which pension to put money in?

dogbower

I have inherited a lump of money and rather than try and get 1.5% interest whilst inflation runs away, have decided to stick it into a pension.
If I'm correct, due to the tax relief, it will in effect get 20% "interest". Seems like a no brainer? Obviously my investment can then go up or down, more likely down short term, but in the long run be the right thing to do.
Now comes the question of which pension?
I have 4 personal pensions, 3 with Aviva, all in the multi asset growth fund, one with Pru, in a with profits fund. None of these funds are very big, total of all pots is around 100K.
The Pru seems to have high fees, last year £485 on a pot of 36K.
My Aviva is less than £50 across 3 on a combined pot of 65K, looks too low?
 
Also possible pensions to contribute to,
My wife works for the NHS, is contributing the maximum with employers contribution, think its 7.1% and 18%?

I think sticking some more into the NHS is the sensible option, even though the payment won't be topped up by the employer, as the pension is then index linked. My wife is not a high earner, annual wage is around £21K, will this limit what we can pay in?
I earn around 40K, and am self employed.
We will both get full state pension come 67, but will hopefully be retired by 57/8. 
We have 100K sat in the bank, won't need it to fill the gap till we get to state pension age, so happy to tie it up.

Albermarle

If I'm correct, due to the tax relief, it will in effect get 20% "interest". Seems like a no brainer? Obviously my investment can then go up or down, more likely down short term, but in the long run be the right thing to do.

There is no added interest ( best to use the right terminology or everyone can get confused) 

 If you are employed?  then tax relief is available on your pension contributions. Exactly how this works depends on how the contribution is made but the end result is the same.  If you are a basic rate taxpayer and you add £1000 to your pension from your savings, then £250 will be added as tax relief. When you take the pension 25% will be tax free and 75% taxable ( the actual amount that you have to pay tax on will depend on your other income at the time) The amount you can add and get tax relief depends on how much you earn. For example you can not add £50K to a pension and get tax relief on all of it if you only earn £25K.

The Pru seems to have high fees, last year £485 on a pot of 36K.
My Aviva is less than £50 across 3 on a combined pot of 65K, looks too low?

The Pru one is high but it is probably right. The Aviva one is too low, probably some of the fund charges are taken internally, so you do not see them. Would be a good idea to get some clarity on this by calling them or looking at the paperwork more closely.

There are some NHS experts on the forum, so best that they comment on your wife's pension . Presume though that you are clear that the NHS pension is a Defined Benefit scheme ( the best type normally) whilst yours appear to be Defined Contribution schemes? Always good to be clear that these are totally different kind of pensions.
 

Markneath

If your wife passed away first what would be the implications for you with her extra pension contributions?

Dazed_and_C0nfused

My wife works for the NHS, is contributing the maximum with employers contribution, think its 7.1% and 18%?

I think sticking some more into the NHS is the sensible option, even though the payment won't be topped up by the employer, as the pension is then index linked. My wife is not a high earner, annual wage is around £21K, will this limit what we can pay in?

Your wife's pension is totally different to a SIPP or personal pension.  The amount she pays is pretty much irrelevant.  As is what the employer pays.

It's a defined benefit scheme so she isn't building a pot of money she is getting a promise to pay £x.

For example if she earns £21k and pays 7.1% that means she is paying £1,491/year (likely real cost of £1193 after tax relief).

In return she will build up an inflation proofed pension of £389.

And so on each year she's in the scheme.

The NHS has a number of options for people wanting to buy extra pension.

https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension

Roger175

Dogbower

You don't say how much you have inherited? Whilst undoubtedly and good move to put some/all of it into a pension, you can only make contributions up to the amount you annual salary, so you may need to spread it out over several years.

As other have said, you will get tax relief, so for every £1,000 you contribute, £1,250 will end up in the pension. When you make lump sum contributions, the pension company apply for and add the tax relief and I find this typically takes about 2 months before the tax relief part is credited to my account. Don't be afraid to drip feed money in, it makes no difference how many tranches you split it into, but it would give you the chance to watch the markets and take a view on when you want to commit, although do bear in mind that you don't necessarily need to invest the money immediately after you put it into the pension. It can sit in the account as cash whilst still having benefitted from the tax relief.

I would be minded to simply open a SIP with one of the on-line providers, rather than use one of your existing pensions. There are many providers to choose from and a huge choice of investments. Look into the charges, which varies depending on whether you will be looking to invest in shares, funds or a combination of both.

The other thing to consider is putting some of it into an ISA. OK you won't get the tax relief, but you won't be subject to tax on any profit and arguably it is more flexible when to get you hands on when needed during retirement. 

Albermarle

As other have said, you will get tax relief, so for every £1,000 you contribute, £1,250 will end up in the pension. When you make lump sum contributions, the pension company apply for and add the tax relief and I find this typically takes about 2 months before the tax relief part is credited to my account. Don't be afraid to drip feed money in, it makes no difference how many tranches you split it into, but it would give you the chance to watch the markets and take a view on when you want to commit, although do bear in mind that you don't necessarily need to invest the money immediately after you put it into the pension. It can sit in the account as cash whilst still having benefitted from the tax relief.

The traditional pension providers ( sometimes referred to as Insurers) like the ones the OP has their pensions with, will prefund the tax relief, so it is added on at the same time as you make your contribution ( so no need to wait two months ). Also normally there is no cash account, so contributions go straight into the selected investments.

One caveat to this is that many of these providers now offer a SIPP type pension as well, sometimes a kind of hybrid between a SIPP and a personal pension . These will have a cash account.

dogbower

Thanks for the replies.
I lost both my parents, within 6 months of each other, the 100K I have at the moment, is from my fathers estate, the bulk of which passed to my mother. I believe I will receive another 300K once my mothers estate has been sorted. 

So at the moment I am trying to invest the 100K as sensibly as I can.
I know I can only put an amount into my pension equal to my earnings, so yes it may take me a few years, in the meantime I have it earning 1.5% !
It was really wether the NHS was a better option. I’ve looked at the buying extra pension for the NHS, just don’t really know if it’s good value? My wife also has a couple of small pensions with Aviva, so could put it in there rather than NHS?
In reality I need to invest the maximum that our wages allow, just want to be sure it’s in the best place.
 Thanks Stuart 

QrizB

dogbower said:

I know I can only put an amount into my pension equal to my earnings, so yes it may take me a few years, in the meantime I have it earning 1.5% !

It doesn't have to be earning 1.5%. You could put £20k into an SSISA and invest it in the same sort of funds you'd choose for a pension, and the rest in a GIA also invested in the same sort of funds.