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?

She is an ordinary working class person?

It’s not her making you feel like a mug, it’s the system. You’d be free to do the same, you’re choosing not to, which is absolutely your right. But it’s not like she’s the one making the rules.

What a terrible system.

OP, I think there are real risks with what you’re proposing- it relies on a) no change to the benefit rules and b) you not getting investigated for deprivation of assets. If you were to be investigated there’s a really good chance they would consider you to have deprived yourself (which is exactly what you are planning to do, to be fair).

A much safer approach would be just to draw down on your pension to pay your rent and council tax etc in early retirement and fund a decent (but not extravagant) lifestyle. After a few years the money will be gone, at which point you’ll be legitimately entitled to support. I know you find it annoying to have saved the money for it to go on things like rent and tax, but that’s completely normal- everyone has to pay for this stuff.

Bullshit. I'm not privileged but I would never do this, it's so unethical. I am a huge believer in the welfare state as a safety net, and have used it to claim job seekers when I lost my job 10 years ago. But I would never seek to engineer ways to get my hands on government money, especially not to fund my winter sun holidays, knowing it could be better used to support a disabled person or a looked after child or the NHS.

She going to run it down anyway isn’t she. Her savings would last me 4.5 years in rent and council tax. Let alone anything else I needed. Someone with a mortgage won’t (on the whole) have that ongoing financial cost in retirement. And someone with no savings, will have help to pay it. So she’s trapped in the middle

@AnneShirleyBlythe it's people like you who, while bleating about "benefits people" make a mockery of the whole thing. Because the system is predicated on people saving for themselves and where there is an exception to that and they could not or even were simply feckless, they are helped so they do not fall into absolute penury, because that is what a civilisation does.

And yet as soon as someone as seen as "getting it for nothing" all these terribly proud, hard-working people immediately get mad, seeing as it something they were entitled to and lost out on, so they should never have worked because they don't feel "incentivised." Why should you be incentivised to do the right thing? Why do you care how little Timmy standing next to you got his biscuit as long as you've got one as well? You want the system to be fair, and yet fail to see that it only CAN be fair as long as the majority accept they need to provide for themselves and we need fewer people to be provided for from the public purse - but instead they react with me too, gimme gimme gimme, they got it, not fair, where's mine.

Right, so she should spend it on cars and holidays. Makes total sense.

Well exactly, except @AnneShirleyBlythe is in the same position as the OP. They’ve both worked all their lives. We’re not even comparing workers and non workers.

True we’d all have more but many of us are not planning on reducing funds to be paid for by others

It’s entirely different. She’s considering doing this deliberately so she can absolve herself of taking responsibility for her bills.

Perhaps. But the outcome will be the same anyway. She doesn’t have enough money to sustain a life paying rent, with her amount of savings.

and actually if she doesn’t draw the full amount and takes it monthly, she’ll be entitled to housing benefit anyway. We’re talking about £6k a year (£500 a month) if she lives for 14 years past retirement, not millions.

someone who didn’t have rental costs, would be free to keep that money (and more) for themselves to live on (car, holiday, food etc)

Is this a wind up? What message does it send your DC? That it’s ok not to save for retirement cause the state will look after you? Well you are doing them a disservice, they won’t have the option of doing it because there will be no bloody money left. If you are going to give them a bit, ensure they stick it in their pension funds, maybe that will ease your conscience when you are sunning it up on one of your holidays.

OP’s proposal under the current system is perfectly rational - she is better off spunking away money before she qualifies for state pension. Not the same, BETTER off.

unless you are a v high earner, there is no incentive to work, save and maximise your income and financial security.

its why we’re fucked.

this

I’d be very wary of doing this, just because the current rules around benefits mean you’ll be entitled to housing benefit doesn’t mean it will stay that way. If Reform get in the benefits system could be completely overhauled, the thresholds for receiving benefits could change etc. You might find in seven years time you’re not entitled to what you would be entitled to in the same position today and therefore can’t retire when you expect to.

and actually if she doesn’t draw the full amount and takes it monthly, she’ll be entitled to housing benefit anyway. We’re talking about £6k a year (£500 a month) if she lives for 14 years past retirement, not millions.

@MyLuckyHelper I forgot to mention this last night and I’m glad you did - I think you the first person who has. It sounds perfectly fine to me, having two pensions and not paying rent, but I guess that’s not enough for OP and people like her.

Wait until a whole generation that expects to be life-long renters reach pension age. They won't be able to cover their rent with their pensions, nor will there be any assets to sell to cover care home fees.

So you can have a pension pot and, as long as you don’t touch it, you can claim UC and all the associated benefits? Am I reading that correctly?

Also you said your injury was two years ago? But doesn’t ESA only cover you for one year?

I would be very wary of making a choice like this in the current climate.

If Reform get in or even another Tory Government the rules around benefits could easily change and you might be wishing you had that extra bit of money coming in.
It's too risky a strategy I would say.

Have not rtft but I just want to say that, ethically, it’s not just spending your own money sooner, and then having to be supported. It’s also that the pension pot is 25% income tax that wasn’t paid by the OP on the basis that it was going to support her retirement. So that’s £21.5 k that is morally , if not legally, tax fraud

Exactly, yet another diabolical outcome of the housing crisis. Which is the biggest driver of poverty and benefit dependency in my view.

She’ll be taxed on it when she draws it

YABU your pension is meant to to be spent on lvingexpenses in reitement, it is not like ordinary savings.

Are you sure you’d get housing benefit and pension credit?
PIL only have 2 x state pension and a private pension of £30 a month, they rent a house at £500 a month and they are not entitled to housing benefit or any pension credit. I think they might get a small council tax credit. They and CAB have been through all the checks multiple times. We and BIL help with the rent, I personally wouldn’t risk it, rules can change especially if you are in your 50s and looking at living another 30 years. I would try to get more into my pension so I had enough longer term.

OP, I was kind of with you until you lambasted doctors and farmers.

A UK trained doctor is the best of the best of our youth. They are the A* genuises who eschew the opportunity to work in high finance, or take their skills abroad. We work them like donkeys, although they are champion race-horses. They save lives with their skill and hard work and it takes many years to approach a decent salary.

A farmer needs to pass on the whole farm to their children without inheritance tax, or its not a farm anymore. They work from dawn till dusk in a solitary job and never know if they will still have a farm the next year, as they are subject to the vagaries of weather, whatever the government will tax them, or the supermarkets will pay them. Just like the doctors, the pressure and long hours often causes mental health problems and high suicide rates.

You are not a doctor or farmer. You are simply a player, who wants to put her fellow taxpayer money into a thick gold chain and sovereign rings to drink beer on the beach. Don't try to dress it up. I know what you are and I am not like you.

OP it's your pension pot, meant to pay your bills in retirement. The figure you state might be minus a lump sum. You don't have to take a lump sum you could choose to boost your monthly income higher. You would get a state pension then this private pension on top. If you don't think it's high enough then pay in more. You still have 7 years before you retire. That is a long time to contribute plus you will have confounding interest so it could well be a lot higher by the time you are 67. Savings are completely different from pension. Have you considered there will likely be a different government by the time you retire. I think most likely Reform who might prioritise defence over benefits.