What to do with a pension that is due to 'pay out' whilst still working?

AdamBrunt

Hi all,

That's probably a badly worded thread title but hopefully I can make myself clearer 😀

Many moons ago, at a former job, I was paying into an Aviva private pension. I left the company nearly 15 years ago and haven't paid a penny into the fund since. From what I can tell, from the latest statement(s), the portfolio is worth (at today's prices) about £180k

However, Aviva have my retirement date as somewhen in 2028 - some SEVEN years before my current state retirement date [ I must have been very optimistic way back then with my retirement plans 🤣 ]

I am currently still working full time and am a 40% tax payer on PAYE.

As a complete pension newbie (it comes to us all some day) I am just trying to find out what my options are regarding the Aviva pension come 2028.

1. Can I just leave it untouched until 2035? Will it start devaluing if I do?
2. Can I convert it into an annuity but not drawn down on it until 2035?
3. If I start drawing down on it, will it be taxed at 40% or would it somehow magically get put in the 20% band?
4. If I start drawing down on it will I need to start doing self assessments or does HMRC know when pensions are drawn down?
5. I am presuming £180k is too big to move to another pension pot before 2028?

Thanks in advance for any help given to this newbie.

Flugelhorn

Depends what sort of pension it is - I have a DC pension that might be like this, It is just sitting there, I don't need and for reasons related to other pensions it would be heavily taxed.

Having said that, it is increasing while I ignore it

You may be able to get 25% tax free in cash and leave the rest there or drawdown some each year - depends what your needs are

NoMore

It will not automatically pay out, you would need to claim it. It's fine just to leave it until you want to start drawing on it.

The age is likely related to lifestyling, this is where your investments are automatically adjusted based on what age you are, but to do that they need a likely date for you to take it. However, this date is not set in stone and does not mean you have to take it at that age.

There's no maximum limit to transferring pensions, also I'm not sure why the reference to 2028 for moving it ?

AdamBrunt

https://forums.moneysavingexpert.com/discussion/comment/81957254#Comment_81957254

Yeah - I was quite surprised when I saw the amount …. didn't expect it to be anything like that at all

AdamBrunt

https://forums.moneysavingexpert.com/discussion/comment/81957283#Comment_81957283

The reference to 2028 was down to me thinking the Aviva pension would need actioning in 2028 and believing there is a max amount you can transfer into a pension pot each tax year (and that £180k over 2 tax years wouldn't be allowed)

dunstonh

Can I just leave it untouched until 2035? Will it start devaluing if I do?

The selected retirement age is adjustable. Investment returns will continue. However, if you are in a lifestyle risk reducing fund, you may need to adjust that.

Can I convert it into an annuity but not drawn down on it until 2035?

Yes. However, those types of products are only available via an IFA and it would likely be an unsuitable thing to do in this scenario.

If I start drawing down on it, will it be taxed at 40% or would it somehow magically get put in the 20% band?

you will be taxed at your marginal rate. However, it would likely be daft for you to do this.

I am presuming £180k is too big to move to another pension pot before 2028?

No. £180k is not particularly large and it is irrelevent to any decision on whether to transfer or not.

MallyGirl

I was more optimistic than you - my only personal (as opposed to workplace) pension had me retiring at 50. The stated retirement age serves no function unless you have a lifestyling product in place in which case it will be derisking too early as it stands

QrizB

However, Aviva have my retirement date as somewhen in 2028 - some SEVEN years before my current state retirement date

Just to emphasise what some previous replies have said - the simplest option (one requiring the minimum amount of effort on your part) is to contact Aviva and change their retirement date to match your current plans.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81957354#Comment_81957354

It does have one other function, in that they contact you about a year before and send you info about retirement options etc. ( which you can of course just ignore) .

OP - If you want to change it, you can usually do this on the providers website, presuming you have access.