Renting into retirement - WIBU to spend my pension pot before age 67?

[Artricha]

I am a housing association tenant and I'm 60 years old. I have a pension pot of £86000. According to best forecasts it would pay out an annuity of £6000 a year which wouldn't even cover my rent. I would then have to pay the remainder of my rent plus council tax from my state pension plus all my living expenses. I have looked into part ownership but that's even worse as the leasehold charges plus rent are around £800 a month.

If I have only £16000 at the point I claim state pension, I will be able to claim housing benefit and council tax benefit too. Day to day living expenses wise I will be no worse off under this scenario. Possibly even better off as there are other benefits that housing benefit is a passport to.

Plus, if I took the money now, I'd quite like to cut down on work over the next few years, give a bit of money to my kids (after all, there won't be anything much to inherit when I die), have a few nice sun holidays in winter, get a decent car, kit my kitchen out with white goods that will last me.

Running down money before retirement is the opposite of what we're told to do, so it feels weird. But I think in my circumstances it's sensible. AIBU?

Yes! What was all that kerfuffle with the doctors recently? "Oh no, I've got a £1 million pension with monthly payments so good it's the same as £2 million so I have to pay more tax than I would rather" - and so they bloody changed the law for them. Landowners calling themselves farmers sat on estates worth millions "oh no, I couldn't possibly pay inheritance tax like the little people do" and then the government backs down. Really it's ridiculous, the shenanigans that go on with people who have absolutely loads of money.

So you're basically trying to work out the best way to deliberately deprive yourself of assets in order to sponge off the tax payer? Fucking hell. Really hope this is just a benefits bashing thread rather than real.

I'm not on benefits. Hence having a pension.

So tax payers have to foot the bill for your housing benefit and council tax because you couldn’t plan properly.

And they think tax payers look on them fondly. We don’t.

@nomas Au contraire. I think I am actually planning quite well.

Op states they will get an annuity so
must be a pension.

But your pension is meant to support you in retirement, replacing income from working. So yeah, why not pay towards all these boring essentials like housing, food and getting your bin emptied.

I fully understand your thinking, but if people continue to take advantage like this, there won't be any benefits in the future

I guess when they start really having to scale back the benefits because the pot is empty ( as there's now so few people actually paying tax), they will have to change the minimum age that these pensions can be taken, maybe in line with state pension age. It has recently changed from 55 to 57. Not really sure why they have made it compulsory to pay into pension schemes if they aren't going to stipulate that people need to use it for their later years. It kind of defeats the object really.

I would do as you have suggested OP, enjoy your money while you can.

Frankly this is a good example of what this country faces in the very near future. People think the benefits bill is big now, you ain’t seen nothing yet. Thousands of people on benefits, many (unlike the OP) have never worked getting housed and spends and all the other associated benefits, whilst those who have tried hard to take care of themselves worse off. It needs to stop and quickly because Johnie Taxpayer is over funding others lifestyles. I don’t blame the OP at all, this is the system and as mumsnetters love to say ‘work out what you’re entitled to’.

So the rest of us have to pay extra for you because you want to exploit this loophole and spend more money before you retire on niceties for you and your family?

YABVU. My moral conscience would never let me do this and sleep well at night.

You really don’t get it do you.

I don't think it's wise to spend it frivolously or give it away to kids, you may need it and rules around benefits could change. God, even some gold in a safety deposit box is safer for you than giving it away to your kids.

Have you thought about the opposite?

Massively start contributing to your pension. And apply for UC.

Pension contributions don’t count as income, and pension doesn’t count as capital.

You have nearly 10 years. That could double your pot and then you would be in a better place.

Yes. I had two long interviews, the second with years' worth of receipts, after I went bust. It was years ago now but I have recently checked the rules and they're the same.

I'm not sure you can take your entire pension pot in one lump sum tax free ? Think you can only take a % tax free each year ?

It's up to you of course but I don't like the idea of taking out your pension money and giving it away to help your children with their bills, cars etc so that it becomes lost in general living costs and then it's all gone. The pension is a good solid basis for paying the rent (most of, anyway) and I expect will increase over coming years. At least try to think more widely than just these two stark alternatives you mention. Do you have any savings and could you buy some white goods or have a holiday out of earnings while you are still working?

As you can't do the part purchase scheme on your own could you pool resources with one or more of your children so you could do a joint purchase of a flat or house? (Retirement income can be taken into account for mortgages.) Or rent together? Do you have a spare bedroom where you could have the occasional student or Mon-Fri weekly lodger to stay?

You may have skills or interests that you could use to supplement your pensions income, with some occasional part-time light work, whether that would be teaching something or making and selling things or baby sitting or dog walking or cat sitting or collecting children from school until the parents get home, doing errands or small jobs for older people, or answering the phone for a local business or doctor or sports club when regular staff are on holidays or the occasional weekend.

The OPs scenario is similar to that of a person with a modest occupational pension and finds tht they have a few £ too much for any state help. But their neighbour who never saved a penny in their lives and pissed their wages up the wall gets pension credit which acts as a passport to other benefits. The system tself is deeply unfair and flawed. There is no incentive to act in a moral way. So people do what they must to look after themselves. This is one of the reasons why people retire or cut down their hours and take cash in hand side hustles. They are not aiming to grow rich, simply to look after their own interests. I dont judge the OP for seeking the best deal for herself. But I wouldnt come on a public forum and talk about it.

This is the position my mum is in. She took the 25% and used it to help me, but the rest gives her less than £500 a month, all of which goes on her rent as her Housing Benefit is reduced by £1 for every £1 pension she gets. She’s in London so she still gets HB, as her rent isn’t higher than the pension despite being in a council flat. It means that after working since she was 16, full time except when I was wee, she is worse off financially than her neighbours who never worked, as they get Pension Credit, so extra things like winter fuel allowance, free and discounted events etc.
The issue regarding pension credit, and pensions, for people renting definitely needs to be reviewed. Pension credit is for the poorest supposedly, but people like mum fall between two positions that mean they end up worse off than everyone.

Why not buy a flat, op? Or take out 25% as a deposit, and get a mortgage (pension is treated as a passive income source).Or you could just use your pension to live on, like most people, and supplement it with some paid work.

As a PP pointed out, morals and legality aside, I really wouldn't like to assume that the benefits system will stay at its current level. This feels like a particularly precarious time in the world, and if things get bad, the government's safety net may not be there to support you to the degree that you're anticipating. It's one thing if you end up in that situation due to circumstances beyond your control, but I can't imagine the kick I'd give myself if it happened after I'd made a conscious decision to pursue that path.

This post is giving me rage. Taking annual holidays and giving money away so you can rely on benefits. No wonder England is becoming an absolute basket case of a country.

I'm claiming UC and working 22 hours a week (I have psychosis that's being treated) and get a top up of UC of £540 on my earnings as doing more hours is where things can go wrong in terms of relapse. Every day I will see/hear something about me being a scrounger, that I am a skiver not a striver, that I'm endangering the country's security by being on benefits because we can't afford war.
Then I hear about our "struggling" pensioners. This lady's example isn't the exception, I'd say this reflects the financial reality of 60% of UK pensioners. I get scared to put my heating on as my budget is £70 pm and use it sparingly. This lady got a winter fuel payment which by her own admission she plans to use for holidays, funsies and family

I am fed up with this 'take take take' mentality. If everyone follows this lady's example, what will be left? I try and contribute what I can through taxation and consciously think about how my UC affects others (i.e. other people go to work to give me a UC top up).

Most 30 year olds don't know they aren't getting a state pension yet. The ones who have realised are livid about being screwed over so badly.

In your shoes I'd be investing that money in a more secure and low-cost future for myself rather than giving it away or spending it on extravagant holidays.

-Buy an electric car
-Upgrade heating and appliances to the most energy efficient
-Do any other home improvements needed to make it accessible, safe, warm and low maintenance so you can stay in it as long as possible
-Private treatment for any preventative health and dental issues