Release or freeze

dottym

Any advice would be welcome
My company is wanting to move pension providers, I only have 5 years left to work, should I transfer my pension of 20 years to another provider, freeze it with existing provider or release my existing pension and join the new one.

atush

What else is changing?

Fees?

Funds?

Their employer's contribs?

Can you leave it where it is on the same terms as now?

Don't see reason for panic, but you will have access to the above (we can't guess) so unless you gave more details we can't help.

jamesd

What sort of pension is this, defined benefit or defined contributions? Defined benefit is usually salary related payout and defined contribution where you can pick the investments yourself.

It would normally be an very bad idea to transfer a defined benefit pension to a defined contribution pension type. A defined benefit to defined benefit transfer would depend on the terms of each scheme.

A defined contribution transfer for a 20 year old pension may have very valuable guaranteed annuity rate or other rights attached that would make moving it highly unattractive. Otherwise a defined contribution transfer would depend on the range of investments and costs of those investments.

dottym

Hi Guys
Sorry I am a novice when it comes to pensions. I will try and make myself a little clearer, we were taken over by a large corporate company who are now making the people who do not have a personal pension join their own personal pension company which leaves us who do have a personal pension unable to stay in that pension and unless we move we will lose our 3% company contribution, we will get this 3% contribution if we go into the new pension, but that will leave my current pension, what I need to know is what shall I do with my current pension, transfer it, freeze it or release the money and move it myself into an isa or something else. Hope this makes it clearer if not I am sorry. Any advice would be most welcome. Thank you

GhIFA

It's difficult to advise OP - we don't know the terms of the existing scheme, or those of the new one, so can't make a comparison between the two.

Generally though, if the only way to retain the employer contribution is to join the new scheme, then join it. The decision over what to do with your existing plan is one that can be made separately once the comparison analysis has been done.

Does your employer have a pension adviser? If so, they should be able to carry out this analysis for you.

xylophone

You have worked for Xco for twenty years.
Xco did not have an occupational pension scheme but contributed 3% of salary to your personal pension scheme?

Xco have been taken over by Yco and Yco are not willing to continue with the previous arrangement?

Yco will however contribute 3% of salary to a pension scheme administered by a company of their choice?

So you can start a personal pension with Yco's choice of provider and thus get Yco's contribution?

You can simply leave your old personal pension with the existing provider and either not contribute to it or make additional contributions if you choose?

You could also opt to transfer the old pension into the new one?

You need a cost benefit analysis and if you cannot do this for yourself you could check with an Independent Financial Adviser - a fee will be payable but it is possible that Yco will fund this in whole or in part?

jamesd

First part is easy, sign up to the new pension scheme to get that employer money.

For the current one you need to find out whether there is a guaranteed annuity rate (GAR) or other benefits. It's old enough that there may be and they can be extremely valuable. If there's a guaranteed annuity rate it would be a bad idea to move it. So you need to ask that question and get that answer before deciding.

The "release" question is also fairly easy: you can't just take the money out and put it into an ISA. Assuming you're at least 55 years old you could take out 25% tax free and put that into a stocks and shares ISA and leave it invested there to grow until you retire. The remaining 75% you could leave until you retire, either in the same pension scheme or a different one you move it to. If there's a GAR this is probably a very bad idea.

If there is no GAR the transfer or freeze question depends on the investments that you want to use and the costs of holding those investments in each place. So decide which investments you want to use and transfer if it's cheaper to have those in the new one.

dottym

Thank you for all your help. My new company has a pension adviser but I am cautious that they will do what is best for the company not for me personally, but with your help I now know what questions to ask. Whatever I decide to do with my existing pension I will start the new pension to get my new employers contribution, even tho it will probably not do a lot in 5 years it is better than nothing. I have never heard of a GAR but will ask the question and if I have one I will leave my existing pension where it is, if that is what you advise
Would I be better to also move my existing pension into a low risk investment as I will not be adding anymore money into it, I will be putting my money into the new one.

GhIFA

dottym wrote: »

Thank you for all your help. My new company has a pension adviser but I am cautious that they will do what is best for the company not for me personally, but with your help I now know what questions to ask. Whatever I decide to do with my existing pension I will start the new pension to get my new employers contribution, even tho it will probably not do a lot in 5 years it is better than nothing. I have never heard of a GAR but will ask the question and if I have one I will leave my existing pension where it is, if that is what you advise
Would I be better to also move my existing pension into a low risk investment as I will not be adding anymore money into it, I will be putting my money into the new one.

Whilst the adviser is engaged by the company, with a group personal pension there is no benefit to the company one way or the other over what happens with your existing plan. In addition, the adviser stands to lose more by not providing you with suitable advice than they will gain, so you shouldn't be too concerned over approaching them.

atush

even tho it will probably not do a lot in 5 years it is better than nothing.

3% of your salary for 5 years = 15% of your salary 'free' plus tax relief at BR = 18%. This is before any growth in the underlying investment.

Not something to sneeze at, and as you say, a lot better than Nothing

jamesd

dottym wrote: »

Would I be better to also move my existing pension into a low risk investment as I will not be adding anymore money into it, I will be putting my money into the new one.

Rather than that you should try to ensure that the combination of the two has the right risk level. That could be high in one and low in the other or any mixture that has the right overall effect.

The best risk level depends partly on your preferences and partly on whether you plan to buy an annuity when you retire. Or you might use income drawdown - staying invested and taking an income from the investments - instead with all or part of the money.