Matured Pension: Take the money now or Re-invest ?

[Charlie1962]

Hello,

From a previous employment, I have a matured €600K DC Pension with Aviva. The fund matured (when I was 60) and has been frozen at 0% interest for almost 2 years (I only recently discovered this). Shortly, I will be 62 and am employed with a multinational and only started contributing 8% to their Mercer pension fund (to match company contribution). Salary €81K, Family just reared, spouse also working. I hope to retire in 3 more years once 65 or 66 latest.

Situation: Aviva will NOT re-invest the €600K Matured DC Pension fund so it now lies dormant there.
Last week, Aviva provided a number of Retirement Options, the 2 most applicable are as follows:

I need to decide on Option 1 or Option 2 below:

Option 1 Take €150K now ( 25% TFL) and the balance ~€450K goes to an ARF/Annuity.
* Since I'm currently employed, my marginal tax rate is 40%, so I assume I will have to pay 52% tax on the yearly benefit from the ARF/Annuity.
* Possibly not logical, but my reluctances to go with Option 1 are as follows:
1/ To avoid eating into the ARF/Annuity Fund before actual retirement ie: Preserve its Value / longevity by pushing it out till I retire in 3 more years.
2/ Avoid having to pay 52% TAX on the yearly benefit.
3/ Will need to find a home for €150K TFL .... of course a nice problem.
Note: Currently, I've recently started contributing 8% into my latest Pension Fund to match employers contribution..
However, with the extra income from the ARF/Annuity perhaps I should increase AVC contributions if Option 1 is the choice ?

Option 2. Transfer the entire AVIVA €600K fund to another Pension provider under the open market option.
* In this case, perhaps I should transfer the €600K AVIVA Fund to my current employers pension fund.
Mercer is the provider and will support this. From a fees/cost perspective, I assume this is the best ?
* This should bring a very low growth for €600K over the next 3 years (due to the very short timeline involved), until retirement at 65 but hopefully provide
some benefit rather than leaving it Frozen/Matured at 0% growth ?

I think Option 2 may be the best but would welcome your inputs as there must be some key facts / inputs i'm missing.

Thank you in advance for your inputs and corrections.

 

[LDFerguson]

From a fees/cost perspective, I assume this is the best ?

I'd ask Mercer for detail in writing as to what the charges are if you transfer your Aviva fund into the current employer's scheme. Any once-off charges? What ongoing charges?

I'd agree that "retiring" the Aviva fund now wouldn't be efficient use of the funds, based on what you've posted.

The other option would be to transfer the Aviva fund into a Buy-Out Bond. The charges might or might not be higher than the Mercer option. But it would give you the option to "retire" the fund at a different time to the current pension scheme, which might or might not be of use to you. Example - you retire at 65, claim the Benefit Payment at 65 and supplement it with the tax-free lump sum from the current pension scheme. Draw the Aviva pension down at a later time. You'd pay little Income Tax for a while. As I say, your specific circumstances might not suit this idea.

 

[Charlie1962]

Thanks Liam. As per your advice, I have followed up on charges and will come back once received. Also, Having the flexibility with a few funds and retiring them at different stages to minimise tax is something I totally overlooked and certainly is worth considering.