Contact back into SERPS... or not?

full-time-mum

dunstonh wrote: »

Are you married or have a partner? They could fund some provision in your name. Retirement provision should always be planned jointly and not be top heavy with one partner.

Yes, OH has a company pension scheme. Originally non-contributary 60ths but since the EL mess, he now has to contribute to keep the 60ths (otherwise it would have gone to 80ths).

dunstonh wrote: »

If you had the fund value in your hand as cash would you let it go? Remember this money is going to be yours later. The more it grows, the more you get. Ignore it and you get less.

At the moment, it seems it makes no odds as to whether I am in or out as I am not putting anything in. We're talking about contracting in/out future contributions, right?

Am I right in saying that the funds already in SL are going to stay there?
If this is the case, then I definitely need to review what SL are doing with them. I wasn't aware I had any control over them. I, wrongly, under the impression that once they had been paid in, that was that.
Is it just a case of getting SL to change where they invest my funds or do I have the option to move to a different provider? How do I go about this - given that I am completely out of my depth and am in dispute with my IFA!?

full-time-mum

jamesd wrote: »

full-time-mum, the existing money in your pension plans is invested somewhere. The choices of investments available in pensions today is better than it was in old pensions and the charges are often lower. So it's worth looking at the investments inside the pensions and managing them. It might be worth combining all of the pensions into one as well, depends on what they are.

As I understand it, and that isn't saying much, both pensions were created by the company I was working for at the time but were personal pensions. Maybe some kind of group personal pension plans. One is with Scottish Widows and is miniscule and the other with EL - not very big either but does have some funds.

jamesd wrote: »

When retired each person gets a personal tax allowance and that's expected to be about 10,000 for people over 65. Since that's tax free money it makes sense to try to get a fairly even split of pensions between partners. Since you can make contributions of up to 2808 a year and still get basic rate tax relief added even if not earning anything it's often a good idea for a partner to make contributions of up to that amount for a non-working partner with low pension provision.

Unfortunately, at the moment, all spare cash is being used to rectify the non-performing mortgage endowment plus the extra contributions now needed to OH company scheme.
I'd like to start earning some extra cash, but at the moment DD2 is still at infants and I haven't found a job that will allow me to be there to take her to/from school and look after her in the holidays. The trouble is that those kinds of jobs are far and few between and don't pay sufficient to cover child-care costs during holidays.

I have to say that the whole retirement issue scares the hell out of me.

dunstonh

At the moment, it seems it makes no odds as to whether I am in or out as I am not putting anything in. We're talking about contracting in/out future contributions, right?

We are talking about the value in your pension. What the fund is worth. That is invested and anything invested pre 2001 can often be more expensive than modern options and have less investment choice. Future contributions are irrelevant as there isnt any.

Am I right in saying that the funds already in SL are going to stay there?

Yes unless you move them.

If this is the case, then I definitely need to review what SL are doing with them. I wasn't aware I had any control over them.

Exactly. Potentially you have upto 2000 investment funds out there to utilise. Choice is massive nowadays and there are options for everyone.

Is it just a case of getting SL to change where they invest my funds or do I have the option to move to a different provider?

SL will offer a range of funds and you can mix and match from these. It will be a limited range so you may prefer another provider that has a wider range. That is down to you (or your adviser if you use one).

How do I go about this - given that I am completely out of my depth and am in dispute with my IFA!?

If you dont like that IFA then there are plenty others. If you have a leaking pipe and the first plumber comes along and you dont like him then you dont put up with the leaking pipe but get another plumber.

You should also review your joint retirement planning. In retirement you can both earn £10k a year without paying tax. That potentially is £20k p.a. tax free. If however, the income is all in your husbands name and say its £20k, then the first 10k will be tax free but the other 10k will have 20% tax which is £2000.

So, just by doing a bit of planning, your allowances could be used up and save upto £2000 in tax per year. For many people this just means splitting their pension contributions between two and costing nothing more.

If you life for 25 years after retirement, the extra tax saved just from careful planning could easily exceed £50,000. in todays terms.

Unfortunately, at the moment, all spare cash is being used to rectify the non-performing mortgage endowment plus the extra contributions now needed to OH company scheme.

Get the new IFA to review the endowment at the same time. It may be that its worth knocking on the head and changing.

EdInvestor

mad wrote: »

I have got the contracted out stuff in reasonable funds and moved from the 'zombie' type stuff so my contracted out pension is reasonably invested. Now that I know that and given that I still may want to retire at 60 is it still worth contracting back in?

According to the age calcs, you should contract back in, BUT, this will happen automatically anyway in 2012. Since you are paying attention to your pension investments'performance , it's more likely you will be able to match the S2P pension level, and by being contracted out you have the advantage of being able to take the pension early and get the 25% tax free cash.So in your case I would stay contracted out and keep the remaining rebates under my control.

The advice is aimed more at the large numbers still in zombie funds who don't have a clue - at least the letters are proividing a partial wake-up call. In many cases it's much more important to do what you've already done - reinvest/transfer the existing money) than to decide on contracting in or out.But of course they don't actually tell you that.

full-time-mum

OK, I need to get my head out of the sand and do something - what I'm not sure. After the first few posts, I thought it made no odds whether to go back in or not but now I'm thinkiing that maybe I should stay out. We have to let SL know by 29 Feb if we want to stay out. I'm assuming that staying out now will not preclude me from opting back in later.

dunstonh wrote: »

We are talking about the value in your pension. What the fund is worth. That is invested and anything invested pre 2001 can often be more expensive than modern options and have less investment choice. Future contributions are irrelevant as there isnt any.

I also need to contact SL and see what my options are re better investments. Will they give me this information or have I got to find a new IFA?

dunstonh wrote: »

Potentially you have upto 2000 investment funds out there to utilise. Choice is massive nowadays and there are options for everyone.

:eek: Considers putting head back into sand!

dunstonh wrote: »

If you dont like that IFA then there are plenty others. If you have a leaking pipe and the first plumber comes along and you dont like him then you dont put up with the leaking pipe but get another plumber.

Point taken - not dealing with anyone at the moment - in dispute with IFA re: endowment mis-sell. Trouble is we've been bitten once and are now twice shy - we're a bit scared of trusting anyone now.

dunstonh wrote: »

You should also review your joint retirement planning. In retirement you can both earn £10k a year without paying tax. That potentially is £20k p.a. tax free. If however, the income is all in your husbands name and say its £20k, then the first 10k will be tax free but the other 10k will have 20% tax which is £2000.

So, just by doing a bit of planning, your allowances could be used up and save upto £2000 in tax per year. For many people this just means splitting their pension contributions between two and costing nothing more.

If you life for 25 years after retirement, the extra tax saved just from careful planning could easily exceed £50,000. in todays terms.

This is a good point and something I hadn't considered before. However, I would have thought it better to continue as we are and ensure the continued 60ths and to invest in my own pension planning once we are a little more flush.

dunstonh wrote: »

Get the new IFA to review the endowment at the same time. It may be that its worth knocking on the head and changing.

Our position regarding the endowment is all up in the air - we are still awaiting a response from our appeal.

This is what happened...

1. The original researcher came down in our favour
2. IFA disagreed and forced it to the ombudsman for adjudication
3. Ombudsman came down against us. One of the reasons was our not disputing reciept of a particular document - we had already denied recieving this in previous correspondence with the original researcher. We were also critisised for not doing anything to rectify the situation. (We hadn't physically paid anything off as it was a better return on our money to invest our savings in a high interest a/c (I'm a non-tax payer) rather than the mortgage - silly us for trying to make our money work!) and we got confused re Low/Minimum cost endowments.

The whole endowment thing is really getting to me now. They gave us 2 weeks to appeal which ended in the first week January 2007 (ie we had the Xmas fortnight to deal with it :mad:). A year on and we have had 2 letters from them stating that they are very busy and have yet to assign someone (again).:mad::mad::mad::mad: but I digress, this is another thread altogether.

dunstonh

Point taken - not dealing with anyone at the moment - in dispute with IFA re: endowment mis-sell. Trouble is we've been bitten once and are now twice shy - we're a bit scared of trusting anyone now.

Harold Shipman was a murderer. Do you stop seeing your doctor? If you get food poisoning do you stop eating? You shouldnt measure the vast majority by your views on one.

I also need to contact SL and see what my options are re better investments. Will they give me this information or have I got to find a new IFA?

SL will provide you with the fund list that is available to you but they will not provide any advice on what you should do. That remit falls to IFAs.

Considers putting head back into sand!

Technically there are about 30,000 funds and almost unlimited investment options if you start including shares and investment trusts and other direct investments. However, it is easy to lower it down to a more reasonable number. How easy will depend on how much time you want to spend researching or if you want to use an IFA.

This is a good point and something I hadn't considered before. However, I would have thought it better to continue as we are and ensure the continued 60ths and to invest in my own pension planning once we are a little more flush.

You should maximise employer benefits but any extra should look at you.

full-time-mum

dunstonh wrote: »

Harold Shipman was a murderer. Do you stop seeing your doctor? If you get food poisoning do you stop eating? You shouldnt measure the vast majority by your views on one.

I know, you are quite right. Just not sure how to find a good 'un. You don't fancy moving this way do you?:D

dunstonh wrote: »

You should maximise employer benefits but any extra should look at you.

That's what we thought. Really could do without having to pay in the extra but it is worth it to keep the 60ths.

jamesd

full-time-mum, try unbiased.co.uk and eliminate any that offer neither New Model Adviser (NMA) nor Client Agreed Remuneration (CAR) pricing. That should rule out most of those who aren't keeping up with the trends. Then ask for second opinions here on whatever is proposed. You could also email or private message dunstonh to see if dunstonh is interested in doing business with you - dunstonh can't initiate this but you can, if you wish. Still ask for second opinions here, but don't say who the firm is or that it's dunstonh's.

Picking whichever of the pensions you currently have that offers the best options then merging all of the money into the one probably makes sense but if you're going to use an IFA it might as well be one that makes it inexpensive for the IFA to do regular annual rebalancing of your investments as part of the management job. Getting the IFA to manage them is optional but seems reasonable if you're worried about the range of options and it'll probably only cost the normal 0.5% annual commission that funds pay anyway, plus a percent or two for initial selection work. Though with no advice you could eliminate most of that commission by paying a fee, so the advice isn't actually free - just paid for over time.

Switching the endowment money into investments inside stocks and shares ISAs may well be a good idea, particularly if it still has a long time to run. Lots of good investment options that way and still an excellent tax wrapper.

If the endowment has at least ten years to run still I'd be inclined to go with pension contributions for you ahead of trying to cover the endowment - the 22% then 20% next year tax gain is pretty significant. I'm assuming that your financial situation will improve over the next few years and that the endowment performance may will improve once it's actively managed, with ample time to see if that happens and correct if necessary.

You can contract in or out again whenever you wish. Nothing irrevocable about the choice. Staying out seems reasonable enough now - no point in changing it when it doesn't actually matter. Longer term, if you want to retire or take the pension money before you're 65 being contracted out is the only way, since the contracted in money can't be taken before state retirement age.

MogMartin

I have been reading this thread with interest as I also have the SL letter. My thanks to all contributors.

I am 60 and have about £30k in SL (½ in ‘Pension Managed One Fund’ & ½ in ‘Pension With Profits Fund’).

I am not working (for money) and have absolutely no intention to work (for money) again before I am 65. Both myself and my wife have other pensions in our own rights which we are already drawing. I have no need of a pension from SL until I am 65.

I conclude that I should stay contracted out as that will allow me to take a 25% tax-free lump sum and ensure that, should I die before 65 – something I have absolutely no intention of doing!, my wife will get the benefit of the whole fund.

Does anybody disagree with this conclusion, please?

Does anybody think I am drastically invested in the wrong fund(s)? I don’t want to do anything that a) jeopardises what I’ve got invested in the hope of a slightly better return (given only 4½ years to run) or, b) is a load of administrative aggravation to effect.

jamesd

You don't need to remain contracted out to qualify for the 25% tax-free sum, rather you get the ability to have it for any contracted out money that's been paid into a pension. So contracting in or out just affects whether new money is paid into the pension and qualifies. Since you're not working for money there will be no possibility of additional payments so contracting in or out will make no difference for you.

But you're way above the age where you should be contracted in if you do work, so should do that. There's little chance that if you did work your pension investments could match the benefit from being contracted in. The change to contracted out contribution rates this year are very punitive for people of your age - a dramatic capping of them.