TRANSFERRING ‘OLD STYLE’ PRIVATE PENSIONS INTO A SIPP
With old style personal pensions diversifying your investments often meant buying a new personal pension so people often ended up with many different plans.
SIPP’s, however, have as much investment choice as you are ever likely to need in one plan. So it can make sense to transfer any other pensions you have into your SIPP and thus make your retirement planning simpler and easier to manage. You will certainly reduce your paperwork and you may save money too.
Another point to consider is that you can now transfer ‘Protected Rights Pension’ (PPR) into your SIPP. A PPR is created when you contract out of SERPS (the State Earnings Related Pension Scheme) now called S2P (State Second Pension).
When transferring one pension to another you must check that you will not to incur excessive penalties or lose valuable guarantees or benefits. If you are not sure you should talk to the pension provider and/or take advice from an Independent Financial Adviser.
YOU CAN HAVE A COMPANY PENSION AND A SIPP
If your employer contributes to a company pension scheme on your behalf but you want to save more; you could have a SIPP too. However, before going ahead you should check there are no better options under your employers’ scheme.
If you subsequently change employers, it may be best to transfer the value of your company pension into your SIPP. However, if the previous pension scheme was ‘Final Salary’ one it would probably not be in your interest to move it. The beauty of a SIPP is that it can stay with you all your working life - no matter how many employers you have - and even if you become self employed.
WHERE TO INVEST YOUR MONEY
Where you invest is usually determined by the intended investment term and your threshold to investment risk. If the term is short and you are unwilling to risk capital, cash may be the only suitable option - though current rates of interest are low.
After cash, gilts are probably the next run on the ladder of investment risk and private pension holders can only invest in them directly via a SIPP.
In the section ‘Safety First Strategy’ we talk about gilts as we think they could do well in these deflationary times. And in our articles INVESTMENTS – ARE YOURS SAFE? Predictions for 2009 and ‘Greed is NOT Good’- we give a detailed explanation of why we think it may be best to avoid the main types of traditional investments like shares, commercial property and corporate bonds for the foreseeable future.
The subject of the ‘best investments’ for these troubled times is a controversial one and opinions differ widely. Please visit our Testimonials section to see what some of our clients have said about our stance on this and how our advice has benefitted them.
HOW MUCH SHOULD YOU PAY INTO A PENSION?
Generally speaking when asked: “how much should I pay into a pension” our reply is: “as much as you can realistically afford within the limits allowed. We also recommend that people start saving as early as possible because time has a massive affect on the eventual size of your pension pot.
We also think that it is better to save something than nothing as you can always increase your contributions when your income rises or add a lump sum if a windfall comes in.
You can also pay into a pension for someone else. So parents can put their children on the pension savings road by contributing up to £3,600 (£2880 net of tax relief) each tax year. There are no lower age restrictions.
Because of this option some people give pensions as presents!
If you would like to start a pension or need help with your existing pension plans please complete the Request- a - Call box below so that we can contact you at a time and by a method that is most convenient to you. Please note that if you require advice on certain types of pension transfer business we may refer you to another firm with whom we have a close working relationship as the advice you may need could fall outside the scope of our authorisation with our Regulator.
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