Moving jobs - will your pension fund keep working for you?
AdviceOnline
Pension transfers
If you have just moved jobs you have probably been offered the opportunity to transfer your company pension benefits.
Your options normally include leaving the inflation protected benefits within the existing scheme, transferring to a personal pension, or transferring to your new employers scheme.
You should seek professional advice in all cases as detailed calculations are necessary to compare your options accurately.
Existing schemes
You may be offered the opportunity to leave your accumulated benefits in your existing company pension arrangement. This may be a final salary scheme or a money purchase arrangement. Final salary schemes will offer a benefit based on the number of years your were employed and your final salary on leaving. The benefit will be inflation proofed between leaving and retirement. If it's a money purchase arrangement your benefit will be based on the value of the fund and the annuity rate applicable at retirement. Your benefit in payment may be inflation proofed.
Personal pension schemes
Most companies will offer you the opportunity to transfer to a personal pension plan. Personal pensions are money purchase arrangements and the value of your fund and subsequent retirement income relies wholly on the performance of the underlying investment fund(s).
Personal pensions offer you the choice of both provider and pension fund(s) and therefore offer much more flexibility than company arrangement.
Stakeholder personal pensions
Offer reduced plan charges but in some cases this may mean reduced investment management so take professional advice before choosing the best option for you.
Self invested personal pensions (SIPPs)
A self-invested personal pension (SIPP) is effectively a do-it-yourself personal pension - you have control over where your pension fund invests its cash. SIPPs can invest in a wide range of areas, including stocks and shares, unit trusts, open-ended investment companies and property. The composition of a SIPP is up to you the owner.
New company schemes
Your new employer may offer you the chance to join his company pension scheme. This may be a Final Salary Scheme or a money purchase arrangement and if you a director it could even be a self administered pension scheme (SSASs)
If it's a final salary scheme offering guaranteed benefits for each year of employment you should strongly consider joining. If it's a money purchase scheme and the employer is not contributing you may wish to compare the benefits with a personal pension plan for increased flexibility.
SSASs
Small self-administered pension schemes (SSASs) are run under company pension rules. A maximum of 11 members are allowed.
Like SIPPs, SSASs can invest in a wide range of assets including commercial property, which means they can be used to buy business premises. A SSAS can be ideal for a family-run business.
Pension transfers are the most complicated of all financial transactions and it is essential that you seek professional advice, please complete our Ask an expert form for an unbiased transfer consultation.
The past is not necessarily a guide to future performance. Levels and bases of, and reliefs from, taxation are subject to change. These investments are intended as long-term investments. If you withdraw from these investments in the early years, you may not get back the full amount invested. Investment values may fall as well as rise. Levels of income may vary; levels of income taken should be reviewed on a regular basis to ensure that capital is not eroded where applicable.
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