what should I do with money in a private pension?

[gincamelbak]

In my previous job, I had a private pension. I was paying into it for about two and a half years. I then left that job and started one with local government and have around 7 years of payments into that.

It's unlikely I'll ever pay into the private pension again. I dont know how much is in there or how much I would get if I cashed it in. I'll contact them when I get a chance but I'm not entirely sure what I should do for the best.

We've got to replace our boiler, buy a new car and pay for other home improvements so any extra cash would be great.

If it was you, what would you do? Carry on with whatever cash is in the pension but not paying into it? Cash it in and lose the employer contributions (I assume)? Transfer it to local government pension ?

I can't afford pay into the private one as well as my employer pension.

Help me make up my mind!
Thanks

first thing is to gather more information. Find out how much is there and if you can actually cash it in. You will lose the employer contribs and there may well be a tax penalty.

also ask for the transfer value into your current pension.

generally it is a bad idea to cash in pensions as you lose all the tax breaks and the benefits of your long-term saving. If matters are that tight consider pausing current contribs; but if you have a good local government scheme think VERY hard before doing that.

You won't be able to 'cash it in' unless you're over 55, they just won't do it as it's such a black mark against them (regardless of the letter of the law).

Leave it 'paid up', move it into a 'managed fund' with a lifestyle option to 65 and then just let them know if you ever have another pension or when you move home.

Neither do I think you will be able to transfer it in to the local government scheme.

From memory, and it was a long time ago, but you had to deal with any such transfers within the first 12 months of scheme membership.

Balls. Thanks for the response!
When I left the company and asked about transferring to the local government one, they were so unhelpful it was unbelievable.

I'm still paying into the local government oone and have no intention of stopping that. I've been able to roll previous local government pensions into that one.

I'll find out if it is possible to remove the money, but am a long way off 55 and hadn't realised that could be the limit. Or a 12 month thing - nothing like that was explained to me when I spoke to them at the time of leaving five years ago.

If I can't remove ill just look forward to my 85p per year in the future :-)

Thank you!

you can take it once you get to 55 as a lump sum, just not now.

You may be able to transfer it into a SIPP - a self invested pension plan - where you manage it yourself. The costs of keeping money in a managed fund are very high, they'll deduct annual fees, management charges etc etc until you are only left with 85p.

Find out what all your options are and then do what suits you best.

also as not-an-adviser I'd look to putting it into something you can manage yourself. Trackers don't generally do much worse than managed funds!

and do take a HARD look at the charges, they can mount up enormously.

How old are you and what type of pension was it?

The new lump sums are only available from money purchase type arrangements and only from age 55. They are also subject to tax at your marginal rate. You can transfer a final salary arrangement to a money purchase one to access funds as a lump sum but are required by law to take advice before doing so.

You might be able to look at transferring the "private pension" into your current employer's arrangement and then you would have all of your pension funds in one place. The management fees in the LGPS may well be lower as well, but you would have to look carefully at the transfer credit you were being offered. The LGPS can take transfers in, but once you have been in employment longer than 12 months, I think it is at the discretion of the individual employer.

The options for dealing with pension are highly complex and very dependant on your personal circumstances. Ideally, you should seek advice from an IFA.

GooseyLoosey has set out the legal position well and I agree it is worth trying to see if you can transfer the money into the LGPS. I just wanted to add a warning - there are a lot of scammers around who will tell you they can "liberate" your private pension money before age 55. They take a significant cut out of any amount "liberated" and you get left with a big, penal tax bill. I think there is more information on this on the Pensions Regulator website. Don't get taken in by these scams.

Agree with other posters: if you can't transfer into the LG pension scheme, move it into a SIPP. The charges levied by your current provider will really erode the value of your private pension over time, and SIPPs are cheap to run. Then if you have more money in future, you can resume contributions to the SIPP alongside your occupational scheme.

Not sure why you think you'd lose your employer contributions into the seven year old private scheme. As others have pointed out already, 'cashing in' your private scheme before you retire would be madness, but once contributions (yours or somebody else's) are in a scheme like this, they generally stay there. The only exception would be where an occupational scheme stipulates that you have to be a member for e.g. two years in order for benefits to be preserved.

Oh, more replies, thank you.

I will speak to the local govt pension folk to ask if possible to transfer in. I knew that I'd lose the employer contributions if I took the money out but wasn't sure if I'd lose the employer contributions if I transferred private to the lgp.

I really don't want to have this oprivate pension as it's such a small number of years I had it and I really doubt, even with the employer contributions it will be worth much once I retire.

I'm 35 now so 20 yrs before I could take it out but who knows how long before actual retirement.

I only had the private scheme for 2.5yrs so thought whilst it may be madness, having a small amount of money now is more worthwhile than small amount in future.

will gather more info and look into xfer or SIPP.

Thanks for the responses.

Just clarify: private pension was onlybeing paid into for 2.5yrs.

Local govt pension has about 7 yrs of contributions. Am keeping this going, not thinking about stopping payments or trying to take money from this one.

Not clear if I could xfer private to local govt.