Please can someone explain what Pension this is?

niftythrifty33

I'm currently doing an overhaul of our finances. My husband took out a Scot widdows policy 10 years ago. He pays £54 p/m. He has an old Royal mail pension (I think its frozen?). He is unable to get a pension with current employer. This is the only policy he has and I don't have one at all? (apart from a very small amount in a local council pension, also frozen, I think?). We know he's not saving enough and I'm not saving anything!

If I give some details of the current pension/policy he has please could someone tell us if it's decent or whether it would be better to move it. We are both trying to get better educated in what our money is doing. Also we're both 40 with 3 teenagers still at home.

Current policy:
Stakeholder Pension
FUND Middle Rate
Mixed 7.0%
SW Newton Managed 7.0%

'Where future payments from your fund are to be invested'
FUND Monthly payments %
Mixed 70.00
SW Newton Managed 30.00
Total 100.00

Please can someone explain what all this is in easy terms? Also, should he move this money to a different type of product?
Also, I can get a pension in work but I'm thinking of changing jobs soon so not sure whether it's worth setting up?

Many thanks for your help

JoeCrystal

Think as pension as a wrapper, there are all kinds of investments that can be held in different kind of pensions. Stakeholder Pension is very basic pension scheme that allow contribution as low as £20 per month.

If he pays £54 net, then that would get tax relief of 20% so worth £67.50 per month. 70% goes into Mixed Fund or £47.25 and 30% goes into SW Newton Managed or £20.25.

What is the value of these funds? It will add up to a total pension fund. Naturally, as they are investments, the funds rise and fall depending on how it performs.

It does not matter if you are planning to change a job in the near future, what matter that you should set up a pension scheme straight away. What if you do not change jobs then ultimately, you would never do it. Check your employer's pension and if they contribute to it, then you lose out on a free money that was on offer. I really hope the following question is not true, your employer is LGPS?

As for your husband, all companies in this country will have to auto-enroll their employees eventually. So his employer will have to offer him a pension soon enough.

The best thing is to ask yourself just how much income you both need when you retire and work out how much the amount is necessary to put aside. At least you still got twenty more years or so to catch up but it is not going to be cheap. £54 (net or gross) per month is very low in this day and age, especially when personal pension scheme require £100 (gross) per month minimum.

Hopefully other posters will answer your questions. Asking more questions never hurts.

Cheers,
Joe

xylophone

Royal Mail pension - not frozen, deferred? http://www.royalmailpensionplan.co.uk/80/deferred-members

LGPS - not frozen, deferred? http://www.lgps.org.uk/lge/core/page.do?pageId=101781
http://www.barnett-waddingham.co.uk/news/2012/07/revaluation-for-early-leavers/

Also, I can get a pension in work but I'm thinking of changing jobs soon so not sure whether it's worth setting up?

Just "thinking"? Might be better to get on with it? Why have you not joined up to now?

dunstonh

If I give some details of the current pension/policy he has please could someone tell us if it's decent or whether it would be better to move it.

The pension itself is basic. It wont be the cheapest. it wont be the best. However, it is not designed to be. The contribution he is making is dire and barely worth it. £54 was good in 1990. It is below most providers minimum contribution nowadays.

At age 40, £54pm will likely return around £54pm in retirement in todays terms.

I would focus on what you are going to get back. Playing with the type of pension or provider to use or investments to use is not really worth the effort if you are only paying in peanuts. i.a. a 10% improvement in terms will still only relate to around £5pm in todays terms in retirement on that contribution. You need to look at how much you are paying and step it big time and make sure the employer pension is joined as soon as the employer pays into it.

niftythrifty33

Wow, thank you all so much for the advice. I'm still unsure whether it's worth him keeping this pension and maybe doubling the payment or moving it to something else?

Also, my old deferred pension was with LGPS but my current job isn't gvmt its voluntary sector who have recently changed hands and not been helpful at all with regards pension stuff, but I will call them tomorrow and get one set up if I can.

Q. from DH, If he takes out a company pension if/when his employer makes one available, will the employer contribution be as much as he gets in tax relief on current pension? Taking into account the fact that hi s boss will pay minimum. Also is the tax relief on current pension just like getting interest? ie. he pays £54 and the gvmt pay £13.50 in interest? Sorry if this is a stupid question.

dunstonh

Wow, thank you all so much for the advice. I'm still unsure whether it's worth him keeping this pension and maybe doubling the payment or moving it to something else?

Doubling is still not taking the planning seriously. It is still only taking you to just above minimum contribution for most modern pensions.

Q. from DH, If he takes out a company pension if/when his employer makes one available, will the employer contribution be as much as he gets in tax relief on current pension?

He still gets tax relief on his contribution. The employer money is "free money" on top of that.

niftythrifty33

Thank you Dunston, that makes a lot of sense. I think we will find an Independent Financial adviser that has been recommended and take a good look at all our issues as there's quite a few things to sort out!

Thanks again for your help.