Should we take lump sum

7136

Hi everyone I am new to this forum and my husband is due to retire in July he received a pension pack from an old pension he stopped paying in years ago and needs to decide by his birthday what to do, he was going to take it all as a lump sum or part and invest the rest however the value is dropping under the unusual circumstances at the moment. We are now considering leaving his pension where it is, my concern is the value of the pension is rapidly diminishing, my husband thinks it will eventually start to go up again but I’m worried that if we don’t cash it all in and invest it somewhere else we will lose even more. Any suggestions would be really appreciated 

Albermarle

Assuming this is a simple DC pension ( it sounds like it ) the you can take 25% tax free and 75% is taxable. Many people take the 25% and leave the 75% invested to be taken out over a period of year as a regular pension income.
However if you do not actually need the 25% tax free just now , or any income, then usually better to leave the pension alone.
concern is the value of the pension is rapidly diminishing, my husband thinks it will eventually start to go up again but I’m worried that if we don’t cash it all in and invest it somewhere else we will lose even more.

On the first point the pension pot will have gone down recently but should now have stabilised . How much did it go down ?- 10 to 20% is typical over the last few weeks. In fact it is not the pension that goes down but the investments within it . Do you know what they are? Maybe they could be changed?
If you cash it all in you will pay tax on most of it and then if you invest it somewhere else how do you know that will be any better ? The only thing for sure is that you will have paid tax unecessarily.
Usually the best idea is to sit tight but you have not really supplied enough details to be sure.

dunstonh

he was going to take it all as a lump sum or part and invest the rest

Why could he not retain the pension for the amount being invested (or another pension if this did not offer the required investments).

It is often pointless cashing in a pension, paying the tax and then reinvesting it.  You just create a tax bill for no reason.

 my concern is the value of the pension is rapidly diminishing

It shouldn't be.  Investment values have been increasing over the last 2 weeks.

 my husband thinks it will eventually start to go up again 

He is basing that on every other market downturn that has happened before.   This is the biggest drop in the last 10 years but its only the third biggest drop in the last 20 years.    

There was a large drop in 2018. What did you do then? - or did you just wait for recovery

There was a crash in 2015/6. What did you do then? - or did you just wait for recovery

There was a bigger crash in 2008/9 -What did you do then? - or did you just wait for recovery

There was a bigger decline over 2001/3 - What did you do then? - or did you just wait for recovery

Get the idea.....

but I’m worried that if we don’t cash it all in and invest it somewhere else we will lose even more.

Equally, what you propose could see 15% lost in tax and the investments you use elsewhere be worse.

7136

Thank you for the advice, this is a pension my husband took out many years ago (in his 20’s) and he stopped paying In to it, completely forgot he had it, it was just a recent letter asking him what he would like to do that prompted this. This advice is really appreciated and after some more research I think we will leave it where it is.  

Albermarle

If it is an old pension it may be better to transfer it to a more modern one , as they are usually more flexible on how you can take the pension when you want to do that. A transfer means you move the whole lot over to a new provider , there is no tax to pay as your money still stays within the pension . Just like moving your current account from one bank to another really.
If you tell us the current provider and how old the pension  is , we might be able to give a view on whether it is worth transferring it or not. 

atush

7136 said:

Hi everyone I am new to this forum and my husband is due to retire in July he received a pension pack from an old pension he stopped paying in years ago and needs to decide by his birthday what to do, he was going to take it all as a lump sum or part and invest the rest however the value is dropping under the unusual circumstances at the moment. We are now considering leaving his pension where it is, my concern is the value of the pension is rapidly diminishing, my husband thinks it will eventually start to go up again but I’m worried that if we don’t cash it all in and invest it somewhere else we will lose even more. Any suggestions would be really appreciated 

i would just leave it.  it will go up again.  Cash it in and you turn a paper loss into a real loss.  Then lose tax on it.  Then invest it in 'something else' which could also go down.  Dont stress, if you dont need it dont take it out.

7136

Hi again everyone, thank you very much for all the advice, even though my question was very vague. So my husbands pension is a retirement annuity contract with Aviva, he is due to retire at 60 in July and the value of his pension has dropped by 15% since 17th January. We are torn between taking 25% tax free and either having the rest as and when we need it or just leaving it where it is. If we don’t contact them in July they will change his retirement date until he is 74. (We don’t want that) if we leave it where it is will we be able to take money out when we need it before then?  

Silvertabby

7136 said:

Hi again everyone, thank you very much for all the advice, even though my question was very vague. So my husbands pension is a retirement annuity contract with Aviva, he is due to retire at 60 in July and the value of his pension has dropped by 15% since 17th January. We are torn between taking 25% tax free and either having the rest as and when we need it or just leaving it where it is. If we don’t contact them in July they will change his retirement date until he is 74. (We don’t want that) if we leave it where it is will we be able to take money out when we need it before then?  

74 is just the latest he can defer it to. 

dunstonh

 So my husbands pension is a retirement annuity contract with Aviva, 

A lot of section 226 retirement annuity contracts have guaranteed annuity rates or guaranteed minimum maturity values.   Have you checked to see it his has?

We are torn between taking 25% tax free and either having the rest as and when we need it or just leaving it where it is. 

It is unlikely you will be able to do that with a S226 RAC.  It would likely need transferring.   If it does have GARs or GMVs then you would need to use an adviser if its over £30,000.

and the value of his pension has dropped by 15% since 17th January. 

So, it hasn't  rapidly diminished as you indicated and it is unlikely it is still dropping.

If we don’t contact them in July they will change his retirement date until he is 74. (We don’t want that) 

You misunderstand that bit.   If you do nothing, you can still take the pension at any time.  It's just that they will put the scheme at the maximum age (which for S226 RACs is usually 74 - as it has to be taken by 75).  It is just a clerical change and not one that says he has to take it at 74.   

7136

Thank you for the advice, that’s been really helpful, given us some clear ideas on what to do now.  

toomsie

We live in new times, old rules might not apply anymore.