What will happen if I spend my savings?

Forgot to put I also realise I could use it all (or most of it) just paying my rent, but want to know what the best option is.

It completely depends upon what you spend and how.

So keep all receipts, new car, maintaining your home and bills are all permissible.

Long luxury holidays, designer clothes and giving it all away may be considered deprivation of income if and when you apply for any benefits.

As you’re renting contact your council when your overall savings are £16,000 or less and put in a claim for both housing benefit and council tax reduction.

Any savings or investments over £10,000 will affect the amount of Pension Credit you get. You’ll be treated as having £1 per week of income for every £500 above £10,000

This is on Citizens Advice website, may be worth a look. .

It seems you want to spend your money in order to get benefits?

Barleyfields

It seems you want to spend your money in order to get benefits?

I didn’t think this, I think with no income other than SP, this OP is worrying about what might happen if her money runs out!

Barleyfields

It seems you want to spend your money in order to get benefits?

That's not how I'm reading it.

She says it's in a "pension" pot. So it's "pension" and not "savings".

According to this …

Yes I think it will definitely be counted as savings, its not possible to get an "annuity" type income from it (special old employers' scheme).

So Barleyfields, I will have to spend it one way or another won't I? Such a silly answer you put just trying to cause an argument!

I'm trying to get opinions on best way to handle this. I'm the only one of my friends I know who has so little income at retirement and the only one who doesn't own any property outright. And the only one recently divorced, so I think I am entitled to be concerned and look into it.

This is an excellent question. TBH £45k isn't a great deal of money to top up State Pension payments (as the OP is 63 at the moment so a few more years before it kicks in), particularly if the OP is renting. I'd probably at least buy a reliable vehicle that will last a few years as replacement costs, even with pension credit, are going to be almost impossible to raise. Good luck.

Divorce settlement?

At 63 are you still working mrsnonsmoker?
Possibly not as you say ‘no other money’ but just checking as not 100% clear.

If you get the full state pension it’s unlikely that you would qualify for pension credit as your income would exceed, unless you have some kind of disability, if you get PIP etc.
I wouldn’t spend it on a new kitchen if I was renting.
Have you had a pension forecast from DWP? If you will get the full pension and therefore just be over the limit I would personally keep the savings as security for when you are older.
If you won’t qualify for full pension then I would buy what is reasonable e.g. a new car, new washing machine, cooker etc that you will probably need to replace within the next few years anyway. That is not deprivation of capital.
The first £10,000 of savings is ignored; then for every £1000 over that it will be taken into account as £2 per week income. So if you still have £12000 in savings, then £4 per week would be taken into account as extra income in addition to whatever state pension you will receive.
Sorry for the long rambling post!

I’m not trying to cause an argument mrsnonsmoker. I was referring to your words I will be renting into retirement and not really able to afford the rent, hence claiming pension credit is important. I’m not suggesting you shouldn’t spend anything, but the impression I had from your post was that you were looking for things to spend your pension pot on so as to get pension credit. As has been said, if you get the full new state pension you won’t qualify for pension credit, and if you have no other savings that pension pot is going to have to last for the rest of your life.

I don't understand this thing about pension pots and only having state pension. Surely the pension pots will give extra pension. It sounds as if she can only draw it out in lump sums.
The system really doesn't encourage one to save, does it.
Personally I would think about earning as much as I could until retiring and seeing if I could buy something somewhere.
Perhaps using those pension savings as a deposit.

could you use it to buy an over 55s retirement property? I live in a very expensive area and there are retirement properties for @60k that look like perfectly nice flats. It would at least solve the rent issue in the future?

You can spend the money on anything you like. It is up to the authorities to prove that the intention of any of the expenditure was to deprive yourself of assets in order to obtain benefits - and that is not easy to do, plus you would have a right of appeal.

So spend it as you wish.

Barleyfields

I’m not trying to cause an argument mrsnonsmoker. I was referring to your words I will be renting into retirement and not really able to afford the rent, hence claiming pension credit is important. I’m not suggesting you shouldn’t spend anything, but the impression I had from your post was that you were looking for things to spend your pension pot on so as to get pension credit. As has been said, if you get the full new state pension you won’t qualify for pension credit, and if you have no other savings that pension pot is going to have to last for the rest of your life.

You can apply for benefits if your state pension leaves you with too little income to live on. Renting on the state pension can leave many on the breadline.

If you have income or savings from an occupational pension, it's unlikely that you will be eligible for Pension Credit. However, the criteria for Housing Benefit is slightly different.

As a general rule, you're expected to live on the full amount of State Pension (either as State Pension or SP plus other income) PLUS housing costs ie rent and Council Tax.

So, as others have said, buy a reliable car and update appliances, so they last. Then your savings will be reduced. When you only have the allowed amount in savings, you will become eligible for Housing Benefit and something towards your Council Tax. You will also be eligible for help towards medical, dental and specs costs.

Sorry, I can't be more helpful because I don't know all your details (and I don't want to know), but your situation will be very similar to what mine is now.

Perhaps consider using the pension pot lump sum draws on a small flat. In Cambridgeshire there are many lovely small flats for less than £45k.

Add a wall bed (we've comfortable wall beds in our extra bedrooms yielding desk room for each of us) and gain floor space during awake hours.

Norah

Perhaps consider using the pension pot lump sum draws on a small flat. In Cambridgeshire there are many lovely small flats for less than £45k.

Add a wall bed (we've comfortable wall beds in our extra bedrooms yielding desk room for each of us) and gain floor space during awake hours.

Are you sure? I live just south of Cambridgeshire. My partner and I were looking for somewhere to live in the area last year. Admittedly, we wanted a house, but most were expensive compared with national average.

I've just looked on Rightmove. The cheapest I could find was an over 55s apartment for £85,000. The annual maintenance charge is £3524.2, which the OP would probably struggle to pay.

is that the catch then of these retirement properties, the maintenance charges?

JaneJudge

is that the catch then of these retirement properties, the maintenance charges?

Yes, that is why the market rate is so much lower than non retirement properties. Where and what on earth can you buy for £45k in Cambridgeshire Norah? Not even a holiday park caravan as far as I can see!

Sorry, not relevant to post, just curious

JaneJudge

is that the catch then of these retirement properties, the maintenance charges?

Service charges and the value when you sell the flat/apartment. The company will have rules who can buy it.