Rubbish Pension

Cloan2

Just googled what a SIPP is. Might be an option. Thank you

greatkingrat

He's been working for 30 years, but has he actually paid into a pension for all that time? It sounds like maybe he only starting contributing when auto-enrolment started. Another possibility is that there is another pension somewhere that he has forgotten about.

Universidad

One thing you have not said is how consistently he was paying into a pension. I would agree with other folks that if he has been paying in to a pension for all 37 years it seems that this would be too low an amount, unless the payments were very very small (smaller than today's legal minimums) or there's a lot of years missing.

When did your husband switch jobs? Is it possible that he had a final salary pension earlier in his career which was closed down at some point? A lot of FS schemes started closing down about 15 years ago.

It's possible that your husband has more than three pensions, even if he's  only worked three jobs, if the provision was changed at some point.

Even if that's all he has in his pension pots so far, don't worry too much, your public sector pension is good and you've got time to have a think about how to work with what you've got. But it's definitely worth checking to see if there's something else out there.

Cloan2

Yip, worked all these years. We are waiting on figures for one of the pensions for where he worked for 20 years so that will give us a definite figure. Thinking it's just the case that the salary level and minimum contributions hasn't been great.

gm0

There are many kinds of pensions.  The two most relevant here are occupational (linked to employment) and "personal or SIPP".   An employment one is arranged via being employed.  And you join when hired and go deferred when you leave.   Leaving an old pot and membership each time until you tidy up.  What you do with those pots later at pension age has many options to read up on.  The absolute basics on freedoms on taking a pension can be found via moneyhelper, queries here and from a Pensionwise appointment call.

Understand that transferring DC (pot) pensions is in general free.  You can just do it.  But people will happily charge you 1% of the pot or more than that to do some admin for you and at the same time sign you up for services ongoing that continue to take >1% each year.  These FAs will be looking for clients with bigger pots to take 1% of and may not trouble you much at 40k.  But be aware there is a legal overcharging racket in progress in this market.  What is done to provide pension advice is regulated somewhat to protect you.  But what contracts and fees you are allowed to sign up for if not careful when shopping - are not.  Do not wander into this nest of vipers without your guard up - checking all details in writing before signing up to anything.

Some employment attracts the much better defined benefit final or average salary pensions - which are now vanishingly rare outside the public sector realm.

The key thing with DC pensions while actively employed is that the employer makes contribitions which SOMETIMES vary when you do more they do more to some limit.  And sometimes are fixed.  Maximising this "free" money from the employer to the matched maximum is VERY important.   You should always aim to reach this "cap" rather than setting a lower % for you and declining the matching employer money.  You cannot go back in time with this if mistakes were made to opt out, or do the minimum long ago.  A trade (lower deductions then), lower pot now - was made.

After employer match - if there is any - next is making sure you put in as much as you can afford to (from cashflow) - to maximise the private pension incentive you receive from the tax man (tax relief).  More contributions + more tax relief = bigger pot saved - subject of course to how investments in "pot" pension then perform.  For basic rate tax payers.  20% return on that salary committed to the pension - instantly - is not to be sniffed at.

The 2nd kind of pension is "personal" / SIPP.  Self Invested Personal Pension.  A family of products you sign up to yourself from old life companies or new financial firms - PensionBee etc. Or the SIPP platforms - iWeb. Vanguard. HargreavesLansdown, Fidelity, AJBell etc.   All of which provide a pension wrapper you can save into independent of employment.  The SIPPS have a very wide (thousands) choice of investments.  

An occupational/employer scheme will have a much more basic selection of 10-50 "funds" - but still be enough for most to do something sensible - which is more cautious or more risk embracing to taste.  And the financial tech companies with their "apps" will fall somewhere inbetween.

A first step with existing pensions is to work out what they are currently invested in.  And whether the choice (or default) if one was not made.  Stays put.  Or adjusts itself as you age towards retirement age.  So called "lifestyle funds".  The can do something useful for some people some of the time.  But older ones sometimes do not.  If setup from the era when we all bought an annuity.  Preparing you to mitigate the risks of a fixed purchase date for annuity - is not helpful - if that is not what you are in fact going to do.  It may take your pot out of "growth" investments too much and too early.  What we are allowed to do now has changed.  And what is considered good practice for pension schemes setup by employers drifts along behind to an extent.  Regulation and practice catches up.  But ex employees may be left as they were until they take a look themselves.

How much you can save and receive tax topup is limited in several ways.  The most relevant is that you can only save to the limit of pensionable earnings in an employment year (and then that amount is capped to a number).  There are more rules again for people taking pensions already.  At 30k income you are below the cap.  But you can't take other savings even if you have them in a savings account - higher than 30k and put them in and receive tax relief in a given year.

So with either type it is a matter of getting the tax relief you can.  Within your budget and spending and earnings. 

Where tax relief is used up or you don't have the earnings for accessing more. 

Then other investments don't have the age restrictions of pensions yet allow the same wide range of investing options.  Stocks and Shares ISA being the best example

QrizB

Cloan2 said:

Maybe it's our total lack of understanding of pensions to be honest. Today we logged in to the 3 different pension accounts that he has (3 different jobs over the years) and 40k was the total current value of them all. I think we are going to get a pensions advisor to sit down with us and go through it all. Thanks all

If either of you are in a trade union, they are likely to have a "tame" pensions adviser who you can meet with and have your options explained, without being given the hard sell.

Cloan2

gm0 said:

There are many kinds of pensions.  The two most relevant here are occupational (linked to employment) and "personal or SIPP".   An employment one is arranged via being employed.  And you join when hired and go deferred when you leave.   Leaving an old pot and membership each time until you tidy up.  What you do with those pots later at pension age has many options to read up on.  The absolute basics on freedoms on taking a pension can be found via moneyhelper, queries here and from a Pensionwise appointment call.

Understand that transferring DC (pot) pensions is in general free.  You can just do it.  But people will happily charge you 1% of the pot or more than that to do some admin for you and at the same time sign you up for services ongoing that continue to take >1% each year.  These FAs will be looking for clients with bigger pots to take 1% of and may not trouble you much at 40k.  But be aware there is a legal overcharging racket in progress in this market.  What is done to provide pension advice is regulated somewhat to protect you.  But what contracts and fees you are allowed to sign up for if not careful when shopping - are not.  Do not wander into this nest of vipers without your guard up - checking all details in writing before signing up to anything.

Some employment attracts the much better defined benefit final or average salary pensions - which are now vanishingly rare outside the public sector realm.

The key thing with DC pensions while actively employed is that the employer makes contribitions which SOMETIMES vary when you do more they do more to some limit.  And sometimes are fixed.  Maximising this "free" money from the employer to the matched maximum is VERY important.   You should always aim to reach this "cap" rather than setting a lower % for you and declining the matching employer money.  You cannot go back in time with this if mistakes were made to opt out, or do the minimum long ago.  A trade (lower deductions then), lower pot now - was made.

After employer match - if there is any - next is making sure you put in as much as you can afford to (from cashflow) - to maximise the private pension incentive you receive from the tax man (tax relief).  More contributions + more tax relief = bigger pot saved - subject of course to how investments in "pot" pension then perform.  For basic rate tax payers.  20% return on that salary committed to the pension - instantly - is not to be sniffed at.

The 2nd kind of pension is "personal" / SIPP.  Self Invested Personal Pension.  A family of products you sign up to yourself from old life companies or new financial firms - PensionBee etc. Or the SIPP platforms - iWeb. Vanguard. HargreavesLansdown, Fidelity, AJBell etc.   All of which provide a pension wrapper you can save into independent of employment.  The SIPPS have a very wide (thousands) choice of investments.  

An occupational/employer scheme will have a much more basic selection of 10-50 "funds" - but still be enough for most to do something sensible - which is more cautious or more risk embracing to taste.  And the financial tech companies with their "apps" will fall somewhere inbetween.

A first step with existing pensions is to work out what they are currently invested in.  And whether the choice (or default) if one was not made.  Stays put.  Or adjusts itself as you age towards retirement age.  So called "lifestyle funds".  The can do something useful for some people some of the time.  But older ones sometimes do not.  If setup from the era when we all bought an annuity.  Preparing you to mitigate the risks of a fixed purchase date for annuity - is not helpful - if that is not what you are in fact going to do.  It may take your pot out of "growth" investments too much and too early.  What we are allowed to do now has changed.  And what is considered good practice for pension schemes setup by employers drifts along behind to an extent.  Regulation and practice catches up.  But ex employees may be left as they were until they take a look themselves.

How much you can save and receive tax topup is limited in several ways.  The most relevant is that you can only save to the limit of pensionable earnings in an employment year (and then that amount is capped to a number).  There are more rules again for people taking pensions already.  At 30k income you are below the cap.  But you can't take other savings even if you have them in a savings account - higher than 30k and put them in and receive tax relief in a given year.

So with either type it is a matter of getting the tax relief you can.  Within your budget and spending and earnings. 

Where tax relief is used up or you don't have the earnings for accessing more. 

Then other investments don't have the age restrictions of pensions yet allow the same wide range of investing options.  Stocks and Shares ISA being the best example

Thanks for this. Think I'm more confused now though. Pensions are so complicated. So should we try and get an appt with Pension wise? I need someone to look at each scheme and tell me what it all means....🥴

gm0

Sadly pensionwise are not that. 

Basics.  Scripted. Explaining recent reforms (Cameron/Osborne era).  Drawdown.  They can talk you through the access options and the terminology - in general terms.  No numbers. Not recommending anything.  On the plus side not charging or selling you anything.   You can ask questions about terminology or options you don't understand.  That's what it is for.  Won't tell you which one to pick or why.  People tend to find that unsatisfying.  But that's how it is.

Yet reading up or learning some of the language can be useful and asking them questions about things you don't understand.

Whether your confusion clears.  Or you subsequently are listening to an IFA and more of the words they say make some actual sense.

Only IFAs do "personalised" advice - based on you and your membership, wealth and needs.  To recommend an option for you to accept and then for them to implement.  But it is an expensive service to access.  1% upfront and 0.5% pa ongoing is typical for an IFA to setup drawdown.  Annuity purchase and prices would be a different form of arrangement.

But like primark vs a tailors shop - to some extent - you get what you pay for in terms of service.  An adviser signing you up for retirement life services at 0.5% per year - may well spend more time on you upfront than one getting in and out doing a consolidate and transfer job for 1% without ongoing service still aiming to do suitable advice to FCA regulations.   One wants you happy with their service and value and signed on and bedded in.  The other wants your transaction finished and gone and on to the next one. 

Cloan2

Thanks for all that info. Ok, so we need to do our homework and get our head round all things pensions. I will look over the paperwork again and come back here and ask further questions rather than get an IFA. Thanks for all the advice everyone, you've been brilliant 👏 

Marcon

Cloan2 said:

Thanks for all that info. Ok, so we need to do our homework and get our head round all things pensions. I will look over the paperwork again and come back here and ask further questions rather than get an IFA. Thanks for all the advice everyone, you've been brilliant 👏 

Pensionwise is a very useful choice for people with little or no grasp of pensions.  The appointment is free so go ahead and book it - at the very least it will help you to identify the types of pension your husband has.

If he's paid in to a pension for many years, I suspect he has a mix of defined benefit (DB, aka final salary/CARE schemes) and defined contribution (DC) schemes, and you might be adding together the projected pension from a DB scheme (which will be paid every year from the time he retires, and increase in value once it is in payment) and the 'pot' value of his DC pensions - there's no way the value is going to be as low as £40K if he was actually paying in to a pension for 20+ years.