Pension Transfer - Post 1997 Protected Rights - Little Help Needed!

scottp_2

Hi,

I have received a letter from my previous employer regarding my pension. The scheme was a defined benefit, so I did not pay any contributions myself. The two options given to me on the letter are:

1 – Reinstatement in the State Scheme

A CEP of £661.16 will be paid to the state.

2 – Transfer of benefits

A transfer of the value into another approved arrangement.

Post 1997 Protected Rights £1598.07
Guaranteed Until 11/07/2008


So from my limited knowledge of pensions, am I right in thinking that the first option is me giving Brown and Darling my £660 and letting them do as they wish (probably pay their mortgage or wife’s taxi bills) and the second allows me to put the amount into an ‘approved scheme’. Is the ‘protected rights’ just the money from contracting out of S2P? I know there are limited schemes that they can be put into, so what are these? I also know that quite a few providers do not like small funds like this.

My plan is to transfer it into a scheme that I can control myself and have a little dabble at investing. I am only 18 so it is not as if I am playing with my nest egg with only a few years left to retirement. Does this sound like a good idea? It is money that I can afford to play about with as I am not really short of cash at the minute.

Thanks for your help!

dunstonh

Is the ‘protected rights’ just the money from contracting out of S2P?

Yes.

I know there are limited schemes that they can be put into, so what are these?

Just about every stakeholder pension and personal pension there is. There is no limited number of schemes.

I also know that quite a few providers do not like small funds like this.

Its fine for a stakeholder pension.

scottp_2

thanks for the answers Dunston. Where can I look to compare these products? I am wanting one that won't charge me anything outside the money that is in the Pension. I do not see this as my money, but I don't want to spend any of my own on it.

Thanks!

EdInvestor

Charges are always deducted from the money inside the pension. What do you want to invest the money in?Decide on that first, then choose a pension proivider who offers the options you want at a competitive price..

scottp_2

I guess I would just want some quite high risk funds to try and make the money grow quickly, I just want to have a little go at investing with money that I am not too bothered about. Is there any areas at the moment worth looking at?

Thanks!

Debt_Free_Chick

scottp wrote: »

So from my limited knowledge of pensions, am I right in thinking that the first option is me giving Brown and Darling my £660 and letting them do as they wish (probably pay their mortgage or wife’s taxi bills)

Yes - but in exchange, your S2P would be reinstated as if you'd never been contracted-out of it.

With option 2, you lose a bit of S2P, which would be replaced by whatever amount the personal pension will buy for you, at retirement.

Your choice is whatever the State will pay you in the future vs whatever the personal pension will provide.

scottp_2

I have very little faith in Gordon Brown and any of his successors in providing me with an income in retirement. I think I will sort myself out!

Thanks for the help everyone!

dunstonh

Contracting out could be seen as the bird in the hand rather than the two in the bush. Only time will tell and that is why its so hard to say why its best to contract out or not. Its a judgement call based on opinion with a each having a few fringe benefits.