leaving a company pension scheme

guitaruser · 14 December 2005 at 4:29PM

Hi I am leaving a company pension scheme, which I have been paying into for over 3 years. I know nothing about pension schemes.

I do know that there is no pension with my new job for the first 6 months.

I am unsure of my options.

For example if I have 5k in this pension. Shouold I cash it in and start a personal Pension?

Transfer it after the 6 months into the new company one?

Invest the money in something else?

I am 27 if this makes a difference.

I will probably go to a financial adviser but would appreciate any help to build up my knowledge first.

Thanks in advance

EdInvestor · 14 December 2005 at 5:02PM

guitaruser wrote:

Hi I am leaving a company pension scheme, which I have been paying into for over 3 years.I do know that there is no pension with my new job for the first 6 months.

For example if I have 5k in this pension. Shouold I cash it in and start a personal Pension?

You can't cash it in, it's not allowed, but you could move it to a personal pension - though it might be in a (Group) PP already.

Transfer it after the 6 months into the new company one?

This is definitely a possibility, depending on what type of company pensions they both are.

Invest the money in something else?

Again, not allowed.

Can you find out what kind of pensions they are?

It will be either

Final salary occupational scheme
Money purchase occupational scheme
Group personal pension.

Your options should then be much more clear.

guitaruser · 14 December 2005 at 5:08PM

EdInvestor wrote:

You can't cash it in, it's not allowed

Again, not allowed.

Will try and find out what schemes they are, with you saying its not allowed....a few years ago I left BT and cashed in a pension.

Has there been a new law? since 2002?

dunstonh · 14 December 2005 at 5:36PM

Ed is correct. However, if you left BT within 2 years of joining it, they would allow a refund of contributions. Shame really as the BT pension would have been better left there.

guitaruser · 14 December 2005 at 6:03PM

dunstonh wrote:

If you left BT within 2 years of joining it, they would allow a refund of contributions. Shame really as the BT pension would have been better left there.

I had to access the money to live while I found another job

EdInvestor · 14 December 2005 at 6:51PM

IMHO the rules are very confusing.

Am I right in thinking the 2 year rule only applies to occupational pension schemes?

With GPPs, once the money's in, it stays in, same as with ordinary personal pensions?

dunstonh · 14 December 2005 at 9:27PM

It only applies to final salary schemes. Each scheme can set its timescale. Its to stop the scheme having too many small pensions which increase paperwork and therefore cost. I believe all the civil service and privatised companies, that still have final salary pensions, are set at 2 years.

EdInvestor · 15 December 2005 at 8:13AM

OK,in that case it's about to get a lot less confusing, since final salary schemes are rapidly closing to new entrants.

But there's going to be even more pension proliferation all over the shop unless people get into the habit of getting one stakeholder pension or SIPP and transferring all their bits and pieces of pensions into it when they move jobs. Tis will be much easier if there are no final salary schemes involved

Otherwise the likelihood is the pensions will end up in poorly performing default funds and get eaten away by charges - just like all that contracted out money lurking now in zombie With-profits funds

The current system - as explained (or not!) - is really is pretty hopeless for most people to deal with.

dunstonh · 15 December 2005 at 9:28AM

OK,in that case it's about to get a lot less confusing, since final salary schemes are rapidly closing to new entrants.

You make that sound like a good thing

But there's going to be even more pension proliferation all over the shop unless people get into the habit of getting one stakeholder pension or SIPP and transferring all their bits and pieces of pensions into it when they move jobs. Tis will be much easier if there are no final salary schemes involved

Many money purchase schemes have very low charges. There may also be some guaranteed income rates built into them which would be lost if transferred. Although the principle of sticking them together in one pot may be attractive, it has to be done with care to make sure decent benefits in the plans are not lost.

The current system - as explained (or not!) - is really is pretty hopeless for most people to deal with.

Yep. Perhaps the biggest disappointment with A day is that it isnt at all radical and didnt address the single biggest issue with pensions and the need to purchase an annuity. A day isnt really about simplification either. It may have started that way but its introducing a load more rules.

leaving a company pension scheme

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