 wrote: »

My company are about to introduce a Scottish Widows pension scheme with a minimun 3% contribution, with the company matching the 3%. There are no penalties to transfer my current fund.
What i am asking is does that sound ok or would it be worth looking at a SIPP alternative or both?

The 3%-contribution matching sounds great to me. They'll pay as much in as you do. For every pound going into your fund, you'll only have paid 50p -- that's an immediate, guaranteed 100% return on your money, and you won't get better than that anywhere.

From what you've told us, it sounds like anyone who advised you to do something other than participate in this scheme would not be acting in your best interest. (Unless you really can't afford the 3% now -- but if you're paying 20% tax, then your 3% contribution will only cost you 2.4% of your take-home pay, because of the tax relief)

However, whether you should transfer your existing pension into this new scheme is more complicated. Unless you provide more details of that pension scheme, and the new arrangement, no-one will be able to help you decide. Transferring a generous defined-benefit scheme into a money-purchase scheme might be very bad. Transferring an old, expensive money-purchase scheme into a modern, low-cost scheme might be good -- unless there were some further complication such as a with-profits market-value-reduction penalty.

paulant18 wrote: »

My friend has just invested 30k into a company called Adimus, who invest in a company called Premier Children Services LTD, with a guaranteed 9% return over 5 years, but it seems a very new idea with no financial history.
I would obviously like the best returns like everyone else with a medium risk, but have no real experience. What to do !!!!
Some advice for a novice would be greatly appreciated.

If you're a novice, then it's a really good idea to keep away from things like SIPPs, which are for sophisticated investors who want the freedom to trade a lot. There's potential for great gain, and for great loss.

Keep things simple until you've found your feet. You're saving for a time when you won't be earning any more, so a little bit of caution and skepticism is a good idea.

Warmest regards,
FA

Stochasticity

paulant18 wrote: »

My company are about to introduce a Scottish Widows pension scheme with a minimum 3% contribution, with the company matching the 3%. There are no penalties to transfer my current fund.

What i am asking is does that sound ok or would it be worth looking at a SIPP alternative or both?

Whether it makes sense to transfer your current pension requires more information, unfortunately.

You should certainly contribute 3% to the Scottish Widows scheme, in order to secure the company's match. The company's 3% is free money.

If you want to contribute more than 6% (i.e. 3% + 3%), it may make sense to contribute the excess to the Scottish Widows, or to another pension, it's hard to say without more information.

xylophone

I have a 48k state second pension that i no longer contribute to.

Do you mean that you contracted out of SERPS/S2P?
http://www.lovemoney.com/blogs/savings-investments-pensions/pensions/15279/contracting-out-pension-what-is-contracting-out

https://docs.google.com/viewer?a=v&q=cache:PAZNSl4FlkEJ:www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/%40dg/%40en/%40over50/documents/digitalasset/dg_186333.pdf+&hl=en&gl=uk&pid=bl&srcid=ADGEEShMRqtO8j_3Y903RhqPQ0-eMNJ6FkZWJpGuC3M3kvQyMp-aY0E4wOG7Bst2GdSjbi7i5-X-VoHPXpY1jIUS6EDF3ZBR4J3AXcSLhAI0or0RmVPZjBCMZoNAtQfGakn6wFxHwnIm&sig=AHIEtbRZhp3fE1uueFAklRHgIL0PNi4bcA

http://www.eversheds.com/global/en/what/articles/index.page?ArticleID=en/Pensions/Pensions_speedbrief_Protected_rights_abolished_from_6_April_2012

paulant18

Thank you for all the replies, they have been a great help.
Just to confirm, yes, i did contract out way back in 1989 when it was introduced. The fund is a "With Profits" if that helps and has grown to 48k.
I contacted the pension service who told me that all restrictions on these types of pensions had been lifted an i can treat it like any other private pension, although i,m not sure i can take a lump sum at 55.
Hope this helps

redbuzzard

The first question that occurred to me was "what is the maximum contribution from the employee that your employer will match?".

You stated the minimum from you was 3% which they will match. You should absolutely do that, it's free money from them. Can you get them to put more in?

My ertswhile employer for example has a DC scheme that starts at 3% (minimum) employee contribution with 6% from the company. But they will contribute in the same proportion up to 5% (employee) and 10% (company).

If you have an opportunity to put more in, matched, take it.

jamesd

Yes, you can take a lump sum at 55. It really is now just like any other personal pension money. Some providers no longer bother to even record the difference and have just merged all money into one combined pot.

Don't take it at 55 just because you can. Needs some good reason. A bad reason would be something like paying off a mortgage before its normal repayment date.

FatherAbraham

paulant18 wrote: »

Just to confirm, yes, i did contract out way back in 1989 when it was introduced. The fund is a "With Profits" if that helps and has grown to 48k.

The "with-profits" aspect may be imuportant for transfer considerations. Such "policies" tend to "smooth" past and future returns, and pay an unpredictable additional bonus at the end.

This means that leaving the with-profits fund early (by transferring your pension "policy" away) could result in it being reduced by a "market value adjustment" (that is, a charge), as well as your losing the terminal bonus.

This is also a consideration if your want to retire earlier than the agreed scheme date. Crystallizing your with-profits fund earlier than planned to start taking pension payments means withdrawing from the fund, which may incur similar penalties if it hasn't be notified to the provider in good time (you only have seven years until you reach 55, so you need to find this out immediately, by looking at the policy documents, or getting an answer from the provider).

Warmest regards,
FA