Q. I am 40 years old and have a number of small “pension pots” in various personal pension plans, mostly associated with previous employers. Should I just leave them where they are or would it be sensible for me to look at consolidating them?
A. This will depend upon a number of factors, including whether you are a member of your current employer’s scheme, the age and type of each contract and the amount of money you have in each “pot”. I therefore recommend that you seek advice from an appropriately qualified independent financial adviser.
It may well be in your interests to consolidate some or all of your pensions, particularly if one of them has lower charges than others. For example, some group personal pension and stakeholder pension providers apply what is called an “active member discount” which, essentially, means that they do not charge you as much whilst you remain employed by the employer who established that scheme. The charges then increase once you leave employment. If you are a member of your current employer’s group personal pension and / or your charges have increased because you previously benefitted from an active member discount then it might be sensible to consolidate your pension savings.
Q. My husband and I are in the process of getting divorced. I am a GP and have an NHS pension which is likely to be over the Lifetime Allowance for pensions when this is reduced to £1,000,000 next year. He has limited pensions. How will my pension be treated?
A. There are three possible ways to deal with pensions in divorce. They can be offset against other assets, for example a house, and left in the ownership of the original owner. There is an attachment or “earmarking” order, where a percentage of the benefit is paid to the ex-spouse when it comes into payment. The downside with this is that the ex-spouse has no control over when the pension starts, and it is still based on the life of the original member. The third option is a pension sharing order. Part of the pension would be allocated to provide a pension based on your husband’s life, and he could draw it at a time of his choosing, subject to the scheme rules. The benefit from your point of view is that the percentage of your pension which is shared to your husband counts against his Lifetime Allowance rather than yours. The proposed Lifetime Allowance of £1,000,000 is likely to affect many more people when it is imposed in April next year, and it is equivalent to less than £44,000 per year pension in the NHS Pension scheme, where there is an additional lump sum. Getting divorced is the only way such a pension can be passed to someone else to set against their Lifetime Allowance.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
