Transferring pensions to a SIPP

smpunter

I have been self employed as a taxi driver for many years now & have never made any contributions to a pension since. I am in the process of transferring 3 pension funds into a Bestinvest SIPP. The 1st one should be straightforward as this is my old works group personal pension with Standard Life value roughly 22K. The 2nd one is with Friends Provident ie Friends Life which is under a grand and was made up of my own personal contributions which I stopped within a year of starting the policy.
The reason for this policy was Abbey National talking me into opening this as a 16yr old & they also persuaded me to contract out of SERPS.

This is where my problem lies, the value of the contracted out Friends policy is about 8K & I am not sure whether I am allowed to transfer this to a SIPP. Having spoken to Friends Life they say I am able to do this but I am not all confident in their response.

I believe being self employed for the last ten years I was never entitled to the state second pension anyway. But what if where to leave self employment & get another financial services job which I am thinking about within the next 3 years.

Would some please advise me on the correct course of action.

Many Thanks

Stephen

dunstonh

This is where my problem lies, the value of the contracted out Friends policy is about 8K & I am not sure whether I am allowed to transfer this to a SIPP. Having spoken to Friends Life they say I am able to do this but I am not all confident in their response.

They are correct.

I believe being self employed for the last ten years I was never entitled to the state second pension anyway.

Correct, your years of self employment built you no qualification under the current rules.

But what if where to leave self employment & get another financial services job which I am thinking about within the next 3 years.

It wouldnt make any difference as you cant contract out and we have the new single state pension coming in.

Would some please advise me on the correct course of action.

Why SIPP?
Generically, SIPPs are more expensive (exceptions apply) and a minority option aimed at the more experienced investor looking for more advanced investment options.

xylophone

You might consider a transfer to a Personal Pension.

If you are going to vary contributions, stop/start etc you might consider a stakeholder.

http://www.cavendishonline.co.uk/pensions/

With regard to the state pension, see https://www.gov.uk/new-state-pension/overview

http://www.theguardian.com/money/2014/feb/10/state-pension-winners-losers-single-tier

If you intend to take up a position as an employee, your employer will need to offer a workplace pension at the latest by 2018.

https://www.gov.uk/workplace-pensions

http://www.thisismoney.co.uk/money/pensions/article-2890203/What-need-know-pensions-2015.html

If you need help, you could consider an IFA

https://www.unbiased.co.uk/

smpunter

Online SIPP charges are roughly 0.3% with Bestinvest & i intend to invest the pensions in various investment trusts. Many thanks for the replies.

jamesd

While you were working before becoming self-employed you were accruing additional state pension entitlement, either under SERPS or S2P. While self-employed you aren't. For both the years do count towards your basic state pension entitlement.

What will happen after the flat rate state pension comes in is that a foundation amount for you will be calculated. This looks at your contribution record and sets your new base amount to the higher of the old rules or new rules calculation. Then for all years worked after the flat rate comes in your flat rate pension entitlement increases by 1/35th of the flat rate amount until you reach the full flat rate, after which more work gains you no more state pension. This 1/35th applies to both employed and self-employed, no difference in the flat rate system.

This means that it is quite likely that you will end up with an entitlement to the full flat rate state pension. Just depends on your foundation amount and how many more years you plan to work or buy years.

agarnett

jamesd wrote: »

This means that it is quite likely that you will end up with an entitlement to the full flat rate state pension. Just depends on your foundation amount and how many more years you plan to work or buy years.

So what you are saying jamesd, is that in the OP's case he needn't worry too much about transferring his SERPs policy fund or even drawing it down and spending it, because in his particular case the fact he even has a SERPs policy is very unlikely to reduce his flat rate pension? In fact if he asks, he may find that it has simply been a nice little earner and that the actual amounts paid into it as NI rebates were probably quite small.

Actually though, if it is an old one pre-2001, I wonder if it started life as an AXA with profits policy and whether the OP took a reattribution bribe in 2001? If he did then the performance may still be moderately ok. If it was pre-2001 AXA WP and he did not take the bribe, then it may be important for him to leave it where it is at least until the next 5 year review of special distributions of inherited estate because those have made those policies mega-ok for those of us too canny to take the bribes! Mine received a £4,500 special distribution in 2010 and the bribe I did NOT take in 2001 had been less than four hundred quid! I am not about to transfer mine lightly just yet!

This is mostly because he clearly hasn't received very many years contributions into it and that strongly suggests his self-employed years and and previous contracted in years will be enough to qualify him for a full flate rate pension anyway? Is that right?

I have never been self-employed and my SERPs policy has a transfer value of £50K. But in my case, although I might well put it in a SIPP eventually, I daren't spend it because the majority of my working life I have been contracted out and therefore my flat rate pension will be reduced I think? Maybe all the way down to the current £113 pw?

smpunter

That is quite interesting as I never knew Friends were merging with Aviva also. The plan was taken out in 1992 & is partly small amounts invested in with profits 1 (4%) guaranteed & with profits 21 (1.75%). The majority is invested in the FL Managed fund.

In short I dont know if im due any bribes so to speak.

P.S. It started as a Friends Provident policy sold thru Abbey National. I did try & take them down the mis-seling route but got nowhere years ago.

dunstonh

In short I dont know if im due any bribes so to speak.

You are not.

smpunter

No bonuses due from the takeover by Aviva in the future?

jamesd

agarnett wrote: »

So what you are saying jamesd, is that in the OP's case he needn't worry too much about transferring his SERPs policy fund or even drawing it down and spending it, because in his particular case the fact he even has a SERPs policy is very unlikely to reduce his flat rate pension? In fact if he asks, he may find that it has simply been a nice little earner and that the actual amounts paid into it as NI rebates were probably quite small.

What he does with the SERSP policy has no effect on his state pension. You're right that it's likely that he will end up with both the maximum flat rate payment and the money from contracting out, while someone who didn't contract out would only get the maximum flat rate pension.

agarnett wrote: »

I have never been self-employed and my SERPs policy has a transfer value of £50K. But in my case, although I might well put it in a SIPP eventually, I daren't spend it because the majority of my working life I have been contracted out and therefore my flat rate pension will be reduced I think? Maybe all the way down to the current £113 pw?

It's unlikely that your foundation amount will be lower than the current basic state pension so if you continue working or at least paying self-employed contributions after the flat rate come in and before you reach state pension age you might make it to the full flat rate as well. Mainly depends on how many years you have to go until you reach state pension age. If it's not may you won't be able to get to the maximum flat rate level.

If your health is of normal good levels then one good use for the SERPS policy money would be helping you to defer the state pension, to get the 5.6% per year of deferring increase for those who reach state pension age after the 2016 introduction of the flat rate.