Suggestions for a 50k pension pot

SutcliffePJ

I’m 57, working full-time, as I have done since school (except for university years). However, I’ve had an erratic career, to say the least, switching jobs frequently, always looking for the worthwhile and interesting role, salary not being the prime motivation. So I’ll have a full state pension (after a couple more years working) and I’ve got (small) defined benefit pensions with teachers, NHS & Ford Motor Co. that might give me about the same as the state pension. But I also started a personal pension plan when I was young, paid in and then ignored it for the last 30 years and it’s now got a transfer value of approximately £50k. The scheme seems pretty rubbish (the last annual increase was barely more than the charges) but I can’t transfer into any of the db schemes. I’m not planning to stop work very soon (still looking for that perfect job) so what’s the best thing to do with this £50k for the next 5 to 10 years? I don't see any reason to play very safe but I know very little (as you can tell). Any suggestions warmly welcomed!

Dazed_and_confused

Is the soon to be full State Pension based on evidence from looking at your forecast on gov.uk or your Personal Tax Account or an assumption about needing 35 qualifying years?

And by "transfer value" do you really mean a fund of approx £50k?

If so is there any restriction on transferring to a new personal pension/SIPP, potentially with lower costs, and then taking a more active role in what happens with this one?

SutcliffePJ

Hi Dazed and Confused,

Thanks for your reply.

The forecast on gov.uk says I need to work for 2 more years; and the transfer value on the personal pension (I tried to transfer into the NHS pension but they refused it) was given as just over £48,000.

Would you recommend a SIPP - given that I know little about investing? The charges seem quite high. Is there any way of being able to transfer to a platform that would let me pick a few low cost tracker funds (they seem quite a safe but reasonable bet) without paying large amounts?

dunstonh

Is there any way of being able to transfer to a platform that would let me pick a few low cost tracker funds (they seem quite a safe but reasonable bet) without paying large amounts?

What makes you think trackers are safe?

SutcliffePJ

Hi Dunstonh,

Only the briefest of research! It read as if they were unlikely to produce great results but unlikely to be terrible either. But I stand to be corrected...

Albermarle

Two points to keep in mind here :
1) If it is an older pension the it will probably have higher annual charges than if you opened up a new personal pension /SIPP, but you would need to check. Be aware that there are usually two charges , one for the pension provider and one for the funds the money is invested in.
2) The pension provider is only providing a kind of administrative/tax function. What funds your money is actually invested in is probably more important .
For example you mention index trackers : they have low charges but as they are 100% dependent on the markets they are actually quite high risk but potentially high return products. There are also low risk funds but the long terms returns will probably be low. Then there are managed funds which try and manage the volatility and give a decent return , but tend to have higher charges.

dunstonh

Only the briefest of research! It read as if they were unlikely to produce great results but unlikely to be terrible either. But I stand to be corrected...

Trackers track the market benchmark they are following. If that benchmark is capable of 40% loss then you will lose 40% on that tracker.

A tracker may be higher risk or lower risk than managed funds in the same sector. Some sectors will have higher risk trackers in the same sector. The fact it is tracker or managed does not affect the risk. Where it invests affects the risk.

xylophone

Some reading which may help.


DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning, by John Edwards.

https://theescapeartist.me/2018/04/26/do-you-even-know-whats-going-on-in-your-pension/

https://theescapeartist.me/2015/09/07/honey-i-fired-the-financial-adviser/

https://theescapeartist.me/2015/07/28/the-simplicity-portfolio/

https://monevator.com/using-vanguard-lifestrategy-funds-life/

https://monevator.com/category/investing/passive-investing-investing/

https://www.moneyobserver.com/best-sipp-platforms-your-portfolio-2018

SutcliffePJ

Hi Albermarle,

Thanks for your reply. Yes, the charges seem high and I think I need to change.

You seem to suggesting that I should worry more about the investment than the admin charge itself? If that's a fair description, in my position what would you go for? A SIPP and start to research investing?

SutcliffePJ

Thanks Xylophone, I'll start reading!

And probably come back and ask more questions after I've read...

SutcliffePJ

Thanks for the info, dunstonh.

My understanding is that trackers are cheaper than managed. My thinking was that if I picked a comparatively low risk sector then the increase in value was likely to exceed charges without me knowing too much about individual company trends.

But I can see that there's always a risk.