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Small pension - take the money and run?

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 Lankyman 10 Nov 2022

I have a very small work-related pension fund which seems to be plunging in value.  Since the end of 2021 its value has dropped by 7%. They're predicting it to fall further over the next few years. I haven't contributed anything to it since March. I'm wondering whether or not to cash it in, at least get a tiny bit of interest? BTW, it's not millions and any pension in a few years' time would be a pittance. I'm not convinced I'm going to live a long time either. Jam today?

 stubbed 10 Nov 2022
In reply to Lankyman:

Leave it - you won't have paid income tax on this money, and if you withdraw it you will need to. If you are not a higher rate tax payer it might only be 20% but you won't get more money out than is in it at the moment. All pension funds (more or less) have dropped in value over the last year, but it should be ok long term so I would leave it, or even pay more into it.

You might also have to fill in a tax return, which is a pain.

 neilh 10 Nov 2022
In reply to Lankyman:

Leave it,unless you are desperate for the cash..and I mean desperate.Sit on it a few years and it should bounce back.

I am assuming you cannot wrap it into another pension you have.

 ScraggyGoat 10 Nov 2022
In reply to neilh:

Depending on age their are implications to withdrawing. Best to do some research. From memory if young and not having contributed for very long you can cut and run. If older taking a chunk out then reduces the amount you are allowed to contribute into a pension per year tax free.  There may be other gotchas both in terms of fees and HMRC regs. HMRC website would be a good place to start researching.

Post edited at 12:11
 Toerag 10 Nov 2022
In reply to Lankyman:

If it's your only pension other than State pension leave it alone, or consider transferring it into a different provider who provides better performance more often.  If you have other pensions, then look to see where they're invested and look at the performances. If performance is similar and the investments are diverse keep it separate to retain that diversity.  If performance is worse and more often so, then transfer it into your other pension(s) to gain performance.

I assume it's not a defined benefit pension?

You need an incredibly pressing need to pull money out of a pension. I'd consider funding a good, well-researched business opportunity or funding a deposit for buying a house instead of renting to be about the only things suitable.

 Ridge 10 Nov 2022
In reply to Lankyman:

What everybody else said. Only do it if absolutely necessary.

OP Lankyman 10 Nov 2022
In reply to Lankyman:

Thanks all for responding. As ever, more research is required. Can anyone recommend a reputable crystal ball company?

 Rob Exile Ward 10 Nov 2022
In reply to Lankyman:

Yes - it's in the form of a small metal disk with King's head on one side. 

OP Lankyman 10 Nov 2022
In reply to Rob Exile Ward:

> Yes - it's in the form of a small metal disk with King's head on one side. 

I've got an older one of these! I'll give it a go.

 Rick Graham 10 Nov 2022
In reply to Lankyman:

Nothing to lose by getting your  free "pensionwise" appointment.

Look it up .

> Thanks all for responding. As ever, more research is required. Can anyone recommend a reputable crystal ball company?

 Moacs 10 Nov 2022
In reply to Lankyman:

> I have a very small work-related pension fund which seems to be plunging in value.  Since the end of 2021 its value has dropped by 7%.

Not unusual given the state of the markets in the past 12 months.

> They're predicting it to fall further over the next few years.

Then you should look for another company that manages defensive better, or switch to a diversified portfolio of trackers.  Extraordinary thing fo rthem to say!

> I haven't contributed anything to it since March.

Unless you genuinely can't afford it, I'm surprised that's the sensible option.  Does your employer contribute?  Have you an alternate retirement savings strategy?

> I'm wondering whether or not to cash it in, at least get a tiny bit of interest? BTW, it's not millions and any pension in a few years' time would be a pittance.

It'll be worth the value of the pot - you don't *have* to take an annuity

> I'm not convinced I'm going to live a long time either. Jam today?

Well, we're all dying, aren't we?  Unless you've got a life-limiting diagnosis, or have significant addiction to alcohol, drugs or food, (or cave dive or wing suit routinely at the weekends), I'd suggest a prudent approach to thinking about your future financial security.

Post edited at 15:11
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OP Lankyman 10 Nov 2022
In reply to Moacs:

All good points given enough time for things to pan out or improve. My dad died at the age I am now. I've not worked for months but am looking at applying again. I'm never going to build up a large fund before I completely wear out in a few years time. This little pension isn't ever going to contribute much except as another savings account. And it's not doing very well right now.

'Prudence' never was my big thing. Ever since I sold my house in my twenties to fund a year abroad.

Post edited at 17:24
 neilh 10 Nov 2022
In reply to Lankyman:

It will have done alright until about a year ago, so give it a couple of years and it will recover. Putting the money into an interest rate only account means it will never go back. So stick with it for a couple more yeears. 

 Fraser 10 Nov 2022
In reply to Lankyman:

I think the answer to your question actually all depends on how close you are to retiring. You should get a 25% tax-free lump sum if you take it out now but transfer values have generally dropped a lot since the end of last year. One of my pension's TV has dropped 40% since Dec. '21, so I'm not shifting that any time soon!

On the other hand, I think if you're planning on staying put, you'll need to wait longer than 2 years before thing start to improve. My own feeling is it's going to get very messy very quickly. Let's hope it doesn't but I'm fairly sure it will.

 neilh 10 Nov 2022
In reply to Fraser:

Small value will mean at a guess less than £30k pot and you can take that out all in one hit…..

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 Billhook 10 Nov 2022
In reply to Lankyman:

I cashed in a very small pension 15 years or more ago - before I retired - and used it to take Mrs  Billhook and myself off canoeing in The Barren Lands of Northern NWT.  

Never regretted it and probably something my wife would not be capable of now if we'd saved the money until we'd retired.

OP Lankyman 11 Nov 2022
In reply to Billhook:

> I cashed in a very small pension 15 years or more ago - before I retired - and used it to take Mrs  Billhook and myself off canoeing in The Barren Lands of Northern NWT.  

> Never regretted it and probably something my wife would not be capable of now if we'd saved the money until we'd retired.

Sounds similar to my experience. I did things earlier on in life that are beyond me now. My Dad died at 63 but he and Mum packed a lot into their time together. Thank goodness he didn't put it all off till he retired. 

 Forest Dump 11 Nov 2022
In reply to Lankyman:

My old man grafted til 67 and has been too sick to do much since

 Duncan Bourne 11 Nov 2022
In reply to Lankyman:

I had a similar thing, small pension not paid into for years. I contacted a financial advisor who advised the return on cashing it in would be small compared to letting it mature. When it did we sold it on to another provider and that somehow increased its value so it now pays me £80 a month.

 yorkshire_lad2 11 Nov 2022
In reply to Lankyman:

On one hand, pensions are a gamble on mortality (will you live long enough to receive it, will you be healthy and fit enough to enjoy it), and companies who provide pensions factor in that some people who pay in most of their working life will die before they get to receive it (as unpalatable as that seems).

On the other, there's an article in today's Chronic Investor (sorry, Investor's Chronicle) that might be useful

Mind the penalties if you withdraw from your pension early
https://www.investorschronicle.co.uk/ideas/2022/11/09/mind-the-penalties-if... (paywalled)
or via Google https://www.google.co.uk/search?q=%22mind+the+penalties+if+you+withdraw+fro...

YL (I have no connection with any pension organisation or financial advisor or the noted publication, but I'm not far off thinking what to do with my own pension!)

 Jim B 11 Nov 2022
In reply to Lankyman:

your investment may go up as well as plummet...

if you are not going live long it will not do you much good when your dead, if you can wait 7 years or so it might be on the upturn .... or people like Putin may still be messing things up

 Godwin 15 Nov 2022
In reply to Lankyman:

Book a free appointment with Pension Wise, it worth an hour, you can either do it face to face or on the phone.

I think a very important thing is Tax, may go on your tax return and you may end up paying tax on it at your basic rate. 

The trouble with pensions is there are a lot of be suited shysters about, who will happily take 1% of your pension or £x00 for their advice, when in reality they know jack shit., and do not care if you live or die, never mind if you lose all your money, so long as they get their 1%.

We still need to sort that walk, I will be busy until next April, but something I would enjoy.

1
In reply to Ridge:

> What everybody else said. Only do it if absolutely necessary.

To echo this and the general consensus, leave it. Pensions are long term bets and world troubles are affecting them all atm. We have to hope the world will be a better, greener pkace in the future and that pensions will respond accordingly.

If not, I'll draw mine out too and join you in the mother of all benders into oblivion.

 Michael Hood 15 Nov 2022
In reply to yorkshire_lad2:

> On one hand, pensions are a gamble on mortality (will you live long enough to receive it, will you be healthy and fit enough to enjoy it), and companies who provide pensions factor in that some people who pay in most of their working life will die before they get to receive it (as unpalatable as that seems).

My Dad (recently deceased) had a DB scheme paying out for 34 years so they definitely "lost" on him.

You're right about the gamble, defer a bit to get slightly higher pension, but will you live long enough so that it "overtakes" what you would have received without deferring - do you feel lucky, punk? (which is actually a misquote)

OP Lankyman 15 Nov 2022
In reply to Godwin:

> We still need to sort that walk, I will be busy until next April, but something I would enjoy.

But will I recognise you in your latest persona? I believe the 'Lancs' are having their annual Christmas flog over a rain-sodden moor in a few weeks time. I might see if I can get down and will probably need porters - fancy carrying my bag round? Then again, I may be sitting on the beach (Formby) enjoying my pension fund ....

 Mlewis 15 Nov 2022

I'm far from knowledgeable when it comes to investments and pensions. 

If it's a small sum and your not paying into it,  the annual fees may be eating into it. Could be worth transfering to another provider and putting it into a low risk investment or bonds if you plan to use it soon. 

*No idea if it's beneficial, talk to a advisor...

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/transfer-...


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