Aviva: Thoughts about moving some DC pension into cash fund ???

MetaPhysical

I have another thread running along similar lines regarding Aviva.

My DC pot is about 650k (I also have DB pensions but leaving them aside for this discussion). I know I will want/need a 100k cash TFLS when I retire in 2026.  Is it worth moving 100k into a cash fund to protect that value?

Part of me says, yes do it.  Another parts says no, because: 1.  If there were a crash then although the 100k wouldn't crash the rest would so it would make me nervous about spending that 100k.  And 2.  The cash fund grew 5.75% which is not at all bad but maybe not as good as equities.  We can never know the answer to that but it's a salient point nonetheless.

What do the ninjas of MSE pension experts think please?

Keep_pedalling

As we are only talking about a year away and the lunatics are in charge of the asylum I would do it.

MetaPhysical

Keep_pedalling said:

As we are only talking about a year away and the lunatics are in charge of the asylum I would do it.

Indeed, thanks for your thoughts.  It isn't cash "cash" (I don't think).  It is still in the pension wrapper I believe even though it is in a cash fund inside that wrapper and so if RR decided to reduce TFC to say 50k I would still be limited to that.

dunstonh

You should always move to cash or appropriate assets when a large withdrawal is coming up unless you are particuarly high risk and have capacity for loss to cover off any negativity. (i.e. alternative savings that can be used to allow a recovery on the assets that have gone down).

It doesn't matter if you feel positive or negative about markets.  Its all about certainty, risk and affordability.

SVaz

I wouldn’t be able to sleep at night without having the necessary amount protected.

MetaPhysical

Thanks all, but just to be straight, even though I move the money to a cash fund within the pension, it is still not "cash" withdrawn is it?  The return on that cash within the pension ( a decent 5.8%) is still tax free etc?

MetaPhysical

dunstonh said:

You should always move to cash or appropriate assets when a large withdrawal is coming up unless you are particuarly high risk and have capacity for loss to cover off any negativity. (i.e. alternative savings that can be used to allow a recovery on the assets that have gone down).

It doesn't matter if you feel positive or negative about markets.  Its all about certainty, risk and affordability.

Thanks, so you mean to actually withdraw the cash from the pension or to move that amount (100k in my case) to cash within the pension still?

SVaz

It’s not withdrawn until you take it out.
You leave it in cash or a cash fund IN your pension until you need to withdraw,  a cash fund will need to be sold into cash of course so I would do that the month before you need it. 

MetaPhysical

I consider myself to have been educated today on this subject folks.  Many thanks!

dunstonh

MetaPhysical said:

dunstonh said:

You should always move to cash or appropriate assets when a large withdrawal is coming up unless you are particuarly high risk and have capacity for loss to cover off any negativity. (i.e. alternative savings that can be used to allow a recovery on the assets that have gone down).

It doesn't matter if you feel positive or negative about markets.  Its all about certainty, risk and affordability.

Thanks, so you mean to actually withdraw the cash from the pension or to move that amount (100k in my case) to cash within the pension still?

Most pensions have a cash/deposit option.   So, you can retain it in the pension.  Although, if it's TFC, then taking it now if you can find better options outside of the pension may be the better option.   For example, if the pension has a fund like Royal London Short Term money market, then that is a good option within the pension.     Aviva's platform SIPP pays 3.87% interest on cash.  Aviva's Life and pensions products tend not to have a cash facility but will offer a deposit fund.   It won't be market-leading and can be bettered outside of the pension.

SVaz

5.8% seems awfully high for a cash fund.

I’m getting the inter bank rate on my Short term money market fund, just been cut to 4.5%. 

If it was sitting in cash then it would be around 2.7%.