(Probably very basic) pension questions

[TheProblemBlob]

I have an appointment booked for a call with Pension Wise but I have some questions in advance I'm hoping someone can help me with, for some reason I can't get my head round pensions at all.

1. I have three pensions. One is what I presume is called an 'occupational pension' (no idea if that's right). I haven't paid into that for about 10 years as I don't work in that industry any more. The other two are what I call 'private' pensions - no idea if that's the correct term - and I pay into them each month.

2. If I had three savings accounts, I would know which to amalgamate into based on the interest rate, how do you compare pensions?

3. What paperwork/figures am I likely to need for the convo with Pension Wise?

4. I think I can make voluntary contributions to the occupational pension, even though I don't work there any more. Is this a good idea?

5. Am I right in thinking pensions such as Nest are just a way of saving up a pot of your own money, which you get access to on retirement age? They don't give you an amount per year, do they, and the government doesn't add a meaningful contribution, unlike the occupational pension.

If you've got this far, thanks!

(1) "Occupational pension" just means "pension scheme you are in because you worked somewhere" so if you got that pension from work then yes it is that one. Did you start the private pensions yourself then?

(2) You don't need to consolidate the pensions at all if you don't want to, and leaving them separate gives you flexibility to draw them at different times. Pension Wise can tell you more about comparing pensions. One factor is what fees they charge (usually a % of the fund per year) where lower is better of course. The ultimate return will be down to what they are invested in and how well that does, but that investment strategy is something that Pension Wise can talk to you more about.

(3) I would try and get information on the names of all the three schemes, as up to date a value as you have, and if possible what they are invested in.

(4) There are really two different questions here - should you pay AVCs into a pension? And - if you do - should it be that one? Speak to Pension Wise about both questions.

(5) Money purchase (also known as defined contribution) pension schemes like NEST are exactly like that. They are a personal pot of invested money that is yours that when you get to retirement you can access. If you like you can dip into it like a bank account (known as "drawdown") or if you prefer a regular monthly income you can buy an "annuity" from an insurance company that will give you that. However, the annuity is irreversible - if you buy one you can't change your mind and go back, but if you do drawdown you can always buy an annuity with what's left later. The government don't really "contribute" anything at all either to occupational or private pensions. What they do is allow you to pay into them from your earnings before income tax is calculated. So if your income is already so low you don't pay income tax that's of no benefit at all. If you are a 40% tax payer that's a huge benefit. If you a 20% tax payer somewhere in the middle.

Thanks so much for taking the time to answer, @snowlaser .

I actually had one private pension first (long term self-employed), then I did a job for a few years where I was enrolled into the occupational one. The second private one (Nest) pension came about because I did a teeny bit of work for a company who used that, and I've continued to make contributions into it.

Thanks for the tip on what info I'll need, I'll start digging out the fee rates etc, if I can.

I had no idea about any of the annuity stuff, so that's great to know, thanks.