Work Place or Private?

missywest2000

Hello - I currently have an Aviva private pension set up in my 20s that I've been paying into in increasing amounts for the last 12 or so years (I'm 34). I now am putting £300 a month into it, and the government contributions knock it up to around ££60 I believe.

I am offered work based pensions in my full time employment with various suppliers. over the years I've accumulated about 4 small pensions from employers with no more than £1000 each. I have just moved jobs and again been offered a work based pension,

Advice from my parents is to opt out, and continue to increase my personal pension contributions, and after having bought a new property next year, I could contribute around £400+ per month.

I'm after advice on whether this is the right thing to do - I'm not very clued up - do I continue to plug away with my Aviva pension, and keep all my eggs in one basket? One would argue that having additional input from employers will only increase my long-term pot, but I'm unsure.

Help!

TheBiggestBadger

If your new work are making contributions into this pension too, why would you turn down essentially free money?

JoeCrystal

You should not be opting out of the workplace pension scheme. The employer has to contribute 3% into it after all (If they contribute more, even better!). If you opt out, you are essentially taking a pay cut. It may be worth looking into transferring all other four small pension pots into your private pension scheme as well. If you leave this job, you can transfer your current workplace pension scheme into the private pension scheme to keep it all together.

Well done for setting up the private pension scheme so early in your working life, your future self will thank you. There is nothing wrong with contributing to both pension schemes.

Anonymous101

Increasing you pension contributions is good advice but opting out of workplace pensions is certainly not.
You are certainly foregoing the percentage match and also, depending on whether the workplace pension is Salary Sacrifice or not, paying National Insurance contributions that you don't necasarily need to be.

dunstonh

Advice from my parents is to opt out, and continue to increase my personal pension contributions

Employer scheme has an employer contribution. Often referred to as free money. Why would you turn down free money? Nothing beats free money.

Also, your Aviva pension is old. Financial products are like other retail products. They can go out of date. Some old things are gems worth keeping. Others age badly.

I also believe that Aviva will not accept pension contributions from someone who has opted out without an IFA signing off on it (and the IFA wont sign off on it because it would be bad advice).

There is also the possibility that the workplace scheme uses a method called salary sacrifice. This can reduce your NI contributions and further make the workplace scheme more attractive.

Spreadsheetman

Anonymous101 wrote: »

Increasing you pension contributions is good advice but opting out of workplace pensions is certainly not.
You are certainly foregoing the percentage match and also, depending on whether the workplace pension is Salary Sacrifice or not, paying National Insurance contributions that you don't necasarily need to be.

This.

The majority of my own pension provision is in private schemes, but I am still in my employer's NEST scheme for their contribution. Who says no to free money???

hugheskevi

I currently have an Aviva private pension set up in my 20s that I've been paying into in increasing amounts for the last 12 or so

You should review the charges you are paying. The market has changed a lot since you set up the pension, with charges falling significantly. You should also consider whether the investment options are competitive and meet your needs. You may find it better to transfer the pension to a new provider.

over the years I've accumulated about 4 small pensions from employers with no more than £1000 each. I have just moved jobs and again been offered a work based pension,

You can transfer those small pots into another pension if you wish, eg, you could:

1. Transfer all the small pensions into the Aviva pension
2. Open a new pension and transfer all your pensions into that
3. Investigate the investment options and charges in each of your 5 pensions, choose the best, and transfer all pensions into that.

Transferring will make tracking and managing them more straightforward.

Advice from my parents is to opt out

Based on this, I wouldn't listen to any financial advice they give you about any financial matter.

after having bought a new property next year, I could contribute around £400+ per month.

Is this part of a financial plan, or are you just contributing what you can afford? At some point, you want to be following a clear plan about how much and when you put money toward precautionary savings, mortgage reduction, ISA saving and pensions (and anything else which could be relevant, eg, buy-to-let).

For example, if you are currently a basic rate taxpayer and expect to be a higher rate taxpayer in future, it could be better to save in a S+S ISA now, and a pension later.

I'm after advice on whether this is the right thing to do - I'm not very clued up - do I continue to plug away with my Aviva pension, and keep all my eggs in one basket?

Take the employer pension and contribute enough to it so that you fully benefit from whatever the employer is offering, eg, they may voluntarily match your contributions up to a point.

You need to understand diversification. Aviva provide you with a pension, and you choose what investments you put into the pension. Having all your eggs in one basket relates to the investments you choose rather than the provider.

LHW99

Check / compare the charges etc on the new employer's scheme. It could make sense to transfer one or more of the old pensions into that.
Also find out whether the employer will increase their contribution if you pay extra into their scheme (more free money!)

Freecall

Spreadsheetman wrote: »

Who says no to free money???

Reading some of the stuff on here, you'd be amazed!

MEM62

missywest2000 wrote: »

Advice from my parents is to opt out, and continue to increase my personal pension contributions, and after having bought a new property next year, I could contribute around £400+ per month.

This is the perfect example of why we go to professionals for advice. Your parents are advising you to turn away free money - not remotely sensible from any viewpoint.

Join the scheme you are being offered at work. If they offer contribution matching contribute up to the limit the offer. If necessary, reduce what you are paying into your private pension to make it affordable.

MEM62

dunstonh wrote: »

Nothing beats free money.

Although free beer does come close! :beer: