Pension pot dramatic drop ,should i take my 25% cash and place in saver account - now?

cannondalerugby5

Hi and thanks for reading.
I am 65 and plan to retire in a couple of years.
I have cash reserves that will pay the bills for nest 10 years plus
Looked at my Aviva pension yesterday and it has dropped by 6% since Jan 2022.
It is in a low risk ,cat 2 investment pot.
Should I take my tax free 25% now and put it in a savings account where i get 1.5% and its safe?
Will of course stay below the £85k safety limit in each account

Thanks

Bimbly

If you take your 25% tax free sum out of your pension now, you will be locking in your losses.

You are better off keeping your money in the pension and wait for the market to recover. You are lucky that you have cash reserves to live off in the meantime and don't need to take money out of your pension pot right now.

Your pension is made up of investments in bonds and shares (possibly some cash too) and these have lost value, but you still own the same amount of them. Next year they could have recovered their value.

It's like owning a house when house prices go down. Do you sell your house now and take less money for it? If all you're going to do is stick that money in the bank? Or do you wait until the market is better?

In short, don't panic Mr Mainwaring!

The market is having a bit of a wobbly at the moment. It's pretty much the worst time to cash in. It could go down further, it's true, but it also has the ability to rebound. It could take a year or five. But the one thing you can guarantee is that if you cash in your 25%, you will be accepting a lower price for your investments. Only to put it into a savings account where the value of the cash will continue to decrease because of inflation (which is higher than any interest rate you could receive).

If you need to take money out, take it as and when you need it at the moment. As I say, you are fortunate in that you don't need it for a while.

jim8888

I would sit tight and do nothing. This too will pass. (I hope!)

dunstonh

Looked at my Aviva pension yesterday and it has dropped by 6% since Jan 2022.

So, not at all dramatic then as your thread title suggests.

I have cash reserves that will pay the bills for nest 10 years plus

So, drawing the 25% out of the pension would be absolutely daft.

Should I take my tax free 25% now and put it in a savings account where i get 1.5% and its safe?

Why do  you think you need to take it out?
2022 is a negative year (so far).
We had a bigger drop in 2020.  What did you do then?
We had a similar drop in 2018.  What did you do then?
We had a similar drop over 2015/16. What did you do then?
We had a much larger drop in 2008.  What did you do then?
We had a much larger drop over a longer period between 2000-2002.  What did you do then?

Drops happen all fo the time.  They are nothing unusual or uncommon.  I suspect you did nothing before.  Which is exactly what you should do now.

Albermarle

Ten years of cash reserves means you do not have to worry about short term movements in the value of your pension pot.
In fact with only a 6 % drop it is performing reasonably well considering current market conditions. After you retire, you will hopefully live for many years, During that time your pension pot will go up and down many times, but the long term trend should be up. That is how it works.

[Deleted User]

dunstonh said:

Looked at my Aviva pension yesterday and it has dropped by 6% since Jan 2022.

So, not at all dramatic then as your thread title suggests.

I have cash reserves that will pay the bills for nest 10 years plus

So, drawing the 25% out of the pension would be absolutely daft.

Should I take my tax free 25% now and put it in a savings account where i get 1.5% and its safe?

Why do  you think you need to take it out?
2022 is a negative year (so far).
We had a bigger drop in 2020.  What did you do then?
We had a similar drop in 2018.  What did you do then?
We had a similar drop over 2015/16. What did you do then?
We had a much larger drop in 2008.  What did you do then?
We had a much larger drop over a longer period between 2000-2002.  What did you do then?

Drops happen all fo the time.  They are nothing unusual or uncommon.  I suspect you did nothing before.  Which is exactly what you should do now.

Since I joined this forum a few months ago I have seen this information posted over and over again. It is the most valuable insight I have read and it taught me to calm down and let my pension do what it is supposed to do. Set it on auto-pilot and get on with life.

NedS

As usual, great comments from those above.

How about flipping it on it's head? Why do you feel the need to have 10 years plus in cash? Maybe now is an opportunity to put some of that cash to work and invest it while markets are on sale and going cheap? Not advice, just trying to help you see the other side of the coin.

Audaxer

NedS said:

As usual, great comments from those above.

How about flipping it on it's head? Why do you feel the need to have 10 years plus in cash? Maybe now is an opportunity to put some of that cash to work and invest it while markets are on sale and going cheap? Not advice, just trying to help you see the other side of the coin.

I would tend to agree in most cases, but it depends on the OP's risk profile. If having 10 years' cash reserves gives OP security, and he/she has enough invested and other income like State Pension to give him/her a comfortable income after the 10 years cash runs out, I would say it is not necessary to risk investing more. However I agree no need to panic and draw more cash from his/her pension.

Secret2ndAccount

NedS said:

... Why do you feel the need to have 10 years plus in cash? Maybe now is an opportunity to put some of that cash to work and invest it while markets are on sale and going cheap? ...

Exactly what I was thinking.

Audaxer said:
I would tend to agree in most cases, but it depends on the OP's risk profile. If having 10 years' cash reserves gives OP security, and he/she has enough invested and other income like State Pension to give him/her a comfortable income after the 10 years cash runs out, I would say it is not necessary to risk investing more. However I agree no need to panic and draw more cash from his/her pension.

Exactly why I didn't post it.

OP came here asking for the best advice, so here goes. Take the the 10th year of cash and use it to buy a low cost, diversified equity investment. You will thank us in 5 years' time.