Pension Review & Opinions

Gentle_Ben

Evening,

This morning I received a letter from the company pension provider, Aviva, saying they could not longer accept any further payments in to the pension scheme. Which I assume is to do with the company I work before beginning to winding down over the next 12 months or so. This prompted me to go in to the Aviva app to see how my pension pots are doing.

Although I have only had one employer for the last 20 years, several changes in ownership mean I have 3 separate pension pots, all with Aviva. I started paying in to the company pension when I was around 26 / 27 and I am 41 now, so these are how things stand after 15 years or so :

Pot 1 (paid into 2010 - 2022)
£113,786.38

Pot 2 (paid into 2022 - 2024)
£22,961.16

Pot 3 (paid into 2024 - present)
£2,674.46

(TOTAL - £139,422.00)

All three pots are invested in the same Aviva fund "AvMyM My Future Growth (Pre-2025) S0" which is risk rated MEDIUM (4 out of 7).

I'm aware that the provider had my holdings invested in slightly higher risk funds when I was younger and that these will be moved to funds of reducing risk as I get older.

I am just wondering if it would be prudent to leave the largest pot as it is, but look at shifting one of the two smaller pots back into a higher risk fund? 

Also I have no idea if these are decent accumulations for 15 years. I keep getting sent illustrations of what my pension could look like when I retire in circa 30 years time, but I don't know how to make sense of the numbers and therefore can't tell if the numbers that are being suggested will give me a pension income that is fit for a Prince or a pauper!

Any advice / opinions / suggestions on current position and strategy going forward greatly appreciated.

Thank you

El_Torro

You can merge your pension pots, or leave them as they are, or even move some of the money to another provider. It doesn't matter too much, what matters more is what investments you hold. 

Since you are at least 16 years away from being able to access this money arguably you could take more risk with all the money. If a volatile fund is going to freak you out when markets drop and lead you to making bad decisions when this happens then you don't want to be too high risk though. You'll need to find your own balance.

You say your funds will derisk as you get closer to retirement. This is generally more suitable for people who are planning to buy an annuity. If you're not going to do this it makes little sense to be invested that way. 


When looking at what your pension could be worth when you retire it's worth playing around with a pension calculator, there are plenty of free ones online. If you tell us how much is going into your pension every month we could even take a look. Remember that when you are using a pension calculator or looking at the forecasts from Aviva assumptions are being used. Assumptions that may or may not turn out to be true. It's just a forecast after all.

Gentle_Ben

Thanks El_Torro.

I've currently suspended making pension contributions for the time being as I'm currently renovating a property which has run massively over time and budget, however the pots I have accumulated are based on personal contributions of 6% per month taken before tax. My annual income is just under £57.5k per annum. I also receive 12% from my employer (6% matching contribution + 6% long service award) so effectively its an 18% pension.

Assuming I've worked it out correctly, 18% of £57.5k / 12 months works out at £870 per month split out as £290 paid by me & £580 per month from my employer.....

My plan is to go for an annuity but I am trying to build passive income through property over the next 5 - 10 years while I am hopefully still reasonably fit and able-bodied!

Thanks

Smudgeismydog

Can I just clarify, are you currently still making the 6% pension contribution, or have you suspended this?

El_Torro

A 41 year old with £139k in a pension making 18% contributions on a salary of £57.5k can expect to have a pot of about £750k when they get to 68. This would allow you to take £188k tax free lump sum and get an annuity of £42k a year. Annuity is based on current annuity rates, we have no idea what annuity rates will be like in 27 years time. 

The above assumes investment growth of 2% above inflation and contributions rising with the level of inflation. The £750k is in today's money. 


Even by making 6% employee pension contributions you are still a 40% tax payer. If you can give up a bit more you can get yourself into the 20% tax bracket.

Have you stopped paying into your pension? I know you say money is currently tight but if you are not currently getting the 12% from your employer it's worth doing what you can to be able to afford the 6% employee contribution. Future you will be grateful for this. 

DRS1

El_Torro said:

A 41 year old with £139k in a pension making 18% contributions on a salary of £57.5k can expect to have a pot of about £750k when they get to 68. This would allow you to take £188k tax free lump sum and get an annuity of £42k a year. Annuity is based on current annuity rates, we have no idea what annuity rates will be like in 27 years time. 

The above assumes investment growth of 2% above inflation and contributions rising with the level of inflation. The £750k is in today's money. 


Even by making 6% employee pension contributions you are still a 40% tax payer. If you can give up a bit more you can get yourself into the 20% tax bracket.

Have you stopped paying into your pension? I know you say money is currently tight but if you are not currently getting the 12% from your employer it's worth doing what you can to be able to afford the 6% employee contribution. Future you will be grateful for this. 

I may have misunderstood but I am not sure that was entirely voluntary.  From the OP

"This morning I received a letter from the company pension provider, Aviva, saying they could not longer accept any further payments in to the pension scheme."

I have a nasty feeling the OP may be out of a job:

"Which I assume is to do with the company I work before beginning to winding down over the next 12 months or so." 

Brie

DRS1 said:

El_Torro said:

Have you stopped paying into your pension? I know you say money is currently tight but if you are not currently getting the 12% from your employer it's worth doing what you can to be able to afford the 6% employee contribution. Future you will be grateful for this. 

I may have misunderstood but I am not sure that was entirely voluntary.  From the OP

"This morning I received a letter from the company pension provider, Aviva, saying they could not longer accept any further payments in to the pension scheme."

I have a nasty feeling the OP may be out of a job:

"Which I assume is to do with the company I work before beginning to winding down over the next 12 months or so." 

But wouldn't the employer still be obliged to provide some sort of occupational scheme??  Assuming it's a company with more than a minimal number of employees of course.  Even contributions into NEST will be good to have at some point.

Albermarle

Brie said:

DRS1 said:

El_Torro said:

Have you stopped paying into your pension? I know you say money is currently tight but if you are not currently getting the 12% from your employer it's worth doing what you can to be able to afford the 6% employee contribution. Future you will be grateful for this. 

I may have misunderstood but I am not sure that was entirely voluntary.  From the OP

"This morning I received a letter from the company pension provider, Aviva, saying they could not longer accept any further payments in to the pension scheme."

I have a nasty feeling the OP may be out of a job:

"Which I assume is to do with the company I work before beginning to winding down over the next 12 months or so." 

But wouldn't the employer still be obliged to provide some sort of occupational scheme??  Assuming it's a company with more than a minimal number of employees of course.  Even contributions into NEST will be good to have at some point.

It seem the situation is not very clear.

I assume if the OP is still employed by the company, then he is still getting paid and they are legally obliged to pay at least minimum auto enrolment levels.
It seems maybe the company is still paying their contribution in though . It is not 100% clear ?
Aviva have said they will not accept further contributions. Just from the OP, or his employer as well ? Also not clear.

R_P_W

Gentle_Ben said:

Evening,

This morning I received a letter from the company pension provider, Aviva, saying they could not longer accept any further payments in to the pension scheme. Which I assume is to do with the company I work before beginning to winding down over the next 12 months or so. This prompted me to go in to the Aviva app to see how my pension pots are doing.

Although I have only had one employer for the last 20 years, several changes in ownership mean I have 3 separate pension pots, all with Aviva. I started paying in to the company pension when I was around 26 / 27 and I am 41 now, so these are how things stand after 15 years or so :

Pot 1 (paid into 2010 - 2022)
£113,786.38

Pot 2 (paid into 2022 - 2024)
£22,961.16

Pot 3 (paid into 2024 - present)
£2,674.46

(TOTAL - £139,422.00)

All three pots are invested in the same Aviva fund "AvMyM My Future Growth (Pre-2025) S0" which is risk rated MEDIUM (4 out of 7).

I'm aware that the provider had my holdings invested in slightly higher risk funds when I was younger and that these will be moved to funds of reducing risk as I get older.

I am just wondering if it would be prudent to leave the largest pot as it is, but look at shifting one of the two smaller pots back into a higher risk fund? 

Also I have no idea if these are decent accumulations for 15 years. I keep getting sent illustrations of what my pension could look like when I retire in circa 30 years time, but I don't know how to make sense of the numbers and therefore can't tell if the numbers that are being suggested will give me a pension income that is fit for a Prince or a pauper!

Any advice / opinions / suggestions on current position and strategy going forward greatly appreciated.

Thank you

I've had several jobs over the past 20 years, I'm 43 now and over the past couple of years I've been starting to transfer these various pots into my SIPP with Vanguard.  Most of these pension pots were 'lifestyling' which isn't really appropriate in my view unless you are planning to purchase an annuity when you retire.

The reason I've transfered them is because the fees are lower and I've just invested in a global index tracker.  So I'm 100% equities and and planning for this to be the case for at least the next 10/12 years when I've review whether I need to shift a small amount to safer options ahead of drawing down any funds (which I'm expecting to be sometime between 58 and 60).

This isn't financial advice, but at 41 you still likely have 20 years to go before you can access the money, I don't think that minimising risk is the right thing to do.

Albermarle

R_P_W said:

Gentle_Ben said:

Evening,

This morning I received a letter from the company pension provider, Aviva, saying they could not longer accept any further payments in to the pension scheme. Which I assume is to do with the company I work before beginning to winding down over the next 12 months or so. This prompted me to go in to the Aviva app to see how my pension pots are doing.

Although I have only had one employer for the last 20 years, several changes in ownership mean I have 3 separate pension pots, all with Aviva. I started paying in to the company pension when I was around 26 / 27 and I am 41 now, so these are how things stand after 15 years or so :

Pot 1 (paid into 2010 - 2022)
£113,786.38

Pot 2 (paid into 2022 - 2024)
£22,961.16

Pot 3 (paid into 2024 - present)
£2,674.46

(TOTAL - £139,422.00)

All three pots are invested in the same Aviva fund "AvMyM My Future Growth (Pre-2025) S0" which is risk rated MEDIUM (4 out of 7).

I'm aware that the provider had my holdings invested in slightly higher risk funds when I was younger and that these will be moved to funds of reducing risk as I get older.

I am just wondering if it would be prudent to leave the largest pot as it is, but look at shifting one of the two smaller pots back into a higher risk fund? 

Also I have no idea if these are decent accumulations for 15 years. I keep getting sent illustrations of what my pension could look like when I retire in circa 30 years time, but I don't know how to make sense of the numbers and therefore can't tell if the numbers that are being suggested will give me a pension income that is fit for a Prince or a pauper!

Any advice / opinions / suggestions on current position and strategy going forward greatly appreciated.

Thank you

I've had several jobs over the past 20 years, I'm 43 now and over the past couple of years I've been starting to transfer these various pots into my SIPP with Vanguard.  Most of these pension pots were 'lifestyling' which isn't really appropriate in my view unless you are planning to purchase an annuity when you retire.

The reason I've transfered them is because the fees are lower and I've just invested in a global index tracker.  So I'm 100% equities and and planning for this to be the case for at least the next 10/12 years when I've review whether I need to shift a small amount to safer options ahead of drawing down any funds (which I'm expecting to be sometime between 58 and 60).

This isn't financial advice, but at 41 you still likely have 20 years to go before you can access the money, I don't think that minimising risk is the right thing to do.

This isn't financial advice, but at 41 you still likely have 20 years to go before you can access the money, I don't think that minimising risk is the right thing to do.

From a purely investing point if view, you are right 

So I'm 100% equities and and planning for this to be the case for at least the next 10/12 years

However the majority of people do not have the high risk tolerance/strong nerves needed to withstand the volatility of such an investment. There is a high risk they will pull out when the markets are at the bottom.
Even when the markets drop just 10%, we always have plenty of posts on the forum from people panicking.

Of course the OP could increase their risk/equity level without going the whole hog to 100% equities. 

ukdw

Re the suspended 6% contributions - if you are paying 40% tax on them - then for a gain of 3.6% you might be losing 18% worth of pension contributions.

That is a loss of a an effective 500% gain on the 3.6% (or 400% if you eventually pay 20% on the pension withdrawals).

I'd consider getting a loan to cover the 3.6% and reinstate the pension contributions.