Login to your server as “root” and install the 'Recode' tool. In Linux Debian you do this by typing:

   apt-get install recode

Then switch to the “postgres” account:

   su postgres

Now start by creating a dump of your SQL_ASCII database:

   pg_dump SQL_ASCII_database_name > SQL_ASCII_database_dump.sql

Next check content of your file by typing:

  file SQL_ASCII_database_dump.sql

You should get the following output:

  SQL_ASCII_database_dump.sql: ISO-8859 text

Then you convert your ISO-8859 or CP1250 file to UTF8 by typing these two commands:

  cat SQL_ASCII_database_dump.sql | recode iso-8859-1..u8 > UTF8_database_dump.sql
  
  iconv -f CP1250 -t UTF-8 -c <Non-ISO-extended-ASCII-FILE.sql >UTF8_database_dump.sql

Check the result by typing:

  file UTF8_database_dump.sql

You should now get the following output:

  UTF8_database_dump.sql: UTF-8 Unicode text

Now open the new UTF8_database_dump.sql file with your favourite editor and change the line:

  SET client_encoding = 'SQL_ASCII';

to:

  SET client_encoding = 'UTF8';

Create a new database:

  createdb new_UTF8_database_name

And import the UTF8_database_dump.sql

  psql new_UTF8_database_name < UTF8_database_dump.sql

That's it!