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pensions argh?

(6 Posts)
noeuf Sat 21-May-16 19:29:40

Ok I don't understand the rules at all.
I had a personal one which I stopped paying into and it's worth peanuts. It's with a bank and the last statement values it at £7500.

I also have had to be enrolled at work. I don't pay anything into this.

I'm 42.

How can I combine the two? Can I? What if I leave work (likely)?

concertplayer Sun 22-May-16 09:40:37

I only have a basic knowledge There will be others here who know more
Advice is to put 20% of earnings away for your retirement but before
you panic remember you also have the State pension(if it still exists)
and to think what you would need for a comfortable retirement.
What is very important to do is to examine your whole situation annually
1. The Government is constantly reviewing the pension situation
2. You may have other investments eg property to use in your
retirement.
There are essentially 2 main types apart from SP :
1 Defined Contributions (sounds like your bank one) where an amount
of money is built up in a pot and used to buy an annuity BUT the govt
changed this so you will need to get advice as you no longer have to
buy an annuity.
The contributions for MOST are tax free the tax being taken later on the whole retirement income above the annual personal allowance (Currently c£11,000)
2 Defined Benefit These used to be offered by most employers but
are rare now They are based on how long you have worked there not
just the pot Grab it best there is Could this be your current scheme?
In general you can have as many private/DC policies as you wish
so long as your and your employers contributions do not exceed £40,000
pa but please check this as constantly changing
Dc will have a transfer value This can be used to go to another provider
Db sometimes let you use your DC to buy additional years but you
will need to ask Db provider as very complicated.

concertplayer Sun 22-May-16 09:58:59

Oh more things
1. There may be charges when you transfer/leave a Dc scheme
2. Some Dc offer attractive extra benefits (esp those taken out a while ago)
so this needs to be checked eg some guarantee a certain amount
3.Dc are normally invested on the S Exchange so less secure than DB
4. Db have normally more features than DB eg provision for spouse
in the event of early death. Annuities have a guarantee period for this
but nowhere near as good as DB
5. Look up these main schemes on the web for further info

LordEmsworth Sun 22-May-16 10:02:45

You can combine the two, but you might not want to.

The advantage of your workplace pension is that your employer pays in to it (and you can choose to do so, or not).

The advantage of your other pension is it's not tied to a job. (I have a similar amount in a stakeholder pension I stopped paying in to a decade ago, but its performance is ok so happy to leave it there). So it will always be there.

If you change job, then you get a new pension through new employer, and you end up with 3 different pension pots. At some point it may be worth consolidating them, but if they are all low-value then actually the fees to transfer the monies might be too high to be worth it.

If you want to move your other pension then don't assume your workplace pension is the best option - it might be more convenient, but might end up costing you money if its performance is worse. And there will probably be a fee for moving your money.

Both providers should give you annual updates on performance, investment risk, value - so you can compare and see whether you think you would be better off moving.

If you do want to move your old pension into your workplace pension, you'll need to speak to your workplace pension provider to find out if it's possible.

If you don't, you can shop around and see whether there's another better home for your old pension, and just transfer it.

42 is a good age to be making proper retirement plans - if you leave it much longer, retirement will be approaching very rapidly. Personally (at 39) I am not willing to rely on the state pension still having any value at all in 25+ years' time.

LordEmsworth Sun 22-May-16 10:03:20

That's long, sorry!

noeuf Mon 23-May-16 21:46:41

Thank you. I'm concerned that I will end up with several teeny pensions if I change jobs!

What happens if you do contracts, short term employment? A new pension each time?

Maybe I should restart the old one.

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