Pension Advice Needed ... Small fund

chris1200

Hi guys, hoping someone can give me a few pointers.
I'm 53 and have 2 personal pension funds that don't really add up to a lot. One has approximately £28000 and the other has approximately £3000. The larger fund is a SERPS pension fund from many years ago and the other was just an ordinary personal pension, again from many years ago. I don't have any other pension arrangements and am not a member of a company scheme. My current employer does offer a scheme but my thinking is that maybe I am too old to be able to make a contribution that will make much difference. I have jumped around from job to job a lot and have never really been in one place long enough to think too much about it. It's my problem, I can't change what has happened and I'll have to live with it.
A friend who worked in the pension industry a long time ago (he doesn't claim his knowledge is up to date) told me recently that I will be able to access these pension funds at age 55 and he thinks I can take 25% of the fund value each year tax free for a 4 year period. Is he correct? I don't imagine that £31k will buy much of an annuity so my thinking is that if I can access the cash then I may be able to do something else with it. Any thoughts?

Dazed_and_confused

No. In simple terms it's generally either 25% of the fund as a one off or 25% of each payment that will be tax free.

The amount of tax due on the remaining 75% will depend on your other taxable income.

As a defined contribution scheme taking any of the taxable 75% will, under current rules, limit your future (gross) contributions to £4k/year.

By not contributing to your current employers scheme you are probably paying more tax than you could do and are also missing out on free money from your employer.

xylophone

My current employer does offer a scheme but my thinking is that maybe I am too old to be able to make a contribution that will make much difference.

Why miss out on the employer contribution and tax relief on yours?

if you do not need to access the old pensions, had you considered enquiring as to whether they could be transferred to your current employer's scheme?

xylophone

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

enthusiasticsaver

If I had 2 small pension funds I would not be looking to withdraw the lump sum and spend it at 55. If you are 53 presumably you have about 13 or 14 years until you can get your state pension so that is long enough to massively increase your contributions, get the tax relief and employer contributions. It is a long time to make up but blowing it all just because it is not a large pension fund seems counter productive.

LHW99

The larger fund is a SERPS pension fund from many years ago

Does this mean you were contracted out at some point? SERPS was a Government scheme (additional State Pension) so isn't a stand-alone. If you contracted out though, during certain years you could get payments made into a personal pension to make up for not getting the extra with your state pension. That could mean you had another company pension during the relevant years.

Albermarle

My current employer does offer a scheme but my thinking is that maybe I am too old to be able to make a contribution that will make much difference.

Probably you are right that at this stage you will struggle to build up a very large fund ( unless you are particularly well paid) However on the other side you are refusing free money , which is never a good thing . Here is a theoretical scenario :
You earn £30K pa and opt in to your company pension scheme , which is a typical auto enrolment scheme and you and your employer pay the minimum % by law.
Each month you will contribute £100 from your net ( after tax pay ) and £25 will be added in tax relief . Your employer will pay £75 . So £200 a month in total ( double what you added yourself).
So after 10 years you will have £25,000 + £31,000 you have already and you can expect some investment growth of say 3% pa above inflation , so you should have £75K in total
Obviously it is only approx. figures but if any of the following applied , then this figure will be bigger, maybe quite a lot bigger :
1) Your contributions are taken by salary sacrifice
2) You contribute more than the minimum 5% or your employer more than the minimum 3 % ( many do )
3) You earn more than £30K

Try putting your current self in the shoes of your older self, and thinking would it be better to have £100K in a pension fund or zero ?

MEM62

chris1200 wrote: »

Hi guys, hoping someone can give me a few pointers.

We will certainly try :-)

chris1200 wrote: »

I'm 53 and have 2 personal pension funds that don't really add up to a lot. One has approximately £28000 and the other has approximately £3000.

That's a bit of a shame if you have been working all your life but it's not too late to make some changes. There are those in worse positions that you.

chris1200 wrote: »

My current employer does offer a scheme but my thinking is that maybe I am too old to be able to make a contribution that will make much difference.

OK, you need to change that thinking right away. By joining your company pension scheme you see money contributed by the Government, as it will go in tax free, and money from your employer. Free money! In addition to which you still have 14 working years to contribute. That will make a significant difference - particularly if you can afford a reasonable contribution yourself.

chris1200 wrote: »

It's my problem, I can't change what has happened and I'll have to live with it.

No, you can't. However, that does not mean you cannot make meaningful changes now - see above :-)

chris1200 wrote: »

A friend who worked in the pension industry a long time ago (he doesn't claim his knowledge is up to date) told me recently that I will be able to access these pension funds at age 55 and he thinks I can take 25% of the fund value each year tax free for a 4 year period. Is he correct?

No, he is not. You need advice from someone who's knowledge is still up to date.

chris1200 wrote: »

I don't imagine that £31k will buy much of an annuity

No, it won't but most won't buy an annuity anyway. Most will use drawdown for their retirement income.

chris1200 wrote: »

my thinking is that if I can access the cash then I may be able to do something else with it.

Such as?

chris1200 wrote: »

Any thoughts?

Yes. Join your company scheme as soon as you can. Get wised up on pensions by speaking to people that know what they are talking about.

chris1200

Thanks for the very sensible replies folks, I really do appreciate them. I guess the first mistake I'm making is not being in the pension scheme at work so I'll get that rectified promptly. Transferring my current funds into the scheme could also make sense if there are advantages for doing so (the scheme is NILGOSC, a local government superannuation scheme). Are there likely to be any advantages other than the fact that everything would be in the same pot?

AnotherJoe

chris1200 wrote: »

Hi guys, hoping someone can give me a few pointers.
I'm 53 and have 2 personal pension funds that don't really add up to a lot. One has approximately £28000 and the other has approximately £3000. The larger fund is a SERPS pension fund from many years ago and the other was just an ordinary personal pension, again from many years ago. I don't have any other pension arrangements and am not a member of a company scheme. My current employer does offer a scheme but my thinking is that maybe I am too old to be able to make a contribution that will make much difference.

So if i offered you, say, £1k or £5k or even £10k for free you'd turn it down on the grounds "it wouldnt make much difference" ?

You're the sort of person who walks past a £10 note on the floor and doesn't pick it up because "it doesn't make much difference" ?
Is that correct?
Because if its not, why would you you turn down free money????

chris1200 wrote: »

It's my problem, I can't change what has happened and I'll have to live with it.

Thats true but you can certainly change what will happen.Such as, getting some money together before you retire.

chris1200 wrote: »

A friend who worked in the pension industry a long time ago (he doesn't claim his knowledge is up to date) told me recently that I will be able to access these pension funds at age 55 and he thinks I can take 25% of the fund value each year tax free for a 4 year period. Is he correct?

No.

chris1200 wrote: »

I don't imagine that £31k will buy much of an annuity so my thinking is that if I can access the cash then I may be able to do something else with it. Any thoughts?

I'm sure you can do soemthing with £31k sure Maybe you could even make it more if you put some away starting now, though without knowing numbers its hard to say much more.

xylophone

(the scheme is NILGOSC, a local government superannuation scheme).

You had the opportunity of joining an excellent DB pension scheme and didn't take it? AAARGH!:eek:

I guess the first mistake I'm making is not being in the pension scheme at work so I'll get that rectified promptly.

Like yesterday?

https://www.nilgosc.org.uk/prospective-members

Re possible transfer - you may have missed the boat but check - see below.

https://www.nilgosc.org.uk/transfers

If you have paid into another pension scheme you may be able to transfer these benefits into the Scheme. The other pension scheme must be another registered pension scheme or from a European pensions institution.

You have only 12 months from joining the Scheme to elect to transfer your previous pension rights or such longer period as NILGOSC may allow.