Pension Question

N79

My wife started work for a company in mid Oct 2005. The company had a group personal pension plan to which they contributed 10% of salery and my wife contributed 5%. There was a 3 month probation period before being eligible to join the plan, so my wife joined in mid Jan 2005. My wife ceased working for the company in Mid Sep 2005. In total, she worked for 23 months and contributed to the pension for 20 months.

The pension company have written asking what we want to do. The pot is a little over 5000GBP.

We are no longer resident in the UK.

We also know nothing about pensions!

From what little I have found out, there seems no point in keeping this money in the pension as administration charges will slowly reduce the pot size to zero. My wife may work again in the UK but currently not for the forseeable future (at least 10 years). If we take the money out - what can we do with it? Can we take any of the money out of the pot and invest it in something that will actually make money rather than a pension fund which will slowly reduce to 0 due to the charges? Can we transfer the money to a better pension even though my wife is not resident in the UK? (Transfering to an overseas pension is not currently possible)

Have we wasted her contributions for the last 20 months?

Any help appreciated.

N79

EdInvestor

N79 wrote: »

My wife ceased working for the company in Mid Sep 2005. In total, she worked for 23 months and contributed to the pension for 20 months.

What kind of pension is this?Is it a "group personal pension" or an "occupational money purchase pension"? If the former you can;t take the money out.If the latter you can, as she worked for less than 2 years, but it will be net of repaid tax relief. (There might however be a time limit on taking the money out.)

there seems no point in keeping this money in the pension as administration charges will slowly reduce the pot size to zero.

This should not be the case, if the fund is suitably invested and the scheme has reasonable charges then it should grow.Ask for details on this. If the investment options are poor and /or the charges high, you can transfer the money to a better provider.You might prefer to switch to a low cost SIPP, as you can manage these online, eg

https://www.sippdeal.co.uk
https://www.h-l.co.uk
https://www.alliancetrust.co.uk

There is no need for this money to be wasted.

PS.As you're overseas you may not know that you now need only 30 years contributions to get the basic state pension.Expat class 2 NI contributions are amazingly cheap at about 2 quid a week, well worth keeping them up.

N79

EdInvestor

Many thanks. It is a group personal pension and I will look into the SIPP option. We will also look into the NI contributions.

N79

dunstonh

SIPPs are more expensive and designed for the experienced investor. Given your comment "Can we take any of the money out of the pot and invest it in something that will actually make money rather than a pension fund which will slowly reduce to 0 due to the charges? " and "We also know nothing about pensions!" that would suggest you are not an experienced investor and shouldnt use a SIPP.

Charges on pensions are explicit and its impossible for a modern day personal pension to end up at zero due to annual management charges.

You may also find that many companies that offer SIPPs wont be interested in dealing with you as they may not have the "passport" that allow them to transact with UK ex pats living overseas (new rules that came in on 1st Nov 07).

EdInvestor

Both HL and Sippdeal are happy to deal with pensions owned by expats, not sure about Alliance Trust.Selftrade (which runs a SIPP whose admin is done by Sippdeal) will also accept expat customers.

The main difference between online low cost SIPPs and conventional pensions is the very much larger choice of investment options, including the best ones, and the standards of service (also much better and unlike most insurers, mostly done online, which is very importnat for expats..)

dunstonh

Even if they do hold the necessary passport under the new regulations, I highly doubt a SIPP is appropriate for the OP given their lack of knowledge and understanding (which isnt something they should be ashamed about).

averageguy11

but sipps these days r becoming more and more attractive to people who r taking more of an interest in there pension ..which is a gd thing...pity u seem so anti sipps dunst

dunstonh

averageguy11 wrote: »

but sipps these days r becoming more and more attractive to people who r taking more of an interest in there pension ..which is a gd thing...pity u seem so anti sipps dunst

Im not anti SIPP at all. They are great for those people that use the features. However, with around 90% of SIPPs taken out post A day going into investment funds, there is going to be plenty of individuals going in to more expensive funds than they would have if they used a personal pension or stakeholder.

We have seen posters on here move from a personal pension on a balanced managed fund at 1% move to a SIPP and pick a balanced managed fund at 1.5% with historically worse performance than what they are in.

A couple of weeks ago I made a recommendation for an L&G stakeholder wtih an amc of 0.7% to someone that had no investment experience. Between appointments he got a SIPP guide from one of the newspapers and on the next appointment he told me he wanted a SIPP and he had picked a Jupiter Merlin fund to invest in. The portfolio spread on the L&G stakeholder had outperformed the fund historically and was half the cost (even more when you looked at TER). At least he had the sense to listen and went with the stakeholder.

SIPPs are fashionable but it doesnt make them right for everyone. Inexperienced investors can do far more damage with a SIPP than a stakeholder or personal pension.

N79

Thank you all for your comments. Having spend last night reading through the links given I can say that 2 out of the 3 require you to be a UK resident in order to take out the SIPP so they are out. I also agree that I am probably looking for something simple. The amount here is small and no further contributions will be made for the forseeable future.

From all I have read I will be best to find a fund with the lowest charges and just put the money there and forget about it for the next 38 years until my wife retires. It may then provide a little extra income which we can use to treat ourseleves and go out to dinner once a quarter (based on their current predictions).


Thanks for your comments.

N79

dunstonh

If you return to the UK, then any adviser will be able to help you as it is face to face. However, they cannot deal with you whilst you are out of the country.

It is a bit daft and its new EU legislation. You can fly over, hand the papers for the transaction to the IFA and they can give advice and process it but you cannot post it from abroad or email the docs.

I say IFA but the same applies to all retail distribution channels. For Ed, who no doubt would want to query this, look up MiFID and in particular passporting, cross border business and branching.

averageguy11

Duns ..i was really referring to yur bit about being more expensive and for more experienced investors....the costs of a sipp have come down significantly over the last few years...and i dont think they r jus for experienced investors...some experience yes...in my view a more hands on approach encourages people to take a more serious interest in there pension which can b no bad thing..

Anyway no desire to fall out with u...jus wish u and Ed cud b a tad more friendly to each othr ..since u r both invaluable posters