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    • Bytor
    • By Bytor 16th Apr 18, 11:36 AM
    • 2Posts
    • 0Thanks
    Bytor
    Small pension fund - what options
    • #1
    • 16th Apr 18, 11:36 AM
    Small pension fund - what options 16th Apr 18 at 11:36 AM
    I have a small Pru AVC pension valued at just under 14k. I thought that at the age of 55 I could get 25% tax free. However having spoken to the PRU they say that as the value is below 25K this is not possible, and I would have to take the pension now (I am 57) - that means access the 25% tax free and take the rest as a regular pension.

    Firstly is this correct as I cant find any reference to it anywhere.

    Secondly, what are the implications of taking the pension now. I am still working and I know this will be taxed at my current rate. I expect to work for at least another 5 years or so.

    My retirement plans are more based on the NHS final salary scheme rather than this smaller fund. The valuation projections going forward do not seem to be increasing the value dramatically. Its a small fund I started many years ago and stopped contributing many years ago, once I moved companies and ended up at the NHS.

    Rest assured I am not seeking financial advice, just some facts so I can make an informed decision.

    Thank you in advance for any inputs
Page 1
    • zolablue25
    • By zolablue25 16th Apr 18, 12:01 PM
    • 1,584 Posts
    • 469 Thanks
    zolablue25
    • #2
    • 16th Apr 18, 12:01 PM
    • #2
    • 16th Apr 18, 12:01 PM
    I don't know whether it is correct or not but I have received notification from one of my pension funds of something similar. I can either take a lump sum now (its less than 25% though) at 52 and the rest as an annuity or take it at 60.

    What I've decided to do is take it now and up my pension contributions to a SIPP by the same amount as the annuity payments. That way I will be, pretty much, tax neutral on the extra income.

    I will use the lump sum (approx 6K) to pay the maximum amount for this year and next year into a pension for my wife (a non-earner)
    • Dox
    • By Dox 16th Apr 18, 1:25 PM
    • 861 Posts
    • 650 Thanks
    Dox
    • #3
    • 16th Apr 18, 1:25 PM
    • #3
    • 16th Apr 18, 1:25 PM
    I have a small Pru AVC pension valued at just under 14k. I thought that at the age of 55 I could get 25% tax free. However having spoken to the PRU they say that as the value is below 25K this is not possible, and I would have to take the pension now (I am 57) - that means access the 25% tax free and take the rest as a regular pension.

    Firstly is this correct as I cant find any reference to it anywhere.
    Originally posted by Bytor
    Ask the Pru to explain exactly why this is the case - preferably in writing. Just saying 'because it's below 25K' is meaningless.
    • dunstonh
    • By dunstonh 16th Apr 18, 1:51 PM
    • 93,992 Posts
    • 61,802 Thanks
    dunstonh
    • #4
    • 16th Apr 18, 1:51 PM
    • #4
    • 16th Apr 18, 1:51 PM
    I thought that at the age of 55 I could get 25% tax free. However having spoken to the PRU they say that as the value is below 25K this is not possible, and I would have to take the pension now (I am 57) - that means access the 25% tax free and take the rest as a regular pension.

    Firstly is this correct as I cant find any reference to it anywhere.
    it is correct and not correct at the same time.

    The transaction you want requires is called drawdown. This is a feature supported on more modern plans or more advanced plans. Rarely is supported on AVCs. So, they cant do it on your existing plan.

    This would mean transferring it to a new plan. However, Pru's in house salesforce wont do small value plans. So, they are saying "they" cannot do it. Not that you cannot do it. All they can do is fully commence the plan under an annuity and tax free cash.

    They are only telling you what they can do. Not what you can do on the marketplace. So, you can do what you want but you need to transfer to a plan that does it.

    The valuation projections going forward do not seem to be increasing the value dramatically. Its a small fund I started many years ago and stopped contributing many years ago, once I moved companies and ended up at the NHS.
    Most Pru AVCs are invested in their With Profits fund and does around 5% a year. It is not meant to be dramatic. Its meant to be stable and steady above a building society but below fully invested in the stockmarket. If 5% or so is not good enough for you, where are you going to put that money instead? Maybe not taking the 25% but investing it differently whilst keeping it in the pension wrapper may be better.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Bytor
    • By Bytor 16th Apr 18, 2:10 PM
    • 2 Posts
    • 0 Thanks
    Bytor
    • #5
    • 16th Apr 18, 2:10 PM
    • #5
    • 16th Apr 18, 2:10 PM
    Thank you everyone - really helpful and explains the situation clearer.- I had not appreciated the issue of PRU's internal policies/processes which I can understand.

    I did take a draw-down facility a couple of years ago on a slightly larger PRU pension fund and they were able to do it in house. With the greatest of respect the value of this pot is not crucial to my retirement plans and the usefulness of the 25% now is more beneficial at this moment - i can consider the options more rationally now.
    • xylophone
    • By xylophone 16th Apr 18, 5:13 PM
    • 26,139 Posts
    • 15,496 Thanks
    xylophone
    • #6
    • 16th Apr 18, 5:13 PM
    • #6
    • 16th Apr 18, 5:13 PM
    Transfer to a SIPP?

    http://www.hl.co.uk/pensions/sipp might suit.
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