Aviva Fund Cash 4.47% Interest Rate Literature

GSP

If anyone has an Aviva pension, they will know they get reams of statements, documents and illustrations.

Within a latest statement, I have noticed a line that says:
“The current interest rate held for cash in your pension portfolio account is 4.47%”.

Now is that actually true?
If I had turned all the investments in it into cash, I would receive 4.47%? i.e. for £500,000 £22,350 in interest p.a.?

artyboy

Possibly but given the £85k FSCS protection limit that would then apply to uninvested cash deposits, you'd be taking more of a risk (IMO) than plonking it in a money market fund that would actually generate a better return!

dunstonh

Now is that actually true?

Depends on which Aviva contract you are referring to.  The platform is 4.47%
Aviva do not take a margin on interest

If I had turned all the investments in it into cash, I would receive 4.47%? i.e. for £500,000 £22,350 in interest p.a.?

Yes. but you would still be subject to platform charge and adviser charge (if applicable)

GSP

dunstonh said:

Now is that actually true?

Depends on which Aviva contract you are referring to.  The platform is 4.47%
Aviva do not take a margin on interest

If I had turned all the investments in it into cash, I would receive 4.47%? i.e. for £500,000 £22,350 in interest p.a.?

Yes. but you would still be subject to platform charge and adviser charge (if applicable)

Thanks dunstonh. And I also would be charged tax of c£2k on the part not covered by my personal allowance. They’ll be nothing left!

Notepad_Phil

GSP said:

dunstonh said:

Now is that actually true?

Depends on which Aviva contract you are referring to.  The platform is 4.47%
Aviva do not take a margin on interest

If I had turned all the investments in it into cash, I would receive 4.47%? i.e. for £500,000 £22,350 in interest p.a.?

Yes. but you would still be subject to platform charge and adviser charge (if applicable)

Thanks dunstonh. And I also would be charged tax of c£2k on the part not covered by my personal allowance. They’ll be nothing left!

Not if this is within a pension.

But personally, unless I was going to be withdrawing the money within the short to medium term, then I'd rather keep it fully invested.

Dazed_and_C0nfused

GSP said:

dunstonh said:

Now is that actually true?

Depends on which Aviva contract you are referring to.  The platform is 4.47%
Aviva do not take a margin on interest

If I had turned all the investments in it into cash, I would receive 4.47%? i.e. for £500,000 £22,350 in interest p.a.?

Yes. but you would still be subject to platform charge and adviser charge (if applicable)

Thanks dunstonh. And I also would be charged tax of c£2k on the part not covered by my personal allowance. They’ll be nothing left!

No tax is due on interest earned within a pension.

If you took money out it would be pension income not interest so non savings non dividend tax rates would apply.

GSP

dunstonh said:

Now is that actually true?

Depends on which Aviva contract you are referring to.  The platform is 4.47%
Aviva do not take a margin on interest

If I had turned all the investments in it into cash, I would receive 4.47%? i.e. for £500,000 £22,350 in interest p.a.?

Yes. but you would still be subject to platform charge and adviser charge (if applicable)

In the wider scheme of things, looking at this again would fit into my longer term plans.
My strategy is/was to reduce my pension over time through say earning 3% on investments against 4-5% on withdrawals. Come just over 5 years time when my SP kicks in, I would reduce the withdrawals meaning my fund would be relatively stable, ‘in a perfect world’.
One big problem however is relying on this cash interest rate within the fund. It’s 4.47% now, who knows what it will do in future, most likely go down in time.
If the rate fell I could buy investments of course, but just what market conditions would I be going into. Buying at a peak isn’t a good idea!

Pat38493

GSP said:

dunstonh said:

Now is that actually true?

Depends on which Aviva contract you are referring to.  The platform is 4.47%
Aviva do not take a margin on interest

If I had turned all the investments in it into cash, I would receive 4.47%? i.e. for £500,000 £22,350 in interest p.a.?

Yes. but you would still be subject to platform charge and adviser charge (if applicable)

In the wider scheme of things, looking at this again would fit into my longer term plans.
My strategy is/was to reduce my pension over time through say earning 3% on investments against 4-5% on withdrawals. Come just over 5 years time when my SP kicks in, I would reduce the withdrawals meaning my fund would be relatively stable, ‘in a perfect world’.
One big problem however is relying on this cash interest rate within the fund. It’s 4.47% now, who knows what it will do in future, most likely go down in time.
If the rate fell I could buy investments of course, but just what market conditions would I be going into. Buying at a peak isn’t a good idea!

You can also put the money into a Money Market fund which should track close to the BOE base rate and is seen as pretty low risk - e.g. the Vanguard Money Market fund is the only fund of theirs that has their lowest risk rating.  I am in the Royal London one which has pretty much the same objective but lower charges.  These funds seem to carry mostly cash and a bit of short term gilts as far as I can tell.

Edit - just to note, the historic performance charts on these funds will look terrible because their objective is to track interest rates, so they would have only started giving significant returns when interest rates went up.

cloud_dog

GSP said:

dunstonh said:

Now is that actually true?

Depends on which Aviva contract you are referring to.  The platform is 4.47%
Aviva do not take a margin on interest

If I had turned all the investments in it into cash, I would receive 4.47%? i.e. for £500,000 £22,350 in interest p.a.?

Yes. but you would still be subject to platform charge and adviser charge (if applicable)

In the wider scheme of things, looking at this again would fit into my longer term plans.
My strategy is/was to reduce my pension over time through say earning 3% on investments against 4-5% on withdrawals. Come just over 5 years time when my SP kicks in, I would reduce the withdrawals meaning my fund would be relatively stable, ‘in a perfect world’.
One big problem however is relying on this cash interest rate within the fund. It’s 4.47% now, who knows what it will do in future, most likely go down in time.
If the rate fell I could buy investments of course, but just what market conditions would I be going into. Buying at a peak isn’t a good idea!

Gilts?

We hold our near term pension requirements in cash in CSH2 at the moment, but am considering placing an amount (for year 3, possibly year 4 money also) in to Gilts.

Albermarle

My strategy is/was to reduce my pension over time through say earning 3% on investments against 4-5% on withdrawals. Come just over 5 years time when my SP kicks in, I would reduce the withdrawals meaning my fund would be relatively stable, ‘in a perfect world’.

If you are only earning 3% on investments, then the value would be going down due to inflation, even without any withdrawals.

You should be aiming instead to make a % growth above inflation in the long term anyway, even if it is only one or two per cent,