Old Aviva Pension what are my options please

slacko2

Hi,

Briefly, I am to receive an inheritance which will going forward cease all income excepting PIP. The sum is not great and I will manage to live off it I hope going forward. 

Other members have given me some really good advice and explained the options I have for investing into fixed rate savings etc which has been invaluable as I really have no clue about the whole financial thing.

During these conversations the question of whether I had a pension came up and I do but the statements just get put in a draw to be honest as it has not been touched for many a year.

Advice given suggests I should wake up the pension and make contributions of £2880 per tax year as this will not affect my PIP situation and maximise my money.

The pension is with Aviva, the pot as of Dec 2022 was just over £1k, my state pension date is September 2029.

Am wondering if there is any advice as to what my best options are. Do I contribute into the existing Aviva as is, do I swap it to another provider as its quite old, am I thinking in the right direction.

As I said other contributors have been fantastic just thought I would ask you pension guys if you had any thoughts.

xylophone

One thought - it appears that your taxable income is (and will remain for around five years) well below your Personal Allowance.

You will be living on capital and interest from your inheritance of £110,000 (plus PIP).

You are over 60.

Would you be permitted to take the whole of the Aviva pension now if you wished? Normally 25% of a DC pension would be tax free with the balance taxed as income in the year of receipt. In your situation if it really is only a little over £1000, you would have no tax liability.

This could help with the gift you would like to make to your son.

You could then consider contributing £2880 per annum to a SIPP with say, Hargreaves Lansdown).

You could make the full contribution in this tax year and as early as possible in the next.

HL would claim tax relief of £720 for this tax year and the next and add it to your pot.



You had originally considered not drawing on the pension until you reached SPA but if personal allowances remain frozen or do not fully increase with inflation, you could find yourself a tax payer at that point.

Therefore one strategy you might consider  would be to draw  from the SIPP for each of the years that you

 remain a non-taxpayer. 

HL do not charge for holding cash or for drawdown.

You can continue to contribute to the pension and obtain the tax relief up to age 75.

Worth doing your research and considering your options.

Albermarle

The pension is with Aviva, the pot as of Dec 2022 was just over £1k, my state pension date is September 2029.

As it is an old pension, it is probably best to start a new one.

You could cash this small Aviva pension in ( as suggested in the previous post) or open a new one and transfer it in to the new one. 

Note that the State Pension date is not really relevant to personal pensions, which can currently be drawn from age 55 ( rising to 57 in about 4 years) .

LHW99

OP, you said in another thread that you have health problems.

While PIP would cease because of the inheritance, would you then be eligible for any other benefits? Lower level Attendance allowance comes to mind. It is not means tested, and you don't have to have any sort of live in care, it can be that you need to pay for specific help that others of your age could do themselved.

Why not check https://www.entitledto.co.uk/ just to see?

slacko2

You could then consider contributing £2880 per annum to a SIPP with say, Hargreaves Lansdown).
I need to figure out how sipps work

You could make the full contribution in this tax year and as early as possible in the next.
I will have enough available to do this

HL would claim tax relief of £720 for this tax year and the next and add it to your pot.
I put in £2880 and the government add £720 to this making it £3600 am I getting that right

You had originally considered not drawing on the pension until you reached SPA but if personal allowances remain frozen or do not fully increase with inflation, you could find yourself a tax payer at that point.
Therefore one strategy you might consider  would be to draw  from the SIPP for each of the years that you
 remain a non-taxpayer. 
HL do not charge for holding cash or for drawdown
Totally lost me now


You could cash this small Aviva pension in ( as suggested in the previous post) or open a new one and transfer it in to the new one. 
That was how I was thinking as the old one is quite old and I think they are getting more money out of this than me. Thanks

slacko2

@LHW99

Yes I am pretty sure it is a 6year review the next being 2026 as they bumped it on 2 years during covid. The problem of course being it cant be relied on. I would be eligible for AA yes.

My illness Is split between arthritis problems and a brain injury which is why I seem dumb. I do not retain info which is so frustrating because I have to keep asking. If you showed me how to knock a nail in you would only need to show me once if I had to read the instructions then it would take a while

slacko2

@LHW99

Sorry I just read this again  While PIP would cease because of the inheritance Am I reading it right ?

xylophone

While PIP would cease because of the inheritance,

PIP is not means tested.

https://www.moneyhelper.org.uk/en/benefits/benefits-if-youre-sick-disabled-or-a-carer/personal-independence-payment-an-introduction#:~:text=PIP helps with the extra,you have savings or capital.

PIP helps with the extra costs of disability or long-term health conditions for people aged 16 and over.

It’s a non means-tested benefit. So you can get it regardless of how much you earn, or whether you have savings or capital.

xylophone

My illness Is split between arthritis problems and a brain injury which is why I seem dumb.

You do not seem "dumb".

 Asking questions when you meet an unfamiliar situation is not dumb - indeed, you could argue that carrying on regardless would be the "dumb" thing to do.......

And if you don't understand an explanation, ask again.

LHW99

slacko2 said:

@LHW99

Sorry I just read this again  While PIP could cease because of the inheritance

Based on xylophone's response above, I assumed incorrectly that PIP did depend on other income, so depending on your review, may well continue.

I wouls still suggest checking that you are receiving all the benefit support that you are entitled to. If the website calculator is difficult for you to work with, Citixen's Advice should be able to go through things with you.

xylophone

I was mentioning the possibility of having to pay income tax even as a pensioner if your income (state pension and any other pension count as income) is above the Personal Allowance.

At the moment, the Personal Allowance is £12,570 per annum. It has not been increased with inflation since 2022 and is not due to increase until 2028.

The full New State Pension will be  over £11,500 per annum from April.  It is possible that it will exceed the PA by 2028.

It seems that up to SPA, your only taxable income will be interest from savings?  PIP is not taxable income.

It seems that your income from savings would not exceed around £5000 a year?

If this is the case, then you will not be liable for tax..

In fact, if a person's only income was savings interest, he could receive up to £18,570 in interest and pay no tax- see 

https://www.gov.uk/apply-tax-free-interest-on-savings

With regard to the Aviva pension, you say that it is an old scheme and currently worth around £1000.

You are over age 55 so if this is a standard DC arrangement, you could claim the whole, be entitled to 25% tax free and the balance taxable as income.

You would need to read your policy document and check with Aviva.

But  as it seems that your income is well below your personal allowance so that no tax would be due.

 Suppose  a person  aged 60 with no  taxable income opened a SIPP in this tax year  (for example with Hargreaves Lansdown), He could contribute up to

£2880 and HL would claim £720 and add it to the pot.

  He could do the same in succeeding tax years up to age 75.

Let's look at the situation when he  draws his state pension - if he had not accessed the SIPP and had chosen to stay in cash  he might

have around £18000 in the SIPP.

Let's say that by that time, the NSP exceeded the personal allowance. That would mean that any income  he withdrew from the pension would be taxable.

Let's now say that  he contributes £2880 in this tax year.

Once the £720 had been added,  he could choose to access the pension - 25% would be tax free with the balance taxable as income.

However, as already established, he does not have enough income to be liable for tax.

In effect, he would get back his £2880 plus the tax rebate.

There used to be a charge for early closure but as far as I know, this charge is no longer made.

That said, it would probably make life easier to leave a small amount in the SIPP keeping it open for the following year.

 

See this thread https://forums.moneysavingexpert.com/discussion/5580163/paying-2880-into-pension-when-retired/p1

It is very long but if you have the time to slog through, you should get a good idea of how it works.

The HL web site also gives full information and you can download a Guide.

It is important to think carefully and do your own research before entering into any financial arrangement, pension, savings, investment or anything else.