Dave1980

Having just changed jobs, i am pondering something. My pension plan from my last job has now ended. The lump sum i have in that pension is around £14k and they have asked me what i want to do with it.

Having looked at the current state of pensions i was wondering what else i could do with it.
Ideally it would be good to put it all in an ISA but obviously i can only put £3k a year in.

Whats the other options for savings?, and should i do this rather than putting it in my new pension plan?. Whats a good sort of rate to look for?.

I am still going to start a new pension plan with my new job but would i would like some form of other sercurity too. I would obvioulsy still top this savings account up monthly as well.

Thanks in advance from a non financially clued up person.

john banks

My wife had a similar situation. She hadn't been with the company long enough to allow the benefits to be left in her old employer's scheme. Her new employer wouldn't accept the funds into their scheme. One of these first two options would have been best. So there were two remaining options: take cash (minus the tax and opting back into full NI contributions) but this was less than a quarter of the value of the pension pot, or transfer to a private pension. She chose the latter and used a discount IFA to do it, but they then realised they weren't authorised so she had to pay higher charges than quoted and do it direct with Scottish Widows into a Stakeholder pension. It was a real hassle to sort out.

I would think of a pension or an ISA as merely a tax wrapper, but the underlying investment could be the same. With the ISA you invest out of taxed income, with the pension you invest out of untaxed income. With the ISA you don't pay the tax later, with the pension you do, and also have to put a large part of it to an annuity which means you don't keep most of your capital

Depending on the amounts you want to put away, I wouldn't want to use ISA allowances to dispose of pension fund proceeds, as the ISA allowances are stingy enough.

For a savings account, you'll pay tax at your marginal rate, so there are better options once you've done ISA contributions. At present I'm using NS&I Index linked savings certificates which pay about the same as the present best savings accounts (just over 6%) but you pay no income tax on them.

If you invest in shares after all the above, you can use your £8000+ per year capital gains tax allowance to avoid paying tax on a fair bit of your gains.

The tax tail should not wag the investment dog, but like charges I like to minimise it as otherwise inflation, charges and tax just ravage your money and you make losses rather than gains.

You could speak to an IFA, but beware if they are funded through commission. When searching on funds through google sometimes you stumble across the IFA only pages for consumer funds, and they seem to concentrate more on the commission that the IFA gets paid rather than the investment benefits for the customer.

Do your own reading, and then whether you self invest or use an IFA you will be wary of the pitfalls of "unbiased" advice.

Dave1980

a very good bit of advice there. thank you very much.

i will get looking into it, if i can find a way to get it into savings or shares i think that would be best.

dont want new labour blowing my pension proceeds if i can help it.

watch this space.

thanks
dave

Scooby Snacks 23

The sort of questions you have asked is the sort of question I get asked everyday, in my capacity of Pensions Admin Manager of a large IT/MC firm and whilst I am not licenced to give advice, I can put a few comments forward for you consider.

For the sort of value you have been quoted, it sounds like a 'fund value' from a defined contribution arrangement (where monies are paid in by the Company and maybe you too into an investment pot).

When you leave an occupational scheme, you effectively have 2 options:-
1. Defer the pension and leave the monies invested in your chosen funds. This will be cost effective as the scheme's annual management charges will probably be quite low, but it may restrict your options for investment funds and/or changing your investment strategy.

2. Transfer the value of your fund to a new arrangement, be it another company one or a personal one, like a stakeholder. You won't be able to transfer the value to an ISA.

There may be a 3rd option of taking a net refund of the value of your contributions if you've done less than 2 years service, but by doing this, you will lose the value of the Employer's contrbutions, so avoid this is you can.

First thing you should do is elect to defer it if you can - this will at least give you some time to look at the various options and consult an IFA if necessary. IFA's will charge on a commission or fee basis and they are heavily regulated so you don't get the cowboys you used to get! You can transfer your benefits out up to a year before you Normal Retirement Age so deferring is not binding!

Drop me a PM if you need any further comments.

SS23.

The Snug Rhino

unless you are due to retire in the next 5 years putting it all in cash would be a very poor investment choice...even if you were allowed to.

a pension is NOT an investment, its a way into an investment - a good fund will grow whether you get their via pension, ISA, bond, etc....a poor one wont.

***Nemesis***

You should see an IFA especially if you are looking for alternatives to pension investment.

Try Find an independent financial adviser - IFA - www.unbiased.co.uk for a list in your area. All IFAs on this list will offer an initial meeting free of charge.