Pension

[Dotty93]

Hello I'm trying to sort my pensions out right now. But it's all frying my head - I'm not good at this sort of stuff.

So here goes, my partners job involves us moving around every couple of years.
I've had lots of little jobs, and now I decided to look into my pension.
I have 4 pension pots ( with some money In each from different jobs ) I managed to combine one, but can't for the rest because I am not paying into my last pension due to moving.

Would it make sense if I set up my own private pension, transfer my 4 pensions into my own, opt out of any future pensions that I have with future jobs.
And just pay into my own pension each month?
Therefore I can keep track of just one pension pots?
If so I do I go about this?

Any help would be amazing!

Opting out is not a good idea, in most cases the employer only contributes into their workplace pension.

Consolidation as the only reason may also not be in your best interests (not sure why it wasn’t possible though - are they all defined contribution schemes? Do you have any guarantees?)

Ahh that makes sense, did not think of that.

Yes they are and looking at my pension documents it states that if I were to pass away a percentage would go to my preferred person.

The reason for wanting to combine them is because in the one pot there is only a few hundred, and in the other three just less than a thousand.

With moving around I won't be working for them companies or contributing to them pension pots.

I have a SIPP (self invested personal pension) to which I transferred all of my pensions from previous jobs. I then have the pension for my current job so that (1)I receive the benefit of the employer contribution and (2) can salary sacrifice additional amounts in to it which reduces my income tax. It is possible to do a part transfer from my work pension to my SIPP so if I decide the work pension is not performing well, I can transfer some of the balance to my SIPP.

From your experience would you recommend opening up a SIPP and then transferring the pensions from my previous jobs?

Do you then contribute your own money each month to your SIPP?

I have been looking at the Aviva SIPP, but will look around.

Wish they taught us about pensions in school!

I like the flexibility of the SIPP. I have one with Fidelity that I can manage online and change my investment funds as and when I want to. I don’t contribute monthly amounts into my SIPP as I contribute at least 10% of my salary into my current works pension but I may pay ad-hoc amounts into the SIPP in the future.

looking at my pension documents it states that if I were to pass away a percentage would go to my preferred person.

Hold up!
If you have a defined contribution scheme, then the value of it when you die passes in its entirety to whoever you nominate. Not a percentage. Percentages sounds like a defined benefit scheme. Can you just clarify whether you mean that you can nominate different percentages for people but still adding up to the full value of 100%?

Oh ok, it just says a lump sum to the person/ people. (I'm aware I need to sort all this out) That's why I'm now getting on top of it all - didn't think anything of pensions in the past.

Stupid question, should it state on my documents what scheme it is?

A defined benefit (DB/final salary etc) pension scheme is one that pays a pension of a defined amount to someone every year, for example £1,000 per year.

A defined contribution (DC/money purchase etc) pension scheme is one that is an individual pot of money, like an ISA, for example £1,000, from which you can draw income when you retire.

If you work in the private sector and are aged under 40 it's unlikely you have a DB pension. They are not usually provided any more. But yes, the documentation you have should tell you what the nature of the scheme is.

As to whether consolidating them is a good idea or not...it's hard to say for sure: one further point that no-one has mentioned yet is that any pension pot you have of under £10,000 you can just withdraw as one lump sum. So if you still have the tiddlers by the time you reach retirement age (and the rules don't change!!) you can just take them as cash. If you combine them into one big pot you would lose that flexibility. But the pot with just a few £100 in it...well that's so small it probably isn't a big deal either way. Just double check it really is a DC pot of a few £100 and not a DB pension of a few £100 per year.

The small pension pot rule become almost meaningless when pension freedoms were introduced.

You can take any DC pension pot as a lump sum (although taxation is the main reason why you wouldn’t, amongst others).

Small pension pots are taxed in the same way / the only difference is them not being the trigger for MPAA.

I have also transferred all my defined contribution pensions from previous jobs into one. If you have defined benefit pensions, or one that has an underpin from a second state pension, then you need to keep them where they are. I have one of each and I'm sure it says I'm not allowed to transfer out without advice. I am also keeping my current company pension because it's the one my company pays into.

I think the additional state pension I mentioned is called contracted out, and it only ended in 2016, less then 8 years ago. See https://www.gov.uk/contracted-out/check-if-you-were-contracted-out

You could be in one of these if you worked for a fairly large company even if you aren't in a DB pension.