Leaving one job and starting another pension advise

hewittinspain

Hi, I'm 52 and I've worked for Royal Mail for 11 years and have paid into their pension scheme since the start which goes into Scottish Widows. At the end of the month I'm going to working for the Council which they will enrol me into their LGPS scheme so:-

A. will I need to advise Scottish Widows to freeze it or will it automatically just freeze when I leave the company?

B. Do I start a fresh with the LGPS scheme and leave the other one frozen?

I've no plans to touch any of my pensions until I practically retire because I think the Royal Mail one only has about £40,000 in it anyway as I lived abroad for many years in my 20s and 30s so I only started my first pension at 40.

I'm really hopeless (and confused) about pensions so some simple and effective advise would be brilliant if you were in my shoes. 
Thank you 🙂

penners324

1. No & no. It will remain invested in whatever fund you've chosen. Assuming it's a DC scheme

penners324

B. Yes join the LGPS

MTB1986

Your Royal Mail pension will be a defined contribution pension, whereas your LGPS is a defined benefit pension. 

A defined contribution (DC) pension and a defined benefit (DB) pension are two different types of workplace pensions. The key difference is how the final pension amount is determined.

Defined Contribution Pension (DC)

The amount you get in retirement depends on how much you and your employer contribute and how well your investments perform.

Your money is invested in funds, and the final value is not guaranteed.

When you retire, you can take your money as a lump sum, buy an annuity (a guaranteed income for life), or withdraw it flexibly.

Defined Benefit Pension (DB) (also known as a Final Salary or Career Average Pension)

Your pension is based on a formula, usually linked to your salary and years of service.

Your employer guarantees a certain income for life, making it more predictable.

The risk is on the employer, not you, because they have to ensure there’s enough money to pay the promised pension.

In simple terms, with DC pensions, your money is invested, and the final amount depends on performance, whereas with DB pensions, your employer promises a set pension, making it more secure.

hewittinspain

MTB1986 said:

Your Royal Mail pension will be a defined contribution pension, whereas your LGPS is a defined benefit pension. 

A defined contribution (DC) pension and a defined benefit (DB) pension are two different types of workplace pensions. The key difference is how the final pension amount is determined.

Defined Contribution Pension (DC)

The amount you get in retirement depends on how much you and your employer contribute and how well your investments perform.

Your money is invested in funds, and the final value is not guaranteed.

When you retire, you can take your money as a lump sum, buy an annuity (a guaranteed income for life), or withdraw it flexibly.

Defined Benefit Pension (DB) (also known as a Final Salary or Career Average Pension)

Your pension is based on a formula, usually linked to your salary and years of service.

Your employer guarantees a certain income for life, making it more predictable.

The risk is on the employer, not you, because they have to ensure there’s enough money to pay the promised pension.

In simple terms, with DC pensions, your money is invested, and the final amount depends on performance, whereas with DB pensions, your employer promises a set pension, making it more secure.

Yes that's what these pensions are!.
So would it be better to leave the Royal Mail pension where it is and start a brand new one with the council and start from scratch with that one basically having two separate pensions?

Marcon

MTB1986 said:

Your Royal Mail pension will be a defined contribution pension, whereas your LGPS is a defined benefit pension. 

No it isn't....
 
OP has worked for Royal Mail for 11 years, so will have joined them (and I trust their pension scheme) in 2014 or thereabouts. They will have been in a CARE scheme until 31 March 2019 and a cash balance scheme from then until the RMPP closed in October 2024.

RM now famously has a Collective Pension Plan, which certainly doesn't 'work' quite like a normal DC arrangement.

hyubh

hewittinspain said:

MTB1986 said:

Your Royal Mail pension will be a defined contribution pension, whereas your LGPS is a defined benefit pension. 

A defined contribution (DC) pension and a defined benefit (DB) pension are two different types of workplace pensions. The key difference is how the final pension amount is determined.

Defined Contribution Pension (DC)

The amount you get in retirement depends on how much you and your employer contribute and how well your investments perform.

Your money is invested in funds, and the final value is not guaranteed.

When you retire, you can take your money as a lump sum, buy an annuity (a guaranteed income for life), or withdraw it flexibly.

Defined Benefit Pension (DB) (also known as a Final Salary or Career Average Pension)

Your pension is based on a formula, usually linked to your salary and years of service.

Your employer guarantees a certain income for life, making it more predictable.

The risk is on the employer, not you, because they have to ensure there’s enough money to pay the promised pension.

In simple terms, with DC pensions, your money is invested, and the final amount depends on performance, whereas with DB pensions, your employer promises a set pension, making it more secure.

Yes that's what these pensions are!.

As Marcon alludes to, technically cash balance is 'DB' as well..

So would it be better to leave the Royal Mail pension where it is and start a brand new one with the council and start from scratch with that one basically having two separate pensions?

You won't be able to remain an active member of the RM scheme after leaving RM employment, you'll automatically become a deferred member. So the next question is, are you are able to transfer your soon-to-be deferred RM benefits into the LGPS or not? To find out, ask your LGPS administrator whether a 'non-Club' transfer-in is possible. If It is, then as soon as you join the LGPS, I'd get a transfer-in quote. This is irrespective of any a priori views on whether actually transferring would be a good idea or not, no point debating that until you know what you would actually get on transferring.

dasherman

Marcon said:

MTB1986 said:

Your Royal Mail pension will be a defined contribution pension, whereas your LGPS is a defined benefit pension. 

No it isn't....
 
OP has worked for Royal Mail for 11 years, so will have joined them (and I trust their pension scheme) in 2014 or thereabouts. They will have been in a CARE scheme until 31 March 2019 and a cash balance scheme from then until the RMPP closed in October 2024.

RM now famously has a Collective Pension Plan, which certainly doesn't 'work' quite like a normal DC arrangement.

That's incorrect I'm afraid Marcon!

The RM DB scheme closed to new entrants in 2008.

The FS scheme closed for existing members at the same time and was replaced for them only, by a CARE scheme up to 2018. The Cash Balance plan then replaced that until it closed in 2024.

Any new starters from 2008 onwards only had the option of a DC scheme until 2018. Anyone who had at least 5 years in DC from then on, were then given the option to join the Cash Balance instead.

The OP will have DC benefits and possibly Cash Balance benefits too.

Cash Balance is technically DB, but it doesn't provide a pension!

Marcon

dasherman said:

Marcon said:

MTB1986 said:

Your Royal Mail pension will be a defined contribution pension, whereas your LGPS is a defined benefit pension. 

No it isn't....
 
OP has worked for Royal Mail for 11 years, so will have joined them (and I trust their pension scheme) in 2014 or thereabouts. They will have been in a CARE scheme until 31 March 2019 and a cash balance scheme from then until the RMPP closed in October 2024.

RM now famously has a Collective Pension Plan, which certainly doesn't 'work' quite like a normal DC arrangement.

That's incorrect I'm afraid Marcon!

The RM DB scheme closed to new entrants in 2008.

The FS scheme closed for existing members at the same time and was replaced for them only, by a CARE scheme up to 2018. The Cash Balance plan then replaced that until it closed in 2024.

Any new starters from 2008 onwards only had the option of a DC scheme until 2018. Anyone who had at least 5 years in DC from then on, were then given the option to join the Cash Balance instead.

The OP will have DC benefits and possibly Cash Balance benefits too.

Cash Balance is technically DB, but it doesn't provide a pension!

Apologies - you're right and I am indeed wrong! I've met the Section C scheme too often...

As you say, OP would only have had the option to join the Cash Balance section once they'd completed 5 years in the DC scheme.

LHW99

hyubh said:

hewittinspain said:

MTB1986 said:

Your Royal Mail pension will be a defined contribution pension, whereas your LGPS is a defined benefit pension. 

A defined contribution (DC) pension and a defined benefit (DB) pension are two different types of workplace pensions. The key difference is how the final pension amount is determined.

Defined Contribution Pension (DC)

The amount you get in retirement depends on how much you and your employer contribute and how well your investments perform.

Your money is invested in funds, and the final value is not guaranteed.

When you retire, you can take your money as a lump sum, buy an annuity (a guaranteed income for life), or withdraw it flexibly.

Defined Benefit Pension (DB) (also known as a Final Salary or Career Average Pension)

Your pension is based on a formula, usually linked to your salary and years of service.

Your employer guarantees a certain income for life, making it more predictable.

The risk is on the employer, not you, because they have to ensure there’s enough money to pay the promised pension.

In simple terms, with DC pensions, your money is invested, and the final amount depends on performance, whereas with DB pensions, your employer promises a set pension, making it more secure.

Yes that's what these pensions are!.

As Marcon alludes to, technically cash balance is 'DB' as well..

So would it be better to leave the Royal Mail pension where it is and start a brand new one with the council and start from scratch with that one basically having two separate pensions?

You won't be able to remain an active member of the RM scheme after leaving RM employment, you'll automatically become a deferred member. So the next question is, are you are able to transfer your soon-to-be deferred RM benefits into the LGPS or not? To find out, ask your LGPS administrator whether a 'non-Club' transfer-in is possible. If It is, then as soon as you join the LGPS, I'd get a transfer-in quote. This is irrespective of any a priori views on whether actually transferring would be a good idea or not, no point debating that until you know what you would actually get on transferring.

Whatever types you have for your RM scheme, it would do no harm (and some good) finding out if it could be transferred, and if so what benefits it would achieve if it was.

You probably have around 12 months from starting the new job to activate the transfer if you so decide, so starting now will be a good thing.

People here will be able to comment when you know what the transfer would get you.

hewittinspain

Thanks for all advise.
I've got little pots all over.🥺 I have a DC plan with Royal mail that has about £45k in it then that recently switched over to a collective plan but it's a new pot when I log into it , then I started AVC's in November which has been put into a Scottish widows account (it's only a few hundred quid) and finally a Reassure plan which I knew nothing about until last year so that was from some old job in the 90s I guess and that has about £7k in.

I'm really stuck as I'll soon be joining a LGPS scheme with the council next month.

So what is the best plan going forward with all these little pots?