Old Pension in UK, cannot pay into due to being out of the country for 5 years, best option now?

[Millian]

I had a pension with an old employer from 2001 - until 2006 when I left the company. I didn't carry on paying into it and haven't had any other pension plans since. I just rang Scottish Widows and asked what my options were, as I'm looking to start saving again for my retirement, but they informed me that due to me leaving the UK over 5 years ago I cannot pay into it any more, UK law they said.

What would be the best advice now? Ideally I'd like to be paying into a pension again and transfer the old pension, however are all pension's dependent on what country you are in? I'm not sure how long I will be staying in Thailand, I have no plans to go back to the UK but then again I don't necessarily have plans to stay in Thailand for good either.

The transfer value is just over £10000, I'm 33 years old. I know this might not be the best place to ask for pension advice, but perhaps some users have had the same issues.

Ta

[fletchsmile]

For the old pension, really depends on what type of scheme you're in and what benefits it gives. If defined benefit it might be worth leaving. If defined contribution, there's a reasonable chance you could move it to a Self Invested Personal Pension (SIPP). Really not enough info tho to say anything more

For investing new money, If you're living and earning in Thailand, check if your employer has a pension scheme. Often worth joining as they will match your contributions. If you leave the country it becomes taxable, but you can tax it out. If looking for a private pension the 2 closest products are:

1) Long term equity funds (LTFs)

2) Retirment mutual funds (RMFs)

For both you will get tax relief at your marginal rate of tax similar to contributing to a UK pension. You can invest up to the lower of 15% of your income or THB 500k in each, i.e THB 1mio max

The advantage of an LTF is you only have to invest for 5 calendar years, so can access much earlier than a UK pension. The disadvantage is you're mainly limited to investing in Thai equity funds.

For an RMF there is a much larger range of funds, so you can work it like a SIPP. You could invest in a wider range of funds global equities, fixed income, Thai equities, gold funds. Your money is tied up until age 55. (Earlier than UK but not exactly flexible and ideal for a young expat not yet committed to Thailand)

I've done LTFs ever since they came out in 2004. Worst case you can cash them in before 5 years and pay a penalty of the tax benefit you received. The main risk is the volatility of Thai.

equities

For RMFs I only started in years where I was closer to 55. Your age I viewed them as too inflexible/ too long term. Now committed to Thailand, with family and kids, I;m quite happy with committing my money to match

Cheers

Fletch:)

Edited January 6, 2015 by fletchsmile

[AyG]

OP, there are a few more things we need to know before making any suggestions:

(1) Is it a defined benefit scheme (i.e. promises to pay a fixed proportion of your final salary based upon the number of years you worked for the company)? Or is it defined contribution (what you get depends upon how investments perform?

(2) Are you working legally in Thailand and paying tax here?

(3) How much a month (or year) are you looking to save?

[Millian]

OP, there are a few more things we need to know before making any suggestions:

(1) Is it a defined benefit scheme (i.e. promises to pay a fixed proportion of your final salary based upon the number of years you worked for the company)? Or is it defined contribution (what you get depends upon how investments perform?

(2) Are you working legally in Thailand and paying tax here?

(3) How much a month (or year) are you looking to save?

1. Defined contribution

2. Yup

​3. Around 10k-20k baht a month

[AyG]

My advice is pretty much the same as fletchsmile (but then it often is).

With your old pension you could transfer it elsewhere, but given the small value I don't really see any benefit in that. However, keep an eye on charges and how the money is invested. Make sure you're happy with both. And if not, consider moving it within the UK. You're definitely not in the league to move it offshore to a QROPS - the charges would just be too high and eat into your investments. (Sorry if that sounds harsh. Minimum of GBP 100,000 and, more realistically, 200,000 required to make it worthwhile.)

Given your current situation I would suggest you invest in LTFs in Thailand. You get tax relief on the investments - that's for up to 15% of annual, taxable income or THB 500,000 (whichever is lower). Specifically, given your age I would suggest putting 100% of your investment into equities since it's going to be quite a few years before you hit retirement age. You need to consider whether you want to put much of the money into Thai funds (probably preferable if you're going to retire in Thailand), or something geographically broader (if you're going to retire elsewhere). fletchsmile mentions RTFs, but given your uncertainty as to where you'll be living in a few years plus your limited savings I'd definitely stick to LTFs for the moment (unless your actual income is much higher than I'm deducing).

Don't get hung up on the word "pension". It's just another form of investing for the future, albeit with some tax advantages in certain circumstances. It's also inflexible given that you usually have to reach a certain age before you can benefit from your investment savings.