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Simple Workplace pension advice sought
Micawber
Posted: 09 November 2017 16:25:18(UTC)
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My youngest, who graduated this summer, has just started salaried employment. Her employer is a small concern, and not likely to be a lifetime employer. She has been asked whether she wants to enrol/opt out of the workplace scheme. I have asked her to get details of the employer contributions (probably the minimum), the provider, and any terms e.g. transfer terms. She has no other pension commitment at the moment. She has an investment ISA which I manage. I have no experience of wp pensions.

Questions:

- I assume a wp pension is a Good Thing (because of employer contributions)?

- any likely problems to cover in transferring from workplace to workplace, or does the employee simply collect many separate wp pensions through a working life? (Would seem clunky to me)

- if she is in a workplace pension, does this preclude or inhibit also taking out a SIPP (I never had a SIPP myself, so another new area for me)?

- if she chooses a SIPP are there likely to be an employer contributions to that in lieu of a wp pension? Or would she forego employer contributions?

Thanks.
Rishan
Posted: 09 November 2017 16:43:41(UTC)
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I have been working for years, but only last month received my first ever workplace pension (now it's a legal requirement for all employers), so at the age of 36 I now have a pot of about £40!!!

1. I think so (free money plus tax relief)

2. Doesn't appear to be too difficult to transfer

3. I don't think so, as long as she doesn't contribute more than the annual limit in total to both. I had been thinking about a SIPP for a couple of years, but now it's probably not worth it, as I have investments elsewhere (ISA and nominee). I could pay extra into the workplace one as well if I wanted to.

4. I didn't get round to asking my employers about this, but our organisation's accountant said it would be entirely at their discretion whether they would pay into a SIPP rather than the wp if I opted out. In my case it would have been extremely unlikely so I didn't upset the applecart by asking
Rishan
Posted: 09 November 2017 16:50:24(UTC)
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Also, it doesn't seem to be as black and white as opt-in or opt-out. She'll be able to stop and start contributions at any time if she stays with it.

If it's the same government compulsory scheme (NEST) thing as me she'll get a useful letter / welcome pack after the first contribution. I have just got set up online and there is plenty of good info on their website for someone like me who didn't really know a thing about pensions.
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Micawber on 09/11/2017(UTC)
Micawber
Posted: 09 November 2017 17:11:42(UTC)
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Thanks Rishan.

The provider (I now know) is called Smart Pension (....) Website: https://www.autoenrolment.co.uk/ Helpful on the phone.

Their charges are 0.75% annually. No transfer charges. They offer three fund choices, all Legal and General: "Ethical" (FTSE 350 equities); "Lifestyle" (multi-asset) and "Sharia"......
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Tim D on 10/11/2017(UTC)
Tim D
Posted: 09 November 2017 17:18:19(UTC)
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Micawber;53068 wrote:

- any likely problems to cover in transferring from workplace to workplace, or does the employee simply collect many separate wp pensions through a working life? (Would seem clunky to me)


If she's with one of the big reputable providers then transferring shouldn't be a problem (and expecting to transfer and consolidate - either into next employer's scheme or a SIPP - does just seem to be part of the game these days).

However, I'd be a bit more wary if the scheme was a "Master Trust"... (more likely to be used by smaller employers?) or other small provider... I've heard *some* of them have a bit of a reputation for making transfers difficult and/or expensive. Some more info here.


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Micawber on 09/11/2017(UTC)
Julian W
Posted: 09 November 2017 17:30:00(UTC)
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Generally good idea to grab the employer match if there is any on offer; and I believe most employer do NOT contribute towards SIPP.

Do not forget LISA:
-she can contributed up to £4000 per year and government top up 25%!
-can be used to buy 1st house, otherwise locked away until age 60
-I think AJ Bell offer one with 0.25% plate form fee and £1.50 per trade

Regards,

Julian
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Micawber on 09/11/2017(UTC)
Jim S
Posted: 09 November 2017 17:53:25(UTC)
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Agree with Julian about importance of contributing up to the employer match. Assuming she's a basic rate taxpayer, I'm not sure I would go above that. If she wants to save more, other options might be better (HTB ISA, LISA etc)

What I have done is transferred my full work pension balance to a SIPP, but carried on contributing to my work pension. I plan to transfer again to my SIPP every once in a while. So that might be worth thinking about later, or when she finishes with that employer.

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Micawber on 09/11/2017(UTC)
Micawber
Posted: 09 November 2017 18:14:36(UTC)
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Jim S;53078 wrote:
Agree with Julian about importance of contributing up to the employer match. Assuming she's a basic rate taxpayer, I'm not sure I would go above that. If she wants to save more, other options might be better (HTB ISA, LISA etc)

What I have done is transferred my full work pension balance to a SIPP, but carried on contributing to my work pension. I plan to transfer again to my SIPP every once in a while. So that might be worth thinking about later, or when she finishes with that employer.



That sounds sensible.

We're not too keen on the LISA (as compared with a straight ISA) in view of the penalties for the free money. My advice to the offspring has been to wait a while and see how they pan out in practice (and what anomalies may appear in the media about them in operation). They all have decent ISAs. None of them yet has a SIPP and I think that's the way to go for their longer term savings plus tax relief.
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