Pensions

[Madgirl2]

Help, I need some (free) pension advice. I am 35 and left my job last year to become a student nurse. I have 2 pensions - a final salary pension which will now lie until I retire and a stakeholder pension which I have opted to do nothing with until retiral. As a student I do not feel I can afford any pension contributions during my study so have not sought any advice regarding a new pension. I will however enter the NHS pension scheme (final salary) when I qualify in 2 years. 3 years ago I contracted out of the SP2 state pension (SERPS) scheme on the advice of my pension provider so that my NI contributions were being paid into my stakeholder pension. However, on the advice of a friend who has pensions experience, have recently contracted back into SP2 as apparently this is the best thing to do whilst I am a student. (Can anyone tell me why this is?) Basically I want to know if there is anything else I should be doing re my pensions and does the action I've taken so far sound reasonable? Pensions are a minefield to me! Thanks in advance for ANY advice!

[raymond 42]

hi madgirl,
i am not an expert, but if you carry on paying your serps
into your stakeholder,at least when you come to draw it
at least you will be able to take a lump sum tax free.
where as with state 2nd penson you wont.
best of luck.

[Pumpsticks]

Hi Madgirl

Ignore everything you have heard or read already. I profess to be something of a pensions expert.

As a student you are neither contracted in or out of S2P- you need to be paying NI to do so. Therefore you do not have an option. If you were working it may be better to contract in, the reasons why are way too complicated so I won't discuss that further!

However, once you join the NHS scheme you will again be contracted out (the scheme is contracted out so you have no choice). Unlike before however, your NI rebates are not going to be paid to your personal pension but the NHS will provide a level of guarantee d income to replace the fact you will not receive a state second pension. The good thing for you is you will pay a reduced level of NI!

As for your existing pension arrangements, it might be best to transfer your final salary pension to the NHS scheme once you have joined (unless your existing scheme is a public sector scheme, the NHS scheme is likely to be better). Alternatively you could transfer it to your personal pension (which given you will be a member of the NHS scheme probably wouldn't be best advice) You would need to obtain sutiable advice before doing so and this willl cost you unfortunately (the advisor must have the G60 exam in order to advise you).

I would imagine your best bet would be to transfer the exsitng final salary scheme to the NHS scheme- whoever you choose to advise you on this will charge you a fee for doing so- be very suspicious if they advise you to transfer it to a personal pension!!!

A for your existing stakeholder pension, changes from April 2006 mean you will be able to take 25% of this as tax free cash if you require it, whether it came from SERPS or S2P.

I hope that all helps.

[Madgirl2]

Hi Pumpsticks!

Thank you so much for the advice. You seem to know what you are talking about. I will certainly take advice re my final salary pension upon entry to the NHS pension. I am shortly starting a part time job (in NHS nursing bank) so assume, whilst I won't be paying tax, I will be paying NI contributions. As I have already contracted back in, then this would seem the right action for the moment.

Thanks again!