Pension Contributions Refunded - Re-invest into new pension scheme?

click86

A family member previously worked for the NHS but left to take up their dream job in the private sector.

Unfortunately, my family member wasn't too savvy with pensions and wasn't aware that the NHS pension was a DB scheme. The new company is however, providing a fairly generous DC scheme.

A knock on effect of leaving the NHS was that said family member didn't completed two years service, so has lost all employer contributions and has received a refund on their own contributions.

My question - Is now a good time to re-invest the refunded contributions into the new employers scheme?

As investments across the globe are quite poor at the moment, would re-investing be wise, or would it be better to wait until they start to improve?

Please could I ask that the comments stick to the question asked, as family member has definitely learnt their lesson regarding how important it is to understand pensions!

Thanks very much

jem16

It's such a pity that your family member chose the refund of contributions rather than a transfer of the value of her benefits as that would have been far better as it would have retained the employer's contributions.

However as to the question asked, if investments are poor at the moment then why wait until they improve when it would then be dearer to buy in?

click86

jem16 said:

It's such a pity that your family member chose the refund of contributions rather than a transfer of the value of her benefits as that would have been far better as it would have retained the employer's contributions.

However as to the question asked, if investments are poor at the moment then why wait until they improve when it would then be dearer to buy in?

Would a transfer option have been available at under two years service?

The NHS pension scheme advised my family member that under two years service entitled them to a refund.

There was no mention about transferring to retain the employer contributions.

I assume this would be transferring the final pot value to their new scheme and just lose out on the 'payment for life' element?

Thanks very much for answering the original question - it definitely makes sense what you suggested!

Edit - I've just fed back this information to my family member. There must have been a breakdown in communication as they have not sent the refund form off yet. There may be hope for a transfer! Would this be requested via the new scheme?

molerat

Would a transfer option have been available at under two years service?

Yes

https://www.nhsbsa.nhs.uk/member-hub/leaving-or-taking-break-scheme

https://www.nhsbsa.nhs.uk/sites/default/files/2018-11/UK Transfer Out Guide and application pack-20181105-(V12).pdf

You must:
 join your new scheme within 12 months of leaving pensionable NHS employment;
 apply for a transfer within 12 months of joining the occupational pension; and
 complete the transfer before you reach Normal Pension Age.

AnotherJoe

As said, transfer if possible.

If not,  re your question "should they wait before reinvesting" imagine you were buying something that didnt age,  say washing powder.

Its on sale at the moment..

Would you buy it now, or wait "until the price had improved" ????

Or, alternatively, you've probably heard the advice "buy low sell high"? You are asking if you should wait until you can buy high?

Though, FWIW in general prices are pretty much where they were before the crash.

click86

AnotherJoe said:

Or, alternatively, you've probably heard the advice "buy low sell high"? You are asking if you should wait until you can buy high?

Thank you, I wasn't thinking of it like that originally but must not have had my brain in gear. I was thinking that if investments got worse, then the money could be lost as quick as it was invested but I suppose that's a risk with pensions in general.

I've got all the relevant documents together and passed them to my family member. They are very thankful for everyone's help on this (they were feeling quite glum thinking they would lose the employers contributions).

Thanks again

Albermarle

Your family member will need to look at opening a new pension asap 
Maybe best to start with a simple one like these for example
https://www.cavendishonline.co.uk/stakeholder-pension
https://www.pensionbee.com/how-it-works

dunstonh

As investments across the globe are quite poor at the moment, would re-investing be wise, or would it be better to wait until they start to improve?

What makes you think that?      They started improving back in March and many investors are now getting close to Janaury values or are back in surplus, depending on their risk profile.