Pension Advice
Discussion
After a bit of advice as I'm not all that clued up on Pensions, I have recently finished contracting and taken up a permanent position which I plan to stay at until I retire (god willing).
I ran a limited company and set-up a pension that I stopped paying into around 10 months ago and it has a healthy figure in there. I believe I can withdraw about 25% tax free when I'm 55, which is in 4 years time.
It's an Egon pension, my new employer's pension is Royal London and they contribute an equal amount as me so 4% + 4%, I've now got that set up to start in Feb, I also believe that after 6 months they will increase the employers contribution so a good pension.
Is it worth me transferring my existing 'dormant' pension into the company one, will my money grow more (compound if that's the right term) or will it make no difference and just keep the one dormant and put into the new company one as I will be doing from 1st Feb?
I ran a limited company and set-up a pension that I stopped paying into around 10 months ago and it has a healthy figure in there. I believe I can withdraw about 25% tax free when I'm 55, which is in 4 years time.
It's an Egon pension, my new employer's pension is Royal London and they contribute an equal amount as me so 4% + 4%, I've now got that set up to start in Feb, I also believe that after 6 months they will increase the employers contribution so a good pension.
Is it worth me transferring my existing 'dormant' pension into the company one, will my money grow more (compound if that's the right term) or will it make no difference and just keep the one dormant and put into the new company one as I will be doing from 1st Feb?
Dashnine said:
I’d leave the Egon (Aegon?) pension where it is, eggs and baskets and all that.
If after a period of time the company pension clearly outperforms the dormant pension then consider moving it, but you’ll probably need financial advice (which I am not) to do so.
Thanks, It is Aegon, so I need to ensure I track the performance of both and then make a decision, will need some professional advice on that.. If after a period of time the company pension clearly outperforms the dormant pension then consider moving it, but you’ll probably need financial advice (which I am not) to do so.
Zero7 said:
Dashnine said:
I’d leave the Egon (Aegon?) pension where it is, eggs and baskets and all that.
If after a period of time the company pension clearly outperforms the dormant pension then consider moving it, but you’ll probably need financial advice (which I am not) to do so.
Thanks, It is Aegon, so I need to ensure I track the performance of both and then make a decision, will need some professional advice on that.. If after a period of time the company pension clearly outperforms the dormant pension then consider moving it, but you’ll probably need financial advice (which I am not) to do so.
You can compare performance in simple percentage terms yourself, I meant you’ll probably need to demonstrate you’ve spoken to an advisor or Pensionwise before you can consolidate your pensions.
As others have said, there’s no intrinsic merit to consolidating them if ongoing charges equivalent.
The only tangential thing I’d say is that you’re not all that far from retirement (well assuming you want to retire before 60) and 4+4% isn’t a huge contribution. It’s the statutory minimum of 8% total. Make sure you forecast your pension pot into the future and see how much drawdown would allow you the retirement lifestyle you expect.
Of course, if covid has screwed your finances over, lower contributions are completely understandable. And likewise, if you’ve shedloads in your Aegon pension then fair enough.
The only tangential thing I’d say is that you’re not all that far from retirement (well assuming you want to retire before 60) and 4+4% isn’t a huge contribution. It’s the statutory minimum of 8% total. Make sure you forecast your pension pot into the future and see how much drawdown would allow you the retirement lifestyle you expect.
Of course, if covid has screwed your finances over, lower contributions are completely understandable. And likewise, if you’ve shedloads in your Aegon pension then fair enough.
Edited by Jawls on Saturday 23 January 13:12
Couple of points to consider.
If you plan to 'backdate' contribution to make use of prior years unused allowance you can only do that to a pension that actually existed during the prior years. You can't set up a new pension and make backdated contributions.
The financial return of a pension is not generally down to the provider - it is a feature of the funds chose within a providers selections. Providers may have different ranges of funds and different costs (which can impact return) but the key choice to make are the funds. So you may want to review the funds selected with the Aegon pension.
If you plan to 'backdate' contribution to make use of prior years unused allowance you can only do that to a pension that actually existed during the prior years. You can't set up a new pension and make backdated contributions.
The financial return of a pension is not generally down to the provider - it is a feature of the funds chose within a providers selections. Providers may have different ranges of funds and different costs (which can impact return) but the key choice to make are the funds. So you may want to review the funds selected with the Aegon pension.
Jawls said:
As others have said, there’s no intrinsic merit to consolidating them if ongoing charges equivalent.
The only tangential thing I’d say is that you’re not all that far from retirement (well assuming you want to retire before 60) and 4+4% isn’t a huge contribution. It’s the statutory minimum of 8% total. Make sure you forecast your pension pot into the future and see how much drawdown would allow you the retirement lifestyle you expect.
Of course, if covid has screwed your finances over, lower contributions are completely understandable. And likewise, if you’ve shedloads in your Aegon pension then fair enough.
Good point about charges, your company scheme might have lower / subsidised management charges which may well make moving your Aegon pension over to save you some money, but unlikely to be more than a 2-3% pa saving.The only tangential thing I’d say is that you’re not all that far from retirement (well assuming you want to retire before 60) and 4+4% isn’t a huge contribution. It’s the statutory minimum of 8% total. Make sure you forecast your pension pot into the future and see how much drawdown would allow you the retirement lifestyle you expect.
Of course, if covid has screwed your finances over, lower contributions are completely understandable. And likewise, if you’ve shedloads in your Aegon pension then fair enough.
Edited by Jawls on Saturday 23 January 13:12
i4got said:
If you plan to 'backdate' contribution to make use of prior years unused allowance you can only do that to a pension that actually existed during the prior years. You can't set up a new pension and make backdated contributions.
Are you sure that is correct? As I understood it the requirement to be able to use carry forward is only that you had a pension scheme in place in the previous years, not that you could only contribute into that scheme or schemes.Dashnine said:
Good point about charges, your company scheme might have lower / subsidised management charges which may well make moving your Aegon pension over to save you some money, but unlikely to be more than a 2-3% pa saving.
Saving 2-3% would be a massive advantage. If any scheme has a 3% charge it's very likely to be worth transferring out of anyway, unless it's a consistently spectacular performer or has substantial benefits attached.Mr Pointy said:
i4got said:
If you plan to 'backdate' contribution to make use of prior years unused allowance you can only do that to a pension that actually existed during the prior years. You can't set up a new pension and make backdated contributions.
Are you sure that is correct? As I understood it the requirement to be able to use carry forward is only that you had a pension scheme in place in the previous years, not that you could only contribute into that scheme or schemes.i4got said:
Mr Pointy said:
i4got said:
If you plan to 'backdate' contribution to make use of prior years unused allowance you can only do that to a pension that actually existed during the prior years. You can't set up a new pension and make backdated contributions.
Are you sure that is correct? As I understood it the requirement to be able to use carry forward is only that you had a pension scheme in place in the previous years, not that you could only contribute into that scheme or schemes.Stand to be corrected by someone with more knowledge.
TwigtheWonderkid said:
Given that most pension funds return better annual growth than you can get in a normal savings account, then unless you have a specific plan for the 25%, I wouldn't bother.
Once you crystallise funds I believe you're also restricted to what you can add in future.I'd get some professional advice rather than ask on PH, unless you go on the IF thread and ask JulianPH
Mr Pointy said:
Dashnine said:
Good point about charges, your company scheme might have lower / subsidised management charges which may well make moving your Aegon pension over to save you some money, but unlikely to be more than a 2-3% pa saving.
Saving 2-3% would be a massive advantage. If any scheme has a 3% charge it's very likely to be worth transferring out of anyway, unless it's a consistently spectacular performer or has substantial benefits attached.Zero7 said:
Some great advice here, thanks will take up the offer with JulianPH. Forgot to add, after 6 months my company with increase their contributions
In general it's not the institution that dictates the performance of your investment, it's the type of fund it's invested in - you can have funds of various risk levels/performance in any provider. What you might want to do go back over your statements & work out how it's performing & assess if it's acceptable for the level of risk. If you don't think it's doing well then you can consider moving it elsewhere - taking note of any benefits you might lose.If it's gained 1% a year then bail out; if it's done 10% a year then it might be best to stick with it. The first step is to dig out the data.
While you can cash in your pension at 55 & take 25% tax free it would probably be unwise to do so unless you have a desperate need for the funds. The other 75% would be subject to income tax & the name of the game is to minimise tax. Your pension is probably going to have to support you for a few decades so a carefully planned witdrawal strategy is needed.
https://www.pensionwise.gov.uk/en/pension-pot-opti...
Don't forget you can still pay into a SIPP/personal pension even if you are an employee if you have spare funds after the company pension contributions.
Mr Pointy said:
While you can cash in your pension at 55 & take 25% tax free it would probably be unwise to do so unless you have a desperate need for the funds. The other 75% would be subject to income tax & the name of the game is to minimise tax. Your pension is probably going to have to support you for a few decades so a carefully planned witdrawal strategy is needed.
I thought you could take the 25% @55 then just leave the rest.It only becomes taxable once you draw on it - and even then, subject to regular allowances, so depends what other income you have. I thought you could take the 25% tax free & leave the rest there indefinitely.....
However, once you've taken the 25%, you're (heavily) restricted on any future contributions in.
So it very much depends on what you expect to earn from other sources post 55 and intend to pay in.
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