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

dunstonh

5.8% seems awfully high for a cash fund.

Back-tested, it would be about right, as looking backward, you have a higher base rate.  Of course, looking forward, you are closer to the mark. Base rate to base plus 0.25% is the typical ballpark. 

Looking at the Aviva deposit S2 fund, it did 5.47% over the last year but it won't do that in the year ahead.

The ex Friends Provident version did 5.14% over the last year but again, it will be lower in the year ahead.

(there are many versions for the old legacy companies within Aviva)

DRS1

One factor which put me off switching to a cash like fund with my Aviva pensions when I was taking the benefits last year was the bid offer spread.  It seemed as if I was triggering a 5% cut in the value of what I put into the cash like fund.  Maybe not every fund with Aviva has such a spread but it may be worth checking.

dunstonh

DRS1 said:

One factor which put me off switching to a cash like fund with my Aviva pensions when I was taking the benefits last year was the bid offer spread.  It seemed as if I was triggering a 5% cut in the value of what I put into the cash like fund.  Maybe not every fund with Aviva has such a spread but it may be worth checking.

The majority of pension contracts stopped applying bid/offer spreads long ago.  Even on those where a spread may have originally been in place.   Typically, you don't see it on contracts set up from about 1998 onwards (1998 being the year that stakeholder rules were known and providers were told to take them into account even though the rules didnt start until 2001)

DRS1

dunstonh said:

DRS1 said:

One factor which put me off switching to a cash like fund with my Aviva pensions when I was taking the benefits last year was the bid offer spread.  It seemed as if I was triggering a 5% cut in the value of what I put into the cash like fund.  Maybe not every fund with Aviva has such a spread but it may be worth checking.

The majority of pension contracts stopped applying bid/offer spreads long ago.  Even on those where a spread may have originally been in place.   Typically, you don't see it on contracts set up from about 1998 onwards (1998 being the year that stakeholder rules were known and providers were told to take them into account even though the rules didnt start until 2001)

Thanks.  I don't think I have/had any post 1998 pensions so that may be why I saw the spread on all the ones I looked at.

MEM62

I have just semi-retired.  As interest rates peaked last year, I put (still within my pension) my next five years income into cash.  By the time I am reliant on the remainder which is still in equities I will have a small DB pension and my state pension in payment.  At that stage I am not reliant on it for the basics - only for fun money.    

MetaPhysical

I've been thinking about this - a few questions please?  If I leave the 100K cash that I want within the pension wrapper I can just take as much of that cash, tax free, as and when I need? So say I have 100k in cash in the pension, I could take 10k from that cash just fine as and when I want?  When I do take it out, that amount counts towards the tax free cash lifetime amount at that point, i.e. when you take it our of the confines of the pension wrapper?

So does that save me from dragging the full 100k out that I want and having to drip feed into cash ISAs over five years?  I can just leave it all in the pension as cash earning interest but inside a tax protection wrapper?  Of course we have to consider prevailing interest rates, but the principle I described is correct?

The reason I want this cash is to protect the equities part of my pot from having to be withdrawn in the event of a significant market downturn.  I can just use the cash to fund me for several years whilst I await market recovery?

SVaz

Yes, you want £10k,  you crystalise £40k in order to take the £10k tax free.
The £40k stays invested, or in cash.
You could do it 10 times until the whole pot is in drawdown and the benefit of doing it in stages is the potential for a bit more tax free cash.

MetaPhysical

Thanks.  Just to sanity check £30k is then moved into crystallised right?  £40K is the total involved, yes,  but 10K was the TFC and then £30k moved to crystallised? 

Notepad_Phil

MetaPhysical said:

Thanks.  Just to sanity check £30k is then moved into crystallised right?  £40K is the total involved, yes,  but 10K was the TFC and then £30k moved to crystallised? 

Yes, that's right. I don't know how your Aviva platform will exactly show it, but after the request to take the £10k tax free lump sum you'll see that £30k is now in your crystallised pot. It might show as a completely separate section from the uncrystallised funds, or it might say that your pension is split as £30k crystallised and however much is then left as uncrystallised.

dunstonh

Whilst the aviva platform allows full drawdown functionality of all options, the Aviva L&P plans often have limited drawdown functionality.    Many of the plans cannot hold uncrystallised and crystallised funds at the same time.   So, it may require a pension transfer to a modern plan that does.