General Pension Help

Poor_Leno

I've got two personal pensions. One is frozen and last time I got a statement (end of 2015, when the scheme closed as the company no longer wanted to match employee contributions upto 8%) it was valued at 25,000. I've got a pack where i can transfer it and such, and while frozen it says it will grow at a rate based on the RPI which is stated as being at least 2.5% and capped at 5%. Can't imagine RPI ever runs that high, so I am assuming it grows at 2.5% then permanently. Have no idea what its value currently is as I never get statements.

The scheme that replaced it, I have a very tiny sum of money. It was with Legal & General, an while the value itself is small, It looks like a much better thing. Since I left this company, Legal & General continue to invest the money in its various funds. I get statements annually and its grown by just under £1,000 since January 2018 til now. (from a value of 6,100 to 7,000. The management fees are pretty small too - £7.51.

I am considering bringing my frozen pension of 25,000 into this smaller Legal & General one. However, I'm unsure. One of the items listed in my statement showed a negative of 1.3% in the fund's capital. However, to me it looks like a well managed fund given how its grown and i it seems fairly obvious from the outset that I should bring the two together. I certainly see no point leaving a pension frozen where it is only growing by 2.5% and is currently uninvested.

Perhaps I need to speak to an IFA. Thing is, 25,000 looks a lot on paper (to me) but I am aware its basically nothing in yearly pensionable terms! I was just curious anyway as to whether I am approaching this with the right thought process...that its better to invest my frozen pension than just having it sat there basically doing sweet merry nothing.

Marcon

Your first pension (which isn't frozen - it increases from the time the scheme closed until such time as you draw your benefits, unless you transfer out before then) sounds like a defined benefit scheme, not a 'personal pension', not least because you aren't receiving annual statements.

£25,000 was presumably the transfer value in 2015; it will have changed since then. To say it is 'only' growing at 2.5% ignores the fact that many pension scheme members have seen far lower growth and in some cases a loss in the type of scheme L&G scheme you describe.

Have a chat with TPAS for free, impartial information: https://www.pensionsadvisoryservice.org.uk. They will be able to ensure you understand the basics, especially why it isn't obvious that you should combine the two pensions.

xylophone

two personal pensions. One is frozen and last time I got a statement (end of 2015, when the scheme closed) it was valued at 25,000. I've got a pack where i can transfer it and such, and while frozen it says it will grow at a rate based on the RPI which is stated as being at least 2.5% but and capped at 5%. Can't imagine RPI ever runs that high, so I am assuming it grows at 2.5% then permanently.

Pension one (above) on the information provided, looks to me to be not a "personal pension" but a deferred DB pension. And it is not frozen - it will revalue on deferment as stated.

See https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

Re RPI history see http://www.swanlowpark.co.uk/retail-price-index - it was 4.1 in 2017.

See https://uk.investing.com/economic-calendar/rpi-267 for current year.

When you refer to £25,000, have you been informed that this is the CETV of this pension?

The second pension looks to be a DC scheme. Is this your current scheme?

xylophone

You should also be aware that if the value of your DB pension is now greater than £30,000, you will require the advice of a pension transfer specialist if you wish to transfer out to a DC Scheme.

See

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf

https://www.royallondon.com/media/good-with-your-money-guides/five-good-reasons-to-transfer-out-of-your-company-pension-and-five-good-reasons-not-to/

hyubh

Poor_Leno wrote: »

I've got two personal pensions. One is frozen and last time I got a statement (end of 2015, when the scheme closed as the company no longer wanted to match employee contributions upto 8%) it was valued at 25,000. I've got a pack where i can transfer it and such, and while frozen it says it will grow at a rate based on the RPI which is stated as being at least 2.5% and capped at 5%.

As Macron says, this can't be all true. A pension organised and contributed to by an employer isn't a 'personal pension', and a personal pension doesn't have inflation proofing - this sounds rather to be an occupational DB ('defined benefit') pension. (I'm guessing by 'personal pension' you mean, 'a pension that isn't the state pension'. However, for a pensions nerd, and indeed in law, the term has a much more specific application.)

On the other hand, a DB pension does not involve contribution matching in any meaningful sense, since the (ex-)employer is responsible for funding a DB pension regardless of contributions made during the period it was being earned. That's the nub of why DB pensions ended in the private sector - the liability is open-ended until the last member or beneficiary dies or transfers out, and tougher accounting policies made that liability explicit.

That said, your description of the inflation proofing sounds more like an increase rate in payment rather than how it 'revalues' between no longer being an active member of the scheme and retiring. Statutory revaluation for private sector DB is (currently) CPI capped to 5% for pension on service (i.e. membership) before April 2009, and capped to 2.5% for service after then - and it's rare for a scheme to offer something different. (Pension increase rates once benefits come into payment are another matter.)

Can't imagine RPI ever runs that high, so I am assuming it grows at 2.5% then permanently.

I see xylophone has beat me to it answering that point!

The scheme that replaced it, I have a very tiny sum of money. It was with Legal & General, an while the value itself is small, It looks like a much better thing.

Hmm, there was a reason why what appears to have been a DB scheme was closed...

Since I left this company, Legal & General continue to invest the money in its various funds. I get statements annually and its grown by just under £1,000 since January 2018 til now. (from a value of 6,100 to 7,000. The management fees are pretty small too - £7.51.

In contrast to the first one, that's definitely a DC (defined contribution) not DB pension.

Poor_Leno

cheers all.

xylophone wrote: »

When you refer to £25,000, have you been informed that this is the CETV of this pension?

It states that this is the (Nov. 2015) transfer value. I've no idea if that is a fixed value until I do something with it or if it will now be higher from being frozen for 4 years.

Regards the Legal & General scheme, it is not my current scheme as I left my old job just under 2 years ago. However, it states I can transfer other pensions into it, but certain types of schemes are excluded. I have requested a transfer pack from them out of curiosity. L&G state that if the transfer value exceeds 30,000 then I need signed paper work from an IFA.

Right now I am only paying into a workplace pension, which is pretty bad in all honesty. It does confuse me a bit that my YTD pay is equal to my taxable pay, whereas I expected a difference between the two - unless the tax break is somehow claimed back some other way. In the near future I will need to get a private pension going, but my first priority really is sorting out what little I already have and then work out what other contributions I should start setting aside (and with which provider.

Bit of a minefield really pensions. I don't understand much of it!

xylophone

See

https://www.moneyadviceservice.org.uk/en/articles/tax-relief-and-your-workplace-pension

re pension tax relief.

Are you in Nest/Now/People's Pension/something else?

Poor_Leno

the workplace scheme is Nest.

xylophone

Nest operates "relief at source" on the pension contributions.

https://www.nestpensions.org.uk/schemeweb/memberhelpcentre/contributions/claim-tax-relief.html

https://www.nestpensions.org.uk/nest/members/your-account/costs-and-contributions.html0

https://www.nestpensions.org.uk/schemeweb/nest/members/my-nest-pension.html

You can choose to make additional contributions to the Nest pension rather than opening another pension.

https://www.nestpensions.org.uk/schemeweb/memberhelpcentre/contributions/make-additional-contributions.html

Poor_Leno

Thank you

I'll probably not make additional contributions to the nest scheme tbh. While I'm ok making the basic contributions since employer makes for about 40% of the pot, I'm having a hard time convincing myself that it'd be worth increasing my contribution to it. To me it seems an expensive scheme compared to quite a lot of others.A colleague of mine as suggested I look at Royal London. On top of whatever else I do, I am aiming to keep putting the maximum into my LISA until I can no longer do so. 25% free money + interest is at least a more than decent no-risk return. Unless I am looking at this the wrong way cos my head is generally wired for cash savings than investing. I do know the stock market out performs cash over the longer term, but the LISA is surely a solid option at least alongside a investment product? Obviously @ 50 I'd need to invest that pot of LISA money somewhere though.

Loads of people I know do not even have any pension plans in place. It does worry me how the future is going to be. I don't know how other people that have no interest in making any kind of personal provision for retirement think they are going to manage when they stop/can no longer work full time.

Albermarle

It states that this is the (Nov. 2015) transfer value. I've no idea if that is a fixed value until I do something with it or if it will now be higher from being frozen for 4 years.

As it is a defined benefit scheme, the £25K is only the value if you transfer out of it and give up all the benefits .
What you would be giving up is a fixed guaranteed income at the Normal Retirement date . It will not be a lot but maybe something like £1000 pa .
When you left the company you should have been issued with a statement of some kind saying what you were entitled to when you retired ? Do you have that ?