Should I Transfer part of my employment pension into my ISA?

EmittaaBee

Is it a good idea to Transfer part of my employment pension into my ISA with CHIP? Is this worth it? in order to benefit from the interest? given the fact that the cash sits in my employee pension pot not earning interest.. advice and thoughts welcome?

Ayr_Rage

What type of pension is it?

If DC, what is it invested in?

There is no simple answer.

EmittaaBee

forgive my ignorance but what is DC? the pension I am referring to is set up by my employer, to receive their contributions and mine deducted from my salary automatically. I was thinking only to take 10k and add it to my ISA to benefit from the interest.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/comment/81890904#Comment_81890904

There are two main forms of pension…

DB - Defined Benefit - it says how much you will receive as a pension from day 1. Normally something like 1/60th of your final years salary for each year you were an employee. There is no concept of a "pot" and it doesnt have a fixed value. You dont get many of these available these days outside of the public sector

DC - Defined Contribution - it says how much will be put in a pot for you but gives you no promises on what size the pension will be at the end. Historically when you retire you'd use the pot to buy an Annuity that provides your regular payment based on the market rates at the time. Since Pension Freedoms you have more choices.

Assuming you are under 55 then there is a significant tax to pay for withdrawing the cash from your pension pot. Plus your pension should be invested and therefore growing under tax free conditions the same as an ISA anyway

p00hsticks

The money in your pension shouldn't (won't ? ) be held as cash - it will be invested. Depending on the scheme you may have some input in exactly how, so find out a bit more from your pension scheme.

EmittaaBee

https://forums.moneysavingexpert.com/discussion/comment/81890915#Comment_81890915

I am over 55 so does this make a difference?

Ayr_Rage

https://forums.moneysavingexpert.com/discussion/comment/81890904#Comment_81890904

If you don't know what type of pension you have you have a lot of research to do before you think of doing anything.

You need to find the type first and then the scheme rules.

How old are you and when do you plan to retire?

How much is currently invested in the pension?

EmittaaBee

https://forums.moneysavingexpert.com/discussion/comment/81890938#Comment_81890938

I am 55 and will have to work as long as possible! only have about 30k in my pension pot.. hence my idea to take some out to try to earn some interest albeit a small amount in the grand scheme of things but even if its a few hundred pounds its still worth it?

p00hsticks

https://forums.moneysavingexpert.com/discussion/comment/81890954#Comment_81890954

That £30k will be invested in stock market funds, and although there are no guarantees, statistically it should make more over the next ten years than if you just took it out (paying tax on it at the time) and put it into a savings account.

As others have said, you need to find out a bit more about it.

saajan_12

https://forums.moneysavingexpert.com/discussion/comment/81890954#Comment_81890954

Why do you think your pension pot isn't earning anything? Usually the amount you put in is invested in things that are expected to increase in value and/or pay dividends, in excess of the interest you'd earn instead.

LHW99

There are also two other possible issues:

1. If you are still contributing, a work (autoenrollment?) pension may not allow you to take money out unless you stop contributing by opting out. That means you would probably lose some employer contributions (free money) and tax refunds (more free money) until you opt back in.
2. If you take out even 1p of taxable money (even if you wouldn't actually pay tax because your income is less than the personal allowance) then you would be limited to putting £10k pa into any pension for all time.

Why do you need to do this? Money in you pension can grow tax-free, just like in an ISA.

Find out more about what your pension is (who it's with, what fund it is in inside the pension).

Then ask a question on the pension board https://forums.moneysavingexpert.com/categories/pensions-annuities-retirement-planning

If you can give details of the pension, there are plenty of knowledgable people on that board who could help you decide whether changing the fund it is in would be better than what you are suggesting.