Other Queries

Can I have more than one pension?

Yes, you can theoretically have as many personal pensions as you want. However, bear in mind the annual contribution limits for tax relief and lifetime allowance if you want to avoid getting stung by a tax bill at retirement. You can keep occupational pensions from past employment, but only contribute into your current employer's scheme.


What does contracting out mean?

If you're employed then some of your National Insurance Contributions are effectively used to provide extra state pension at retirement, under a scheme called the State Second Pension (S2P), formerly called the State Earnings Related Pension (SERPS).

If you wish it's possible to 'contract out' of this scheme and instead receive a small national insurance rebate paid into a pension of your choice. Whether you'll be better off depends on investment performance and future annuity rates.

Given contracting out would be scrapped if the proposed flat state pension is introduced, there seems little reason to contract out at present.


What happens if I move overseas?

If you have a UK pension and subsequently move overseas (i.e. become non UK tax resident) then the pension can remain in situ but you can't make further contributions. Income will be paid as usual during retirement, but you'll probably be taxed locally (although public sector pensions are generally taxed in the UK and exempt from overseas tax). Another option is to transfer your UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS), but it's seldom worthwhile despite some commission hungry financial advisers pushing this route.


What happens if I die?

Before retirement

During retirement - annuity

During retirement - income drawdown

Your pension fund can be taken as a tax-free lump sum and/or used to provide a taxable income for dependents.

If you purchased a guaranteed annuity income will continue to be paid until the end of that period.

If you purchased a dependent's pension it will kick in. 

Your pension fund can be taken as a lump sum (less 55% tax) and/or used to provide a taxable income for dependents.


How safe is my pension?

If you have a money purchase/personal pension then there is a risk you could lose money if investment performance is poor. This isn't covered by a compensation scheme unless it results from bad/dishonest financial advice, in which case you might have a claim against the adviser.

If you lose money due to a pension provider going bust (unlikely, and even if they do your pension should be ring-fenced) then 90% of any losses would normally be covered under the Financial Services Compensation Scheme (FSCS) if you have an insurance style pension such as stakeholder or personal. SIPPs are normally categorised as investment pensions which means FSCS cover of up to £50,000 per investment firm within the SIPP.

If you have a final salary occupational pension and your employer goes bust without enough money in the scheme to pay your pension in full, you should be covered by the Pension Protection Fund (PPF). If you've already reached the scheme retirement age your pension is fully covered, otherwise protection is 90% of your pension subject to annual cap of around £30,000.