Executive Pension plan advice please?

welshgasman

Hi all,

I am looking for some advice about a pension I have with Aegon who was Scottish Equitable.
Please ignore the fancy title of the pension plan, the pension was taken out when I was contracting some years ago. You had to have your own Limited Company in those days to be able to get work through agencies.
Nowadays you can use what they call an Umbrella Company to be the Limited Company and you are just an employee of that company.
Anyway, nothing has been contributed to it since about 2000 when I closed the company down, as no more work was coming in. However it is in effect a company pension, though I was the only one in the company paying into the pension.

I've only just noticed as I am getting to that age , 61 at present, that the number of units is dropping each year, presumably to pay the fees and I appear to be losing around £800 per year. The fund however is managing to go up due to the cost of the units.

At present the fund is valued at £59K. Last year it was £56K.

As I write this I have been inspecting the figures from this years statement and was expecting to write that the transfer value was somewhat less, as this is what happens in my Abbey Life pension, but from this years statement it states Transfer Value is £64K?? However I do not really have a decent alternative pension to transfer it into.

It also mentions "Payments invested in this fund buy units which are guaranteed to have a value of £1 at your
pension date.", so despite me losing around 1000 units per year, I estimate that by the time I am 65 I will still have around 68,500 units left. I currently have 72,700 units.

So my questions are:

1. As this is a company pension, will there be any complications in cashing it in? They have sent me documents in the past re Trustees if I decide to cash it in early.
2. Should I be looking at cashing it in if possible now.
3. Is there any pension that I could start, that might give me a better return if I transfer and leave it invested. A SIPP perhaps?
4. At my age, is it worth contributing to a pension for the next few or more years. I do not expect to retire at 65, so it will likely run at least another 5 years after that if I am lucky.

TIA

xylophone

Had you thought of consulting an IFA to discuss the current position and any additional retirement provision?

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

Have you checked on your state pension position?
https://www.gov.uk/state-pension-statement

welshgasman

xylophone wrote: »

Had you thought of consulting an IFA to discuss the current position and any additional retirement provision?

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

Not yet, I was asking here first for some opinions, before even thinking of utilising an IFA. I will check out the link and ask around for any recommendations

xylophone wrote: »

Have you checked on your state pension position?
https://www.gov.uk/state-pension-statement

Yes, I have a full set of contribution years and received a statement that tell me they expect it to be £133 a week, presumably reduced from the full pension due to the time I was contracted out with these pensions.?

xylophone

Contracting out would reduce the foundation amount for new state pension but as you will be only 62 when new state pension starts and still working, you will be able to continue to increase your pension.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

xylophone

I have just had another thought - I am wondering whether the terms of this policy with the guaranteed value at age 65 would require you to take the advice of an IFA anyway before transferring out.

Is there a guaranteed annuity rate as well?

http://citywire.co.uk/money/why-you-have-to-take-advice-to-get-your-pension-cash/a819560

welshgasman

That is something I never knew about, so it has paid to post here . Thank you.

I will try and contact them this week to clarify this, and perhaps get an estimate as to what I would get if allowed to cash in now.

dunstonh

1. As this is a company pension, will there be any complications in cashing it in? They have sent me documents in the past re Trustees if I decide to cash it in early.

EPPs can provide a greater than 25% tax free entitlement. So, you are likely to need an IFA if you plan to draw the full pot. If the units were staying the same, the return on the fund would be lower.

2. Should I be looking at cashing it in if possible now.

1 - do you need it?
2- do you like paying unnecessary tax?

I've only just noticed as I am getting to that age , 61 at present, that the number of units is dropping each year, presumably to pay the fees and I appear to be losing around £800 per year. The fund however is managing to go up due to the cost of the units.

Charges paid from sale of units is one of the two methods. Quite normal. It means the charges are not being paid within the fund.

3. Is there any pension that I could start, that might give me a better return if I transfer and leave it invested. A SIPP perhaps?

You have told us nothing about your investments. So, we cant compare options. Plus, you havent given any indication of the investments you have researched to use in a SIPP. So, we cant really say. The fact you mention SIPP would indicate you believe yourself to be an experienced investor who wants more advanced investor options. So, let us know what you think and we can offer comment.

4. At my age, is it worth contributing to a pension for the next few or more years. I do not expect to retire at 65, so it will likely run at least another 5 years after that if I am lucky.

You are only 61. You still have 14 years available to utilise the tax wrapper from a contribution point of view. You dont have to stop using it just because you hit a certain age (other than age 75). If the tax wrapper meets your need then use it. If it doesnt then dont and use another instead.

welshgasman

dunstonh wrote: »

EPPs can provide a greater than 25% tax free entitlement. So, you are likely to need an IFA if you plan to draw the full pot. If the units were staying the same, the return on the fund would be lower.

Thank you DunstonH
I have just been in touch with Aegon, and they inform me that I would not be able to take more than 25% tax free.

dunstonh wrote: »

1 - do you need it?
2- do you like paying unnecessary tax?

1. No I do not need it at present, I was just a little concerned that the benefit would be eroded too much over my last few years.
2. No, does anyone? :-)

dunstonh wrote: »

Charges paid from sale of units is one of the two methods. Quite normal. It means the charges are not being paid within the fund.

That is good to know. ;-) I had a horrible experience with Abbey Life, when contracted out where they were selling and buying my units and pocketing the difference. That took the Ombudsman to sort out in my favour, and that is why I am wary.

dunstonh wrote: »

You have told us nothing about your investments. So, we cant compare options. Plus, you havent given any indication of the investments you have researched to use in a SIPP. So, we cant really say. The fact you mention SIPP would indicate you believe yourself to be an experienced investor who wants more advanced investor options. So, let us know what you think and we can offer comment.

No I never would class myself as an experienced investor, in fact most of the shares I invested in a good few years back have either dropped in value or remain stagnant. Alliance & leiecester and Glaxosmithcline are but two. Thus is another turkey and that was recommended by HSBC in one of theri newsletters. So no, not an experienced investor, but was thinkling of the extra £5k if I did transfer.

dunstonh wrote: »

You are only 61. You still have 14 years available to utilise the tax wrapper from a contribution point of view. You dont have to stop using it just because you hit a certain age (other than age 75). If the tax wrapper meets your need then use it. If it doesnt then dont and use another instead.

I've read you advice in the thread https://forums.moneysavingexpert.com/discussion/5305495 and from that it would appear to be, at least the way I have read it that I should continue with my next employer's pension fund, for the reasons you mention in that thread. I will never be a higher rate taxpayer, but who knows what the rules will be by the time I decide to withdraw it.

I have asked Aegon anyway for an estimate of cashing it in now, just to see all my options, but I must admit, my tendency now is to leave it. I cannot contribute anymore to it, as the company was closed down, but even by my calculation I do have an estimate as to what it will be worth at 65, an can work from there.

Thank you, and thank you xylophone for your posts.