Indecision, which pension to pay into? 3 February at 2:33PM in Pensions, annuities & retirement planning 5 replies 437 views

Consumer3

I'll try to keep this concise!

I'm suffering with indecision - finally getting to grips with understanding how pensions work, helped by much reading of this forum and helping family members sort their own pension paperwork. Now time to sort out my own.

I'm 50, married, no kids, mortgage paid off, no debt, will get full state pension due at 67/68, basic rate tax payer earning £23k. No high lifestyle but not scrooge either. 

Currently contributing into my workplace DB LGPS/LPFA pension worth around £5k per annum at SPA. I'm happy with this at the moment to take care of SPA years onwards, as I'll be adding to it for the foreseeable future. 
Also have Pru AVC's, linked to the LGPS - only £1k in the pot, aware this can be taken as 100% tax free lump sum when I take the LGPS pension.
Old Aviva workplace DC pension currently £61k in the pot - no contributions going in.
£75k in high interest cash accounts (from house sale) 
Premium Bonds £10k

You can get the picture re indecisiveness as leaving that lump sum in cash is probably daft! My goal is to retire at 60 using all the above (except the LGPS and Pru AVC's) to fund the gap between age 60 - 68 with a drawdown paying minimal tax.
My question is - I can afford to add around £200 per month into my pension provision and could also use some of the cash too as a single payment in. Which one do I put into, my current Aviva or to start a new one? Hoping to be invested for the next 10 years and not taking a 25% lump sum up front.
Not understanding the funds enough and so much choice has made me freeze rather than getting on with it. I keep reading and learning but thought I'd share here for a few pointers please!

Currently my tiny Pru pot is in highest risk funds (there are 19 funds available) and yes I'm now aware they are really the same fund! : 
Prudential S3 UK Equity Pen and Prudential UK Equity Passive 50/50 split. Charges 0.65 and 0.55%

The Aviva fund currently in a Lifestyling product with retirement date of 65 - I haven't changed the age yet as I don't want to trigger a swap into their consolidated future growth fund.
The whole amount is in my old workplace default fund: Aviva Pensions Mixed investment (40-85% Shares) S6, charges 0.5% - Aviva risk level 4 out of 7.

Any thoughts would be gladly received, thanks!


 

Audaxer

Why do you expect to be invested for only the next 10 years? Do you not plan to drawdown from your investments in your DC pension between 60 and 68?

Will your DB pension of £5k per annum, plus your State Pension be enough for you from age 68?  Is it not possible to pay the extra £200 per month into your DB pension?

Marcon

Consumer3 said:

£75k in high interest cash accounts (from house sale) 

You can get the picture re indecisiveness as leaving that lump sum in cash is probably daft! 
 

Rather depends on what else you might have done with it! Had you invested in equities which then tumbled, you might be patting yourself on the back for leaving it where it is - but what exactly is 'high interest'? If the £75K has been sitting there for several years, you may find 'high' is anything but, so at least worth checking if you can get a better interest rate. Start here for some useful info: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Consumer3

Audaxer said:

Why do you expect to be invested for only the next 10 years? Do you not plan to drawdown from your investments in your DC pension between 60 and 68?

Will your DB pension of £5k per annum, plus your State Pension be enough for you from age 68?  Is it not possible to pay the extra £200 per month into your DB pension?

Yes sorry I meant 10 years before starting to drawdown at 60 until 68. And no I don’t believe I can pay extra into the DB above what I’m currently paying in whilst I’m in the same job though so that £5k will increase, it’s a career average at 1/49 of salary. The Pru AVC’s are the only way I can purchase extra membership. 

It’s the years in between that I’m more worried about. 

We can also downsize our house if needed but not planning on it. 

Consumer3

Marcon said:

Consumer3 said:

£75k in high interest cash accounts (from house sale) 

You can get the picture re indecisiveness as leaving that lump sum in cash is probably daft! 
 

Rather depends on what else you might have done with it! Had you invested in equities which then tumbled, you might be patting yourself on the back for leaving it where it is - but what exactly is 'high interest'? If the £75K has been sitting there for several years, you may find 'high' is anything but, so at least worth checking if you can get a better interest rate. Start here for some useful info: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Thanks yes it’s only been 2 years or so and luckily I have been following MSE and others for a number of years to get the highest rates possible. I have no indecision on moving cash about, but frozen when it comes to picking pension funds, feels like a gamble but want to make the most of these next 10 years whilst working and gaining pension tax relief. Plans depending on what life throws at us of course! 

mark5

It sounds to me like your on target another 10 years to 60 will give you about 10k in todays money from your work pension added to state pension you won’t be far off your current income at 68 with the bonus of no NI to pay.

The avc’s, aviva pension and cash savings should see you okay from 60-68 without needing to take to much risk with what you have already accumulated.

Good luck, Mark