Really, really small pension pots

whattodowithit

Found two really small amounts of savings, in NEST (£2330) and Peoples Pension (£1000) from old employers schemes. Just sitting there...nothing going in.
I've no other private pension, and will just have my state pension when I retire at 67 (in 8 years). I'm in/out of employment (more usually C.I.S. these days!) so no reality of saving for a good pension to top up my government state one.
I may as well just draw them out and stick them in my bank savings or into an ISA I have?...or just treat myself? Will there be loses with withdrawing these small amounts or best just leave them lying there?

TIA

El_Torro

Is the State Pension enough for you to live on? Are you due the full State Pension at 67?

If you won’t need the money later then yes, you can take it now. Remember that 75% of the money is taxable though. It may be better to withdraw it when you are retired, if you take it out over a couple of years you probably won’t pay any tax on it at all.

Albermarle

As above do not take the money out whilst you are still earning and paying tax .
Even then when you cash them in there will be tax deducted but you will be able to claim it back .
It could be worthwhile combining them , so when you do take the money out there is only one payment and one tax claim , so a bit tidier.
It is easy, just ask one of the pension providers to transfer in the other one . You can do it on line .

xylophone

Have you obtained a state pension forecast?
https://www.gov.uk/check-state-pension

so no reality of saving for a good pension to top up my government state one.

Consider moving both to a new scheme and adding what you can afford - even if you have no relevant income, you can contribute up to £2880 (net) per tax year and the provider will clam and add tax relief of  up to £720.

Examples

https://www.hl.co.uk/partners/search/self-invested-personal-pension?partners=1&theSource=PCHLS&Override=1&adg=G+HLBS+HLS+NLP&gclid=EAIaIQobChMIiqWUq4-I7wIVkLrtCh3BdAKzEAAYASAAEgLQAPD_BwE

https://www.fidelity.co.uk/services/sipp/

https://monevator.com/low-cost-index-trackers/

TVAS

The usual suspects above have done a great job in answering your question.

whattodowithit

Thanks all, for your quick replies.

Yes, I do know my pension forecast (full contributions), and I'll have a small property rental to add to that weekly/monthly, and with my partners pension, we will be able to get by quite okay, on our combined monies.

Was just wondering if it was worth just letting that £3k sit there or just withdraw it now and treat ourselves to a little holiday or use it for something we need now.

I can't imagine it being worth much more in 8 years time, in real value compared to worth today?

The only reason the money is there was that it made sense (imo), with the companies basically doubling my small percentage weekly, as in a savings account at the time.
Thanks again!

xylophone

 in real value compared to worth today?

Why forego the tax relief you could get by continuing to contribute?

whattodowithit

Hi, Xylophone.
The £3000 will just sit there. Nothing will get added to it. I know it's not a great ammount and I was just wondering if it's best leave it be, transfer into an ISA I have/other or withdraw and spend it to get the best from it.
Forego tax relief??????? Maybe if there were another couple zeros on the figure!!!? 
Thanks.

xylophone

Nothing will get added to it.

Do you have any "relevant earnings" for the current tax year?

Even if not, let's suppose you were to open a SIPP with eg Hargreaves Lansdown and contribute £2880.

HL would claim £720 in tax relief and add it  to your SIPP.

You now transfer in your tiny pensions.

There is now £6,600 in your pension.

You decide you don't want to invest the cash because you are very risk averse.

In the new tax year you don't have any relevant earnings (or relevant earnings under £3600) but you decide you'll contribute another £2880 - tax relief of £720 is added.

You now have £10,200 in your pension........and so on.

whattodowithit

Hi Xylophone....and thanks for your time!
I'm just a laid back guy, never really thought about money/savings/retirement and happy to just get on by!...but I've also got £20k sitting in a seperate bank account...earning...nothing.
Considering my 8 years til retirement age...opening a SIPP, transfering £2880 of that account/year into SIPP (along with the £3k pension pots) would be a best option of greater return than the £20k sitting there, taking in the chance of maybe SIPP(share value losing/cost of admin etc)?
I wouldn't want to be constantly looking into/managing a SIPP/shares, but, since opening this thread/post you've started to open my eyes to what could be available...albeit a little late in my lifetime!
I've a friend who invested a few thousand in to a 'too good to be true' investment company and lost it, so I've always been a bit (too) cautious in investing, so I'm no 'wheeler-dealer' but would gladly take some advice on how to get the best from my £20+k over the next 8 years....be it a SIPP or other plan.
Like I've said, we'll have our state pensions and a rental income to get by on along with our little bit savings, come retirement time, but making an extra few quid in the meanwhile wouldn't be a bad idea!
Again...thankyou for your good advice.

jamesd

Currently the gross amount you can pay into a pension is limited to your gross pay for the year or £3,600 gross, whichever is higher. If you used the usual way to take out the pension money, UFPLS, that would trigger the money purchase annual allowance limit of £4,000 a year, so no more than that.

To avoid the MPAA you can use the small pot rule. That lets you take out all of a pot worth up to £10,000 three times in your life and doesn't trigger the MPAA. You can combine or split pots first, so you'd combine your current two first. 

Money in a pension you haven't taken money from is ignored for means tested state benefits until you reach your state pension age.

Most pensions allow cash to be held uninvested, though I think the two you are in don't. Pensions just don't allow scam products so anything you can get will be safe from that. Investments work a bit like a rollercoaster in reverse, upwards overall but lots of dips along the way. The size of these dips and climbs is called volatility and it's also called risk because of the chance that someone might need to sell and take the loss instead of waiting.

Another issue is people looking at values at down times, getting scared then selling instead of waiting. The covid crash last year was a great example. Someone could have sold a fund that's all invested in company shares, called equities, at a 40% loss. If they had waited they would have got all of their money back and now be ten to twenty percent higher than before it happened.

You can pick investments that have lower ups and downs, normally done by reducing the equity cut and adding company -  corporate - bonds. A reputable and well known range called Lifestrategy is sold by a company called Vanguard. It has versions with equity cuts of 100%, 80%, 60%, 40% and 20%. The lower the number, the lower the size of the ups and downs as well as the long term profit level. You pick one where you'd be able to handle the biggest likely drop without getting worried and selling at a low point.