Pensions

[sawtooth]

I finally got around to sorting through a large pile of pension annual statements and unopened letters this week, I thought I better not put it off any longer.

After several calls to pension companies and answering dozens of security questions this is what I found out:

Pot 1 - CIS pension started in 1989 was merged into a L&G pension in 2002
Pot 2 - L&G 1995 - present day , stopped contributing to.
Pot 3 - L&G 2002 - present day, again no longer making contributions into.
Pot 4 - Aegon (was Scottish Equitable) 2003 - 2008 , no contributions
Pot 5 - Fidelity 2008 - 2014 , no contributions
Pot 6 - Standard Life 2014 - Present day, employer/employee making contributions currently.

I was going to lump all of these (5 pots) into one pot but after talking to all above companies now I don't think that I will bother. One of the providers above offer a facility online to view all of the other pots on their dashboard. I have to manually input the other figures into the tool and update it myself but at least I can see everything in one place with the one total pot size.

It was a bit of work but I am pleased and somewhat relieved now that everything seems to be in order.

Anyone else gone through this recently?

 

[FairwayDodger]

I've been putting it off.... for years. I actually have more pensions than you but I have no idea what any of them are worth.

Getting to the age where I'm actually starting to think I'm going to need these one day so I'll be biting the bullet and sorting it out before I'm much older. As soon as I get into the new house....

 

[Lord Tyrion]

I have a private pension. My pension advisor tells me it is doing okay but the figures never look that great to me. It hasn't half got to step to give me anything worth having.

Best of luck. Trying to work out the best thing to do with your pension is never easy.

 

[PhilTheFragger]

The government changed pension rules and regs about 18 months ago, so it may be worth getting proper advice about possibly merging those pots and also looking at your current projections verses pension drawdown

I recently moved my pension away from Barclays final salary scheme to a drawdown scheme with the Prudential.

Feel free to pm if you would like any further info, and obviously I am not qualified to give advice.

 

[Jensen]

There's really only one decent type of pension scheme and that's a "defined benefit", otherwise known as a final salary scheme. At least with these you're earning a pension in relation to your salary.
Sadly the others know as "defined contribution" or money purchase are pretty crap in comparison. Here you pay your money into a fund and rely on good fund performance, however returns since mid 90's have been poor. To get a similar benefit to final salary you have to pay in a lot and need good performance.
Whilst it's good to have one don't expect much from a money purchase.
I've got
1. A final salary scheme that I left with benefits still there
2. AVC plan with benefits in that I don't pay in. This is money purchase
3. An old stakeholder plan, again money purchase I no longer pay in.
Pension provision best if possible to work for council, government at least then you can still join a final salary scheme

 

[sawtooth]

There's really only one decent type of pension scheme and that's a "defined benefit", otherwise known as a final salary scheme. At least with these you're earning a pension in relation to your salary.
Sadly the others know as "defined contribution" or money purchase are pretty crap in comparison. Here you pay your money into a fund and rely on good fund performance, however returns since mid 90's have been poor. To get a similar benefit to final salary you have to pay in a lot and need good performance.
Whilst it's good to have one don't expect much from a money purchase.
I've got
1. A final salary scheme that I left with benefits still there
2. AVC plan with benefits in that I don't pay in. This is money purchase
3. An old stakeholder plan, again money purchase I no longer pay in.
Pension provision best if possible to work for council, government at least then you can still join a final salary scheme

Final salary pension wasn't available from my employer. I think I will get professional advice at some point as Fragger recommended but my head is still hurting from all the reading in the past week.

My aim is to get somewhere close to 60℅ of my salary.

 

[PhilTheFragger]

Final salary pension wasn't available from my employer. I think I will get professional advice at some point as Fragger recommended but my head is still hurting from all the reading in the past week.

My aim is to get somewhere close to 60℅ of my salary.

If your first contributions were in 1989 then you are probably in your mid 40's, so 20 plus years until retirement at 68 ish.

Perfect time to get a review done as you have a significant amount of time before you start drawing your pension.

 

[pendodave]

My aim is to get somewhere close to 60℅ of my salary.

1.25mil gets you about 40k at 65. Better get saving....

 

[RustyTom]

Im so confused with my pension, luckily being 26 i have age on my side to fully look into it, my pension gets about 270 a month into which i thought was quite good but my work mate pays in £700 and my bro in law pays in over a £1000 a month.

Do i need to up what i am paying in, or are they massivly over paying? My workmate started late so i think is playing catch up but hes still only 37 so plenty of years left!

 

[Trojan615]

Im so confused with my pension, luckily being 26 i have age on my side to fully look into it, my pension gets about 270 a month into which i thought was quite good but my work mate pays in £700 and my bro in law pays in over a £1000 a month.

Do i need to up what i am paying in, or are they massivly over paying? My workmate started late so i think is playing catch up but hes still only 37 so plenty of years left!

I think you need to up it, but it depends on what you can afford compared to your salary.... never too early

 

[ScienceBoy]

Are pensions the best solution for the future though? Should there be a more up to date solution? Does pensions need an overhaul?

 

[Val]

My biggest fear on pensions is living long enough to spend what you put into it. I aim over the next 11 years to put as much as I can (25-30%, my employer also pay 11%) into mine to enable me to draw a decent chunk as a lump sum at 55 then see what happens.

 

[louise_a]

Some options are better now after recent changes, I had 25K in a little pension I had had for a few years, at the time my only option was to buy an annuity with it, which pays me around £600 a year. Under new rules I could have taken it has a lump sum (less tax) which would have been far more use than the pathetic amount I get now.

 

[Hobbit]

Been number crunching and looking at different products for at least 2 years. My plan looks something like to following;

1. Take the 25% tax free lump as I retire.
2. Retire early, taking a fixed term annuity that will pay more out in the years running up to when the state pension kicks in.
3. Fixed term annuity expires as the state pension kicks in, and the residual will be used to by another annuity that will top up the state pension to the levels of the previous fixed term ann.
4. Spend it on beer, drugs and loose women, then waste the rest.

 

[SwingsitlikeHogan]

Fortunate that both myself and wife have final salary schemes, she's starting to take her NHS scheme this year. And my one (from my first job started Jan 1984) is forecast to pay just about as much a year as I paid in contributions in total over 16yrs!. When I get my state pension at 66 we'll have a minimum of £30k and when my wife gets hers 2 and half years later that'll put us to about £38k a year. On top of that we'll have whatever I get from my current company scheme which is currently looking at about £10k a year.

With no mortgage and having survived on not a lot those last 20yrs - we should easily be OK.

But who knows.

But I know that we are very fortunate. Circumstances and our good luck - I do not think it's anything more than that.

 

[SwingsitlikeHogan]

Been number crunching and looking at different products for at least 2 years. My plan looks something like to following;

1. Take the 25% tax free lump as I retire.
2. Retire early, taking a fixed term annuity that will pay more out in the years running up to when the state pension kicks in.
3. Fixed term annuity expires as the state pension kicks in, and the residual will be used to by another annuity that will top up the state pension to the levels of the previous fixed term ann.
4. Spend it on beer, drugs and loose women, then waste the rest.

I like your 2) and 3) as I hadn't thought of that. I hope to retire 'early' also and maybe also cutting down to P/T in next couple of years - but there is the gap before my 66th birthday when state pension comes in that I was wondering about - that you may have just filled it for me.

 

[SteveJay]

I am considering options now, being 52 and hopeful that I can retire in maybe 4-5 years.

Fortunately I have a defined benefits scheme for most of my career (in financial services) and only in the last decade have we switched to average career earnings. Saying that I lost part of my earlier pot due to divorce.

Having shared some experiences from those in similar situations, and about to retire, you should consider what you actually need. Someone said earlier they wanted 60% of final salary - I suggest that is higher than most really need. Think about current net income and then deduct mortgage costs, assuming you own your house and it will be repaid by retirement. Its surprising how much most of us pay on mortgage costs. Tax will probably be lower too, and no NI.

Then think about other outgoings that will stop. I know some will increase (leisure time spending maybe) but I reckon most of us would live comfortably on well below 60% - I am thinking c 35% of current gross salary, plus a modest lump sum supplementing existing savings, will suffice. The old age pension makes a difference too.

One of the seminars I heard about was advocating trying to spend all your money by the time you die, you can't take it with you...and if you own your house that will still provide kids with an inheritance.

 

[Hobbit]

I like your 2) and 3) as I hadn't thought of that. I hope to retire 'early' also and maybe also cutting down to P/T in next couple of years - but there is the gap before my 66th birthday when state pension comes in that I was wondering about - that you may have just filled it for me.

Looking at what you posted earlier Hugh, i.e. the sums, it might be worth taking a smaller annuity than you need but using a percentage of the 25% you can take tax free to top up the annuity to a level you're comfortable with. Its a more tax efficient way.

BTW, I'm an engineer, not a financial consultant - find the right person for the advice...

 

[SwingsitlikeHogan]

I am considering options now, being 52 and hopeful that I can retire in maybe 4-5 years.

Fortunately I have a defined benefits scheme for most of my career (in financial services) and only in the last decade have we switched to average career earnings. Saying that I lost part of my earlier pot due to divorce.

Having shared some experiences from those in similar situations, and about to retire, you should consider what you actually need. Someone said earlier they wanted 60% of final salary - I suggest that is higher than most really need. Think about current net income and then deduct mortgage costs, assuming you own your house and it will be repaid by retirement. Its surprising how much most of us pay on mortgage costs. Tax will probably be lower too, and no NI.

Then think about other outgoings that will stop. I know some will increase (leisure time spending maybe) but I reckon most of us would live comfortably on well below 60% - I am thinking c 35% of current gross salary, plus a modest lump sum supplementing existing savings, will suffice. The old age pension makes a difference too.

One of the seminars I heard about was advocating trying to spend all your money by the time you die, you can't take it with you...and if you own your house that will still provide kids with an inheritance.

Interesting the 35% figure - which obv. means £35k on £100k gross. Would that £35k include state pensions - so £12.5k for a couple in retirement on full basic state pension.

 

[Mattyboy]

I am looking at mine at the moment and as it happens this is my day job too.

Pot 1) Defined Benefit which I will switch to Defined Contribution (I know the transfer value)
Pot 2) Defined Benefit and I am awaiting the transfer value. This will be smaller and I might transfer this one.
Pot 3) A SIPP where I own a share of my company.

I am planning to retire in 8 years time at 56 but it depends on the business.

Switching from DB to DC isn't for the faint hearted. You are taking on the investment risk. A working knowledge of pensions would be an advantage. However, gilt yield changes and pensions freedoms make this possibly attractive at present. I should be able to give my 2 kids enough from the tax free cash to give them a deposit on their first houses at this time. Also, they will inherit (possibly taxable) what I and Mrs M do not use.