Lost pension turns up.

Elmer_BeFuddled

Hi all! First post!
Had a letter last week from L&G to confirm I'd changed address for a pension I've been searching for over the last 5 to 10 years for a company I left more than 20 years ago (on contacting SJS consultants they stonewalled me with its been "moved on" but didn't tell me where to).
After replying to L&G I've had a letter stating that from Jan 2018 (when I'll be 60 :eek:) I can get c£2600p.a. or c£2100p.a. and a £14Kish tax free lump sum.

As I've no intention of retiring just yet (officially 66) I'm wondering what to do.

I'm actually leaning towards the take the cash and run option and as I'm a minimum rate taxpayer I can afford the 20% tax reduction in my £2100p.a. pension from age 60. Also I smoke, I drink, I've high blood pressure (obviously!!) so I can't see myself living to 91ish to get all the lump sum back as a pension.

Thing is, where would anyone advise I put my lump sum to earn a good rate of interest?
I don't really need the lump sum (my daughter might disagree!) but I'm thinking it's better in my hands and I know where it is.

GDB2222

Elmer_BeFuddled wrote: »

Hi all! First post!
Had a letter last week from L&G to confirm I'd changed address for a pension I've been searching for over the last 5 to 10 years for a company I left more than 20 years ago (on contacting SJS consultants they stonewalled me with its been "moved on" but didn't tell me where to).
After replying to L&G I've had a letter stating that from Jan 2018 (when I'll be 60 :eek:) I can get c£2600p.a. or c£2100p.a. and a £14Kish tax free lump sum.

As I've no intention of retiring just yet (officially 66) I'm wondering what to do.

I'm actually leaning towards the take the cash and run option and as I'm a minimum rate taxpayer I can afford the 20% tax reduction in my £2100p.a. pension from age 60. Also I smoke, I drink, I've high blood pressure (obviously!!) so I can't see myself living to 91ish to get all the lump sum back as a pension.

Thing is, where would anyone advise I put my lump sum to earn a good rate of interest?
I don't really need the lump sum (my daughter might disagree!) but I'm thinking it's better in my hands and I know where it is.

First stage is to ask L and G what happens if you leave the pension until 65.

The lump sum, I would just invest in a FTSE tracker fund, bearing in mind that can go down as well as up.

kidmugsy

Elmer_BeFuddled wrote: »

After replying to L&G I've had a letter stating that from Jan 2018 (when I'll be 60 :eek:) I can get c£2600p.a. or c£2100p.a. and a £14Kish tax free lump sum.

Tell us more. Is this a Defined Benefit pension, for example a Final Salary pension? If so, what is the inflation-protection on the annual pension?

Or, is it perhaps a money purchase pension with a guaranteed annuity rate?

Or is it something else?

Anyway, the Tax-Free Lump Sum. Are there any debts you'd like to clear? Any expenditure on the house you'd like to make? Any chance that you'll need to replace a car in the next few years? Do you have an adequate emergency cash fund in case of unemployment before you reach 66? Are you making best use of high-interest current accounts and Regular Savers? Are you longing for a holiday in Iceland to see the Northern Lights? Do you want to go to Orkney and see all the wonderful archaeology? ........

Do you have any long term investments already? If you want to make more, consider doing it within a personal pension of some sort that you can contribute the £14k to (perhaps over more than one tax year).
The great disadvantage of pensions - that the money is tied up to age 55 - is no disadvantage to you.

Elmer_BeFuddled

kidmugsy wrote: »

Tell us more. Is this a Defined Benefit pension, for example a Final Salary pension? If so, what is the inflation-protection on the annual pension?

I believe it was a final salary pension, just because of the age of it makes me think that is right. Guaranteed min/max of 2.5/5% according to RPI each April

kidmugsy wrote: »

Anyway, the Tax-Free Lump Sum. Are there any debts you'd like to clear? Any expenditure on the house you'd like to make? Any chance that you'll need to replace a car in the next few years? Do you have an adequate emergency cash fund in case of unemployment before you reach 66? Are you making best use of high-interest current accounts and Regular Savers? Are you longing for a holiday in Iceland to see the Northern Lights? Do you want to go to Orkney and see all the wonderful archaeology? ........

Do you have any long term investments already? If you want to make more, consider doing it within a personal pension of some sort that you can contribute the £14k to (perhaps over more than one tax year).

No debts I need to really worry about, house is "social (council) housing". Replace my car? I'm hoping my "new" Beetle will outlive my original one, though I doubt that. Paid cash for this one, but I've never spent more than £5K on a (used) car, just not worth it. I think I could survive if anything job wise went pear shaped (done it before). Not got a high interest current account. No long term investments etc. etc..
No to Iceland (to bloody cold), yes to Orkneys (not so bloody cold!)

To be totally honest retirement is something I've never thought about. I never thought I'd have to, and now I've suddenly got some money to play with (and thinking "Burger, am I really this old?"). OK, it's not a lot, I'm a pleb specialised manual industry worker in a dying trade/industry. That has helped boost my income over the years due to scarcity of new practitioners of my trade, but it's nothing like some of the figures I've been reading on this forum.
However small this lump sum may seem, I obviously want it to work for me the best it can.

kidmugsy wrote: »

The great disadvantage of pensions - that the money is tied up to age 55 - is no disadvantage to you.

Rub it in why don't you? :rotfl:(tongue firmly stuck in cheek with that comment)

xylophone

Interest rates on standard savings accounts are uninspiring.

http://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html


If you want to keep the £14,000 in cash you might consider opening a Nationwide Flexdirect current account which will give you 5% on £2,500 for a year and allow you to open the Flexclusive monthly saver.

You might also open a TSB Plus which would give you 3% on £1500.

If you have 6 DDs available, then you could open a couple of Tesco current accounts which would give you 3% on a total of £6000.

A Lloyds Club current account gives 2 % on up to £5000 - 2 DDs required.

Where a monthly pay in is required this is easily cycled in/out as required either by matching same day SO's between the accounts or by faster payment.

kidmugsy

Elmer_BeFuddled wrote: »

c£2100p.a. and a £14Kish tax free lump sum.

I recommend you get the official estimate of your State Retirement Pension. Because you'll have been "contracted out" for the years of your Final Salary pension you may not get full new-style SRP. It's worth knowing in advance so you can buy yourself some more pension if you'd like to.

Anyway, lets assume your SRP is (for arithmetic convenience) £6,900 p.a. Add £2,100 of this old pension you've discovered = £9,000 p.a. in retirement. Do you have other pensions that you'll want to draw at 66? The point is that your Personal Allowance against income tax will be (using current value) £11,500 so that you could draw another £2,500 p.a. of pension with no income tax to pay. So if your further pension looks like being sparse, there would be a case for contributing the £14k into a pension, but perhaps closer to age 66 rather than now.
I say that because having £14k cash available as capital for emergencies might be a comforting feeling.

So the proposition is that you eventually add the £14k to a pension: the tax relief that hmrc pays to your pension provider is £3,500, bringing your pot up to £17,500. You withdraw 25% of that as tax-free lump sum and you withdraw the rest at rate of £2,500 p.a. and still pay no tax on that either. If, on the other hand, you have heaps of extra pension to draw from elsewhere at 66 this idea becomes less attractive, though still potentially a good idea. But no hurry.

Elmer_BeFuddled

Thanks both for your answers. Who'd have thought pensions would be more difficult than choosing a pair of socks (Red or green? Red or green? Red or green? Or blue? Striped it is then.)

According to Gateway I've maxed out on my SRP at £197.28pw/£857.82pm/£10293.79pa so at current allowances I'll already be paying some tax on this found pension (say £900 at 20%)
The company I work for currently (I started in June '15) has a pension pot of (@ 25th Nov '16) a lump sum of £918 and a massive £62pa. Yes, £62 a year! I need to live to pushing 140 with that to get my "money paid in" back!! That though is an assumption I'll retire next January so I have written to them and postponed that one until I'm 66.

With my current company pension I pay in 2% and the company matches it. However if I even add another 1% to my pension the company will contribute 6%. That is it. If I paid in an extra 10% the company will still max out at 6%. I only found that out yesterday morning so I think that would be wise to do as its not my money anyway. Thoughts?

LHW99

Always pay in as much as will get the company's maximum contribution if you possibly can.
No need to turn down free money.

Elmer_BeFuddled

LHW99 wrote: »

Always pay in as much as will get the company's maximum contribution if you possibly can.
No need to turn down free money.

I'll be phoning Human Resources asap tomorrow (whatever happened to the personnel department? bloody yank ideas!!)

atush

However if I even add another 1% to my pension the company will contribute 6%.

Hot foot it to HR and get your contribs up by that extra 1%! And if you dont want to pay tax on the new pension income, then do put the 900 in as well. the company wont match it, but you will get your BR tax back.

For saving on top of that, consider an ISA.