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Pensions & benefits advice

Is this a stupid idea?!!!

(32 Posts)
Scentia Fri 06-May-22 18:51:35

I am at an age (55) where I can draw down my private pension if I want. It is only worth 32k at the moment but I know if I leave it in there it will be a lot lower than that due to the global financial situation.
I am considering drawing it all out, not just the tax free 25% (which was my first idea) my DH has a much better pension and I feel that we can do some great things with this 32k (less tax) whilst we are fit and well. DH had a heart attack 10 weeks ago and I seem to have a very different outlook since then. Just don’t know if it is a totally silly idea. WWYD???

timetogo2016 Fri 06-May-22 18:59:04

Me............. i would take Dh on a long cruise,that will give you both time to really think about the money you have.
And i would probably enjoy every day as if it was my last,i pretty much do that anyway tbh scentia.
I hope your Dh makes a full and fast recovery.

Redhead56 Fri 06-May-22 22:35:44

I agree make the most of life now while you can plan how you will manage your money. Hope your husband makes a full recovery.

ShropshireMiss Fri 06-May-22 22:42:04

About it being a lot lower if you leave it there, who knows, in ten years time it might have doubled in value.

Honeysuckleberries Fri 06-May-22 22:53:10

I think you might still be in a state of shock over your husband’s heart attack and not really thinking straight yet. I hope that doesn’t sound patronising but I wouldn’t make any large financial decisions for a while yet. It doesn’t have to be all or nothing financially. Why don’t you take a little bit at a time because once it’s gone it’s gone. You might look back in a few years (you are still young) and think oh if only I had a few thousand to spend now.
Perhaps just taking out the tax free sum would give you fun times at the moment, after all who wants to pay more tax than they have to.
I wish your husband a continued good recovery and some peace of mind for you.

ShropshireMiss Fri 06-May-22 23:00:39

You could take it out in chunks, for each chunk 25% would be tax free and 75% taxable.

Marydoll Fri 06-May-22 23:19:56

I have friends, who tried to persuade me to take my pension early, as they did. They are regretting it now.
Experiencing trauma like a partner having a heart attack, does change our perspective. I know, I had two heart attacks, hadn't a clue there was anything wrong with my heart.
It took some time to come to terms with it. My cardiac rehab included psychological counselling, which I initially refused, saying I was OK. However, I wasn't and benefitted greatly from it in the end. I would hope your husband was offered the same.

However, I wouldn't rush into, but would take time to think about the implications. It's only ten weeks since the heart attack and in my opinion, too soon to make a huge decision like this.
I did eventually go down the route of draw down, but used a financial advisor, as the process wasn't as easy as I had anticipated and HMRC made a mess of the tax.

I hope you can come to the right decision.

Germanshepherdsmum Sat 07-May-22 09:17:52

I don’t want to sound morbid, but if your husband were to die what would your income be? Do his pensions include a widow’s benefit and if so how much? It will be many years before you get the state pension so you really need to think this through. I realise that your pension pot is very small but it could easily increase substantially over the years.

Smileless2012 Sat 07-May-22 09:25:44

The first time you access funds from a private pension is the only time you get 25% tax free. If you just take 25%, the remainder will be subject to tax whether you take it as a lump or in smaller amounts.

If it were me, I'd take the 25% tax free for now Scentia.

Smileless2012 Sat 07-May-22 09:26:35

as a lump sum

ShropshireMiss Sat 07-May-22 09:35:50

Rather than take the whole 25% tax free lump sum in one go you can now take out a number of smaller lump sums. If you do it that way for each small lump sum 25% will be tax free and 75% will be taxed as earnings.

midgey Sat 07-May-22 09:56:41

Have to say I think you would be nuts! You have no idea what’s around the corner, while heart attacks are serious they don’t need you to throw all plans in the air. I had a heart attack twenty years ago. Then I got an amazing job that I really loved.
Serious illness concentrates the mind, try going part time, don’t take your pension out. If there is a recession as many think there might be you will be very relieved to have a full pension in the pot.

MargotLedbetter Sat 07-May-22 10:11:01

Scentia

I am at an age (55) where I can draw down my private pension if I want. It is only worth 32k at the moment but I know if I leave it in there it will be a lot lower than that due to the global financial situation.
I am considering drawing it all out, not just the tax free 25% (which was my first idea) my DH has a much better pension and I feel that we can do some great things with this 32k (less tax) whilst we are fit and well. DH had a heart attack 10 weeks ago and I seem to have a very different outlook since then. Just don’t know if it is a totally silly idea. WWYD???

Your pension fund doesn't stay static. The money is being managed and invested. If you leave it it will grow. I have a fund that in 2020 grew by 20%, despite Covid. Now, of course, we're about to go into a major recession with high inflation so there's no saying what the situation will be in a few years. But I just wanted you to know that in the 12 years you (technically) have left to work, it could increase considerably.

Given your husband's circumstances I can totally understand your desire to celebrate life while you can, but like another poster I suggest that you don't take what might be seen as a major life decision while you're still in shock at his brush with mortality. Sit down with your husband and take a firm look at your finances, calculate your state and private pensions and see where you stand. I hope a long cruise still looks like a good idea once you've worked out the sums.

GrannyGravy13 Sat 07-May-22 10:14:42

I would take the 25% tax free, and leave the remainder for my retirement.

ShropshireMiss Sat 07-May-22 10:15:58

After the 2008 financial crash my investments in 2009 were worth half of what they had been in 2007, but by 2015 they were worth double what they had been in 2007.

Germanshepherdsmum Sat 07-May-22 10:19:08

Taking 25% out of a very small pot would significantly diminish your retirement income.

Maggiemaybe Sat 07-May-22 11:11:47

GrannyGravy13

I would take the 25% tax free, and leave the remainder for my retirement.

It’s not as simple as that, GG13. If the OP takes 25% of the pot now, ie £8k, only £2k of that would be tax free and tax would be payable on the other £6k.

Smileless2012 Sat 07-May-22 11:46:39

confused of the OP takes 25% of the total of her pension pot which equates to £8K then there is no tax to pay on the £8k.

rockgran Sat 07-May-22 11:58:08

We retired as early as possible - did the sums and agreed to live on beans if necessary but got on with our plans to travel. I have never regretted it. We are both now much less mobile and happy to stay at home most of the time but we have very happy memories and no unticked destinations. Also it is surprising how far the money goes when you do not have to factor in the expenses of working.

ShropshireMiss Sat 07-May-22 12:10:49

I suppose when you do eventually start taking it, whether now or later, it will be some form of drawdown, as £32,000 would probably only buy an annuity of around £1,000 a year, depending on whether or not it was index linked.

ShropshireMiss Sat 07-May-22 12:18:42

Perhaps £1000 is a slight underestimate for an annuity on £32,000,, but if it was index linked to inflation and able to be passed onto your husband if you died first, then it wouldn’t be much more than £1000. Of course left invested for ten more years, who knows, it could double in value.

kittylester Sat 07-May-22 13:09:20

I agree with smileless.

Am I correct in thinking that you can take 25% in each financial year?

GrannyGravy13 Sat 07-May-22 13:11:26

I have just taken 25% of a pension pot no tax liability.

ShropshireMiss Sat 07-May-22 13:32:42

The are at least two different ways of doing it:
1. Take the whole 25% tax free amount in one go. Doing this would limit to annual amount you could pay into any future pensions. The remaining 75% would be taxed as income, whether you took it at the same time or took it out in bits and bobs over the years. One danger of taking all 100% of the pension at once is you could get pushed into the higher tax band depending on how much other income you have in that tax year.
2. Instead of taking the 25% tax free lump sum, you take smaller lump sums. So for each smaller lump sum 25% is tax free and 75% as taxable income, and that could be done for any number of years.

Smileless2012 Sat 07-May-22 14:10:35

You only get one bite of the cherry so to speak Kittylester so as far as I know you can take 25% in one go tax free.