I can't withdraw the money in my pension so what's the best thing to do?

undrop79

Hi, newbie here.

I started contributing towards a pension scheme which is now with Aviva years ago whereby a % of my wage was automatically put towards this on a monthly basis (I think that this was when the government were making it mandatory for companies to offer their employees the option to sign-up to a private pension).

Anyway, back in 2006, I stopped paying into it and I now have around £3,5k sitting there which apparently could result in around £25 per month when I retire.

I spoke to Aviva to find out what options I had, initially wanting to withdraw the funds and put them towards this year's ISA allowance instead, however I was informed by Aviva that I can't withdraw until I am either 55 when I'll be able to take out 25% tax free and get paid the rest in monthly payments, or wait until I'm 60 when I'll be able to take out whatever's in there (as long as I have less than £18k in total in pensions funds). I'm 33 at the moment so have a good while to wait for either of these options.

From what I was made to understand though, I do have the option of transfering the money to another pension plan as long as they accept "transfer in's".

I've learnt a lot about savings and ISA's in the last few years thanks to Martin's advice but have no experience in pension other than paying towards one when I was younger.

Does anybody have any advice on what I can/should do?

dunstonh

I'm 33 at the moment so have a good while to wait for either of these options.

That is the point of a pension. You pay over your working life to build a pot until you retire.

Does anybody have any advice on what I can/should do?

At age 33, if £3500 is all you have in your retirement planning then you are falling behind. A rough guide is to aim to have £35k by age 35. You have one tenth of that. Do you have another pension on the go?

undrop79

Thanks for your post, just to clarify, I'm not interested in having a pension fund anymore. This was something that I started contributing towards when I was younger and I've since found better ways to prepare for my later years. Had I known this before I wouldnt have started paying into a pension fund.

In an ideal world, I would take the money out and put it in a high interest savings account or an ISA.

The question is, since I'm not very familiar with the ins and outs of pension funds, is there anything I should do in my current situation which might improve it? I'm not looking to pay anymore into the pension fund, but should I consider transfering the £3,5k to another pension or something else?

le_loup

undrop79 wrote: »

have no experience in pension

Now might be a good time to find out about them.
What they do, the tax advantages, the employee advantages, what happens when you're older, what your needs may be, the disadvantages of other methods of preparing for life at an older age.

undrop79

I run my own business now and my plan was to contribute towards ISA's and high interest savings accounts. Do you think considering a pension now is a better option?

xylophone

http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073868310

sorcerer

I was in the same situation as you, but in the end I opted to have a mix of all of three so I have cash ISA, Stock and Shares ISA, SIPP, work pension and savings accounts. This will hopefully give me plenty of options when I get to retirement age. Off course this is only possible if you can afford all these things.

undrop79

Thanks for the information and for the link.

Should I be transferring my pension from one provider to another like I do with my ISA's to acheive better results?

dunstonh

In an ideal world, I would take the money out and put it in a high interest savings account or an ISA.

Which is generally a pretty awful idea.

The question is, since I'm not very familiar with the ins and outs of pension funds, is there anything I should do in my current situation which might improve it?

You have ruled out pensions without actually knowing about pensions. Is that a wise decision?

I run my own business now and my plan was to contribute towards ISA's and high interest savings accounts. Do you think considering a pension now is a better option?

Is it self employment or limited company?

Yes there are advantages of pensions but pensions are not always the answer.

For most people, a combination of stocks & shares ISAs and pension would work out best. For a 33 year old, cash savings would suffer inflation risk and shortfall risk and require you to contribute around 3-4 times more than you would if you used pensions.

undrop79

Hmmmmm... I get the feeling I'm going to have to spend some time looking into pensions then. Thanks for the advice.

How about the transfering of pensions from one provider to another (like I do with my ISA savings)?

Linton

undrop79 wrote: »

Hmmmmm... I get the feeling I'm going to have to spend some time looking into pensions then. Thanks for the advice.

How about the transfering of pensions from one provider to another (like I do with my ISA savings)?

Modern pensions are more like an S&S ISA - just a wrapper in which you can buy a range of funds which are similar to the funds you may buy in an S&S ISA. You can in general transfer but it's not something you would do frequently. Typical reasons are for consolidation, reduction in charges, or access to a wider range of funds.