5 years until draw pension- what to do with funds

tingly

Hi there
I am after a bit of advice please.
My husband has 5 years left before he needs to be draw his pension. He has 320,000 built up in a small self administered scheme, split between 4 accounts. They are currnetly earning from between nil and 1/2 a per cent. Does anyone know of any bank accounts where he could place funds without taking any risk but eArning a bit more. There seems very few "normal" accounts which will accept funds.
Will be pleased to hear any advice. Thanks

Goldiegirl

I think your husband may need to see an IFA, if he wants advice on a pension pot that size.


I'm no expert, but there must be some low risk funds out there, with a better rate of return than he's currently getting


I suppose he could draw down some of his pension now as part of his tax free lump sum and put the money in various high interest current accounts - but he'd need an awful lot of accounts for the sum of money that could be drawn down. Apart from The Santander 123 account where you can earn 3% on £20k, most of the other high interest current accounts have an upper limit of about £2k to £5k for interest earning purposes

xylophone

I think the OP means that the funds in the pension are currently held in cash deposits?

zagfles

The base rate is 0.5%, so you're not going to get much more than that 'without taking any risk', except by taking advantage of loss leaders such as banks offering high interest on limited amounts (& sometimes limited time) in current accounts, regular savers etc.

He'll need a vast number of them as the limits are invariably low eg a few thousand. He'll also need to comply with the conditions eg paying in conditions so would need to cycle money around. There's plenty of people doing it over on the saving & investments board - have a search there.

But realistically I doubt he'd be able to do it for the whole amount, and he'll up with tens/hundreds of debit cards etc imagine if they were stolen, all the hassle etc!

zagfles

xylophone wrote: »

I think the OP means that the funds in the pension are currently held in cash deposits?

OP mentioned bank accounts so doubt the money is in a pension.

tingly

Thankyou everyone so far
To answer a few queries, it definetely is held within a pension , however as its self administered he is able to control where its invested (with agreement of the trusttes)
It is indeed split between cash deposits to mitigate any bank failure.
Thanks

zagfles

tingly wrote: »

Thankyou everyone so far
To answer a few queries, it definetely is held within a pension , however as its self administered he is able to control where its invested (with agreement of the trusttes)
It is indeed split between cash deposits to mitigate any bank failure.
Thanks

Well current accounts are out then. Regular savers too probably, as they wouldn't be in his name. He has no choice but to take a risk. Either an investment risk or an inflation risk. Staying in cash with current interest rates means the risk that the pension is likely to go down in value in real terms.

Linton

What does he want to do with the pension when he reaches retires? He has the choice of an annuity or drawdown. If its the latter then he should remain invested in equities rather than put the money in a cash fund. If the former he may as well keep it in cash as there would otherwise be a risk (though not a very large one) that the pot could be worth significantly less when he retires.

He cant sensibly take all the money out of his pension and put it in a bank account as after the 25% tax free lump sum anything taken out of the pension will be taxed as income. In this case anything significant would be taxed at a higher rate.

I agree that he should discuss his options with an IFA.

xylophone

OP mentioned bank accounts so doubt the money is in a pension.

It is possible in full SIPPs to hold cash accounts within a pension but the interest rates on offer are often (almost always?) dire.

If you hold uninvested cash in a Hargreaves Lansdown basic SIPP, you will receive interest on it though at a very low rate.

xylophone

Your husband is clearly concerned about a fall in the cash value of his pension savings - at the moment, inflation is low so that the dire rates on offer on cash deposits within the pension are not of immediate concern.

However, he might wish to consider other options. He could ask around for personal recommendations in respect of Independent Financial Advisers or try

http://www.thepfs.org/yourmoney/find-an-adviser/

or https://www.unbiased.co.uk/

Another option might be to take the PCLS now (leaving the balance in the pension and invested) and use current accounts ( sole and joint) as savings accounts.

See post 490 http://forums.moneysavingexpert.com/showthread.php?p=69801816#post69801816

dunstonh

Does anyone know of any bank accounts where he could place funds without taking any risk

He is taking a risk. He may not have investment risk and he appears ot be mitigating provider risk. However, he is still subject to inflation risk and shortfall risk.

My husband has 5 years left before he needs to be draw his pension.

Are you saying that he plans to withdraw the whole £300k in one go in 5 years time? Has he looked at the tax bill he will suffer for doing that? If he isnt doing that then why is he putting the whole lot in cash?