If you had enough, could you not bother with a pension & just live off savings instead? Is there a rule that you have to have a pension?

[Aop]

Totally ignorant here, that's why I'm asking. Like, lottery winners wouldn't need a pension would they?

@ArseInTheCoOpWindow obviously I don’t know your friend’s circumstances but sounds like she’s been terribly poorly advised to opt out of a final salary teachers pension. I’d be opting back in asap ☹️.

Yes she knew about it. But couldn’t afford it.

@Aop I think you can only have 25% tax free if you take it out in one go so you would have a hefty tax bill if you withdrew it all at once to buy a house.

@CanaryWharf2 @Testina
I remember something in the 90's/Y2k to do with Equitable life and Scottish Widows? A freind lost quite alot or the fund underperformed. I was glad I'd not invested as they had a good name & I was considering it to boost a final salary scheme I have.

I'm a bit confused about the maths here. You have 1.5 million. You take 500,000 and live on it. You buy a property to let with the 1 million. That's all the money gone. Where is the "another 500" and "the other half" coming from? Or are you hoping to make another 1 million from the buy to let income?

It’s not really like savings at all.

or if it is, it’s like savings where

• someone (your employer) matches what you put into your savings account
• where you’re not taxed on the gain on your savings or paying interest.
• and where growth is significantly higher than cash savings as typically invested for growth I. A wide ranging portfolio of equities, bonds & gilts

Equitable Life was 2000, they had paid out too much money, basically ran out of cash, tried to cut guaranteed bonuses to their pensions, went through courts, lost, couldn’t cover legal fees and bam.
It’s part of what to the PPF and raft of other pension legislation in 2005.

Sadly many people only have access to Defined Contribution pensions now. With these the money buys shares (simplistically) so there can’t be a black hole in what was promised - because is promised. They perform well or badly. Much simpler.

I think under performing your friend mentioned was probably related to mortgage endowment policies not specifically pensions.

It’s such a shame that many people are out off and don’t research pensions properly because people have mentioned these cases… when actually they’re most likely in an entirely different type of scheme, and they don’t know about the protective legislative changes.

@Testina I didn’t bother paying into a pension for years because I thought they were money pits. More fool me!

If you are not yet retired you can use this year’s and the last two years allowances now. If you are on a “normal” wage that means that you can take the entirety of the last three years earnings out of your savings and put it into your pension, getting the full tax benefits

If you really are super risk averse, I would have thought you would want to buy a guaranteed income for life.
As your funds are not in a pension you could buy a purchased life annuity, depending on your age a significant proportion would count as return of capital and would not be taxable.
investing in one property would be a huge risk.

@CanaryWharf2 Id love to do that but I have Long Covid - I’m unable to work and I need every penny to live on now.

With £1.5M floating around, it's probably worth talking to a financial planner/adviser.

Do you really want to be a landlord though and do the economics of a single £1M property stack up as an investment? I know that could be a middle of the road semi in an expensive area, but would it generate the rental income needed to cover tax, maintenance, letting agent fees and provide a good yield? What if prices went down, seeing as it sounds like you're relying on continued growth in value as part of your strategy?

In your position, I'd just make sure I had somewhere I liked to live that didn't need a lot of maintenance or heating etc and have the rest invested in a mix of cash/shares and bonds etc to provide an income and hopefully grow enough to match inflation or at least not run out in my lifetime.

Then I'd get on with enjoying spending it while I was still able to travel.

It’s the last 3 years, not 2. Which is good!
Caveat that you do need to have been in a pension scheme during any of the years you want to carry forward - even if you didn’t make any contributions. So you can’t suddenly decide to start a pension when you don’t already have one, and go back the 3 years.