Low risk choices for short term pension?

i8change · 23 May 2018 at 5:10PM

I would be grateful for any advice on the best choices to secure a small pension pot for the short term.

I have paid off my mortgage and will receive small, safe-ish (BT and Civil service) "final salary" pensions in a couple of years when I am 60. Just enough to get by on.

My wife's job has a "money purchase" Aviva run pension where she puts the max allowed 8% of her 30k salary in and they put in an additional 10% and she has had it for a couple of years.

The pension pot will be small as she may take the pension in three years at 56, but she may work till 60yrs. at the most.

As we can cash this small pension pot in fairly soon we are looking to use it as more like savings as our contribution is more than doubled by the employers 10% contribution and we will not be looking to buy an annuity with it as we have my pension.

As it is probably not worth paying for professional advice for such a small amount I was wondering what would be the best portfolio choices to secure the pot in the short term, till we take it?
My choices seem to be:-

let Aviva manage it in a low risk close to retirement fund.
Choose to manage it ourselves and put it in a mix of UK Gilts, Cash etc.

With equities at an all time high and another recession likely in the near term I was thinking of short term Gilts/Cash but if I understand it right gilts are vulnerable to interest rate increases and they are at an all time low!

We are so close to accessing it I would probably just put it in NS&I if I could but have only the choices the pension/Aviva allow.

Many thanks for any replies.

dunstonh · 23 May 2018 at 5:20PM

My wife's job has a "money purchase" Aviva run pension where she puts the max allowed 8% of her 30k salary in and they put in an additional 10% and she has had it for a couple of years.

Most money purchase schemes will go to 100% as a maximum. Although will be reduced if its a salary sacrifice scheme. Its probably just a maximum to get the increased employer contribution.

As we can cash this small pension pot in fairly soon we are looking to use it as more like savings as our contribution is more than doubled by the employers 10% contribution and we will not be looking to buy an annuity with it as we have my pension.

It may be more tax efficient for her to keep that pension and draw on it when required rather than take it out early. You both have a personal allowance in retirement. So, you should aim to utilise both of those rather than have it lopsided in one name.

There are also death benefits to consider. If she gets 50% of your pension then having her own pension makes sense.

With equities at an all time high and another recession likely in the near term I was thinking of short term Gilts/Cash but if I understand it right gilts are vulnerable to interest rate increases and they are at an all time low!

Recessions and stockmarket performance are not linked.

We are so close to accessing it I would probably just put it in NS&I if I could but have only the choices the pension/Aviva allow.

Why do you want to access it? What are you going to do with that money? Taking it out the pension and putting it into other savings is usually a bad thing to do.

i8change · 23 May 2018 at 5:47PM

Thanks for the reply dunstonh

We intend to get by on my pension and use this as some cash for some travel whilst we are still young/healthy.

We did not want to put more in, just the 8% to get full use of their 10% max employer contribution.

I was really just looking to secure it for the short term with it in mind that (although nobody really knows) expectations are that equities may go lower in the short term.

If they did and the wife worked till 60 I would consider moving the pot back to equities.

Thrugelmir · 23 May 2018 at 5:54PM

i8change wrote: »

If they did and the wife worked till 60 I would consider moving the pot back to equities.

Because you can buy something "cheap" doesn't mean it offers good value.

Low risk choices for short term pension?

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