How to make a pension pot disappear?

DoublePolaroid

Hi all. Sorry for the lack of conciseness below, I struggle with that. 

I’m 40 and in the NHS pension scheme with roughly equal benefits in 1995/2015. The 19/20 tax year was the first in which I encountered the ultimate first-world problem, a breach of the AA limit to the tune of £5k. I’m in the process of trying to work out what my options for mitigating this are in the future but for now I expect to be hit with tax bills for 20/21 and 21/22 for being a few thousand over £40k in annual pension growth. Even with mitigation I expect to be nudging the AA limit annually until I retire. So far so straightforward. 

However, it was only in the course of reviewing my pension finances that I realised the small private DC pension pot worth £13.5k I have and had more or less entirely forgotten about, is relevant to this subject. It was opened for me by an FA in 2008, I contributed to it for 2-3 years then stopped for reasons I can’t recall and have paid it no heed ever since. As I’d put it out of my mind I had not even made my accountant aware of its existence which I assume is not relevant prior to 19/20 (I was always a few thousand under AA to that point). Clearly this needs to be rectified as I owe/will owe tax on the growth. 

Given that this pension is going to potentially cost me (an admittedly relatively small) amount in the the present every year it grows but also given that the pension is so small compared to the benefits I am likely to have accrued in the DB scheme come retirement time - at which point I expect to be trying to find ways of mitigating LTA issues - I think I would prefer the pension didn’t actually exist! An added small wrinkle is that the charges applied by Clerical Medical for investing on my behalf are 2.1% which I don’t intend to pay going forward on principle. 

So the somewhat nebulous question is what to do about this? I am aware I can’t take anything out of the pot until I’m 57. I’d be happy enough to liquidate it and give it to charity but I know that’s not happening either. My initial thought is to transfer into a SIPP and find the most volatile, dubious, high risk high reward “investment” I can think of e.g. some sort of crypto fund and if I lose it all I won’t give a monkeys and if it performs stratospherically then, hey it’s not all bad. 

Am I missing something? If not suggestions for terrible investments welcome!

Malthusian

Clearly this needs to be rectified as I owe/will owe tax on the growth.

What makes you think that? Growth within a DC pension has nothing to do with the annual allowance. Only money paid in.

Trying to destroy a DC pension to avoid a Lifetime Allowance charge makes no sense; it's cutting your nose off to spite your face. 45% (or whatever) of something is better than 100% of nothing.

If the charges are high you can transfer it to a more competitive one (check there aren't any safeguarded benefits or any other reason not to do so first). Or you might be able to reduce it by switching funds - 2.1%pa would be extremely high for a baseline charge and suggests you may have chosen expensive funds.

My initial thought is to transfer into a SIPP and find the most volatile, dubious, high risk high reward “investment” I can think of e.g. some sort of crypto fund and if I lose it all I won’t give a monkeys and if it performs stratospherically then, hey it’s not all bad.

If it performs stratospherically then your non-problem will get even worse as your LTA bill will increase. And if DC growth was subject to the AA that would get worse too (but it isn't).

Crypto isn't available to pensions, but high-risk individual shares would be. If you opened your own SIPP or SSAS you could technically purchase unregulated investments that would lose all the money. However you would either need dodgy pension trustees willing to facilitate the scam or open your own scheme fully under your control.

DoublePolaroid

Thank you my entire post was based on ignorance on my part - as you know AA within DB is calculated on growth and I assumed incorrectly this applied to DC. 

Non-problem averted.

Might still consider dubious investments for a flutter, mind…

Prism

You won't be paying any tax on this growth so don't worry - the £40k limit is only on contributions to your DC pension of which you have none. You may eventually end up paying tax if you exceed LTA but thats a different matter for later.

Albermarle

Might still consider dubious investments for a flutter, mind…

As already said , a mainstream SIPP provider , will not have available any unregulated 'dubious ' investments . 

However they will have available individual company shares , which is quite a high risk way of investing , especially if you only hold one .

DoublePolaroid

Albermarle said:

Might still consider dubious investments for a flutter, mind…

As already said , a mainstream SIPP provider , will not have available any unregulated 'dubious ' investments . 

However they will have available individual company shares , which is quite a high risk way of investing , especially if you only hold one .

I did mean the latter given that I really don’t know enough about the subject to invest in individual companies with anything other than a Hail Mary. So dubious for me though I was being only semi serious. My other investments are in low cost, boring but low maintenance buy and hold index trackers. 

NannaH

I’d be looking for any funds investing in metaverse and/or space tech.
Metaverse stuff really could be stratospheric but knowing exactly which companies will soar or sink is a coin toss,  other than the big guns.

Malthusian

NannaH said:

I’d be looking for any funds investing in metaverse and/or space tech.

Investing in any current fad being peddled by shoeshine boys and newspapers (or "meme stocks" as they're currently called) is the best way to lose money without using individual shares. Some technology funds lost 90% of their value after the dot-com crash and never recovered. I would throw "blockchain ETFs" into the mix.

It's very unlikely that even the worst fad fund would completely disappear though, so they wouldn't quite meet the OP's original criteria.