pension that i have not paid into for a long time should I move it to new scheme?

recci

I don't know that much about pensions and have been pretty careless about having one mainly due to not really having the money to spare with child maintenance payments etc.. I am approaching 40 and really need to start thinking about this stuff.

Anyway i recently started with a new employer and got automatically enrolled into their scheme. This spurred me into looking up the details of an old pension I had with an employer back in 2002. I literally only paid into it for about 4 months then got made redundant so I assumed it would be worth next to f**ck all forgot about it.

It turns out that I have about £8000 in it. Looking up the statements I paid in about £270 and my employer at the time £320 before I was laid off. So in that time it has grown to 8K? Most of it seems to have come from government contributions and the rest from a share tracker.

Will the government still have been making contributions all this time even though I haven't paid into it for 15 years?

The pension is a Scottish Widows stake holder pension plan. And the new scheme from my employer is a Royal London retirement solutions group personal pension plan with profit share. With the new employers scheme they will match my contributions up to 4% and this gets larger over time. Its also doing the salary sacrifice thing.

So I am wandering what I should do? Should I transfer the 8 grand into my new scheme as a start or leave it where it is to keep growing or even start adding something to the old plan? I really don't understand which pension plan is better. But I cant see the company I am currently with lasting long term as they are looking to sell withing 5 years.

MallyGirl

Salary sacrifice is good stuff as it also saves you NI so I would stick with that. You would need to ask whether your new company pension accepts transfers in. If it does it might make for a simple life to do that, given that the old one’s value is modest. You would need to check that the old one is DC and also that it doesn’t have any extra benefits that you would lose if you transferred

Smoothape

Compare how well the funds have been performing in that scheme Vs funds available in a different scheme. I have a Scottish widows stakeholder pension that I hadn't paid attention too in a couple of years and suprisingly it rose 20% in just a year with the default fund.

I have another pension which I can micromanage and choose whatever insured funds available whenever I want. I was going to transfer my Scottish widows pension over but I am uncertain now since the Scottish widows fund is performing suprisingly well despite it being in a low risk default fund. I will probably transfer it over anyways since I like to micromanage and benefit from lower charges.

You also want to compare the fund charges. I'm charged .75% on the Scottish widows scheme but the pension which allows me to micromanage funds I can invest in typical funds with only around a .30% charge.

There is no harm in having multiple pensions with different providers. Even once you reach retirement age there is no harm. Only real difference anymore would be annuity charges between providers once you reach retirement.

The government will no longer pay into your Scottish widows pension as you would have been contracted out of SERPS in 2012. The benefits in the Scottish widows pension are excluded from state pension even though they are national insurance contributions. You maybe get higher tax relief from them but chances are you won't. If that is the case Scottish widows would inform you and advise you not to transfer as you will lose the additional tax relief.

Salary sacrifice doesn't make any difference to anything. It is a regulatory requirement that companies match your contributions. In the end it's same as if you were to pay your own contributions. The companies obligation to match contributions doesn't have anything to do with the pension provider.

Royal London is a good provider but I haven't looked to see how their available funds have been performing.

In any event, having multiple private pensions doesn't really make any difference except what funds are available, how well the funds perform, and the charge for the funds and if you have any benefits or additional tax relief (they are required to let you know if you do transfer away).

If you are not up for investigating it all and comparing fund availability performance charges etc it's best probably to either hire a financial adviser or just leave things as they are. The default funds in any private pension are typically low risk and will steadily grow over time. You may have some benefits with you Scottish widows pension that you wouldn't with the Royal London one or vice versa. It's best to call them both and ask. Ask them what the charges are, if you have any defined benefits, and a list of available funds.

recci

thanks, how do I go about comparing how well the funds have been performing?

xylophone

The government will no longer pay into your Scottish widows pension as you would have been contracted out of SERPS in 2012.

Do you mean contracted back in to S2P in 2012?

You are assuming that the OP's SW pension was a "protected rights" type which continued to receive NI rebates after he left the employer?

https://www.eversheds-sutherland.com/global/en/what/articles/index.page?ArticleID=en/Pensions/Pensions_speedbrief_Protected_rights_abolished_from_6_April_2012

http://www.financialadvice.net/protected_rights_pension/zone/378

MallyGirl

Smoothape wrote: »

Salary sacrifice doesn't make any difference to anything. It is a regulatory requirement that companies match your contributions. In the end it's same as if you were to pay your own contributions. The companies obligation to match contributions doesn't have anything to do with the pension

Salary sacrifice can make a difference - not to whether OP should transfer the old pension anywhere but certainly as to what they might do with regards to the new one. You don’t pay NI on amounts you sal sac into a pension - 12% if basic rate taxpayer (approx). Some employers also put the NI they would have paid into the pension - sadly mine doesn’t but my DH’s does. You would not get the NI saving if you just got employer to contribute to a SIPP.

Smoothape

MallyGirl wrote: »

Salary sacrifice can make a difference - not to whether OP should transfer the old pension anywhere but certainly as to what they might do with regards to the new one. You don’t pay NI on amounts you sal sac into a pension - 12% if basic rate taxpayer (approx). Some employers also put the NI they would have paid into the pension - sadly mine doesn’t but my DH’s does. You would not get the NI saving if you just got employer to contribute to a SIPP.

I forgot about the NI difference. In the long term that probably does make a difference but at the moment I get an employer only pension contribution with no salary sacrifice and the extra cash at hand seemed more beneficial to me. I am still a bit unfamiliar the NI benefits though.

If I currently pay 150 in NI contributions a month but were to salary sacrifice 10% of my income each month say £250. How much would that offset NI contributions? Am I left with less each year in net income? Any way to do salary sacrifice and offset NI to have the same net income and benefit from higher pension savings?

xylophone

Play with the calculator here?

http://www.legalandgeneral.com/workplacebenefits/employees/plan-for-your-future/salary-sacrifice/

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/salary-sacrifice