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?

I think it's interesting that OP hasn't responded to anyone questioning the morality of her scheme, which implies that she actually doesn't care about whether it's ethical, and is just looking for validation to go ahead with it anyway.

Whilst I do agree with OP about the loopholes the rich can get away with and people like Clarkson and his ilk buying farms for tax benefits, the problem is that the care and benefit system is already in a mess. People are living longer, and their retirements will need to be funded one way or another, whether by themselves or by the state. We will get to the point where there simply isn't the money to do that, especially if we have lots of people purposely depriving themselves of any assets and claiming support from the state. It's likely there will have to be a huge overhaul of the system anyway soon, for it to be sustainable.

OP, what will you do if you do deprive yourself of your assets, and either the system is then overhauled, or your case is investigated and you're found to have deprived yourself of your assets? How will you live? Will your children take you in? Or will you carry on working as long as you can?

Once you turn 67 UC benefits stop. You can no longer claim them instead it's pension credit which basically tops single people up to full state pension level. You can claim council tax reduction if living alone at any age.

Pension pots don't usually count as "savings" when it comes to things like benefits entitlement. so the 16K rule probably doesnt apply here in the way it would if you had £86K in the bank. I'd get some proper financial advice before you do something rash!

So we've got the millenniums and generation Z who have figured out how to claim benefits because they don't see why they should support themselves.

And now we are going to have generation X coming into the mix. Great....what has happened to pride! If you were my friend OP, I'd want nothing more to do with you with that attitude.

Luckily DWP can use this thread as proof that OP has of an intention to deprive herself of assets. That would be karma!

This. A future government could make changes so what you are expecting is significantly altered. The right to housing benefit/rules around secure tenancy could change, the way they assess deprivation of assets could change etc you might wish you had the £6k a year.
Have you looked at how much your pot might grow in the next few years if you waited until state retirement age to start spending? You’d also quite possibly have more to give your children if you kept the pension pot.

@ lucky manifestations, you clearly have a disability so fair enough to claim UC. Once you reach 67 UC stops so then you start claiming your pension along with state pension. You should still get pip. That is different to what OP is wanting to do.

Sure, OP, splash the cash. Great idea. We're all happy to pay additional tax to support you once your savings are gone !

NOT

Have they challenged this with the DWP or their local authority? Because that doesn’t sound right at all about them not being entitled to HB.

https://www.ageuk.org.uk/information-advice/money-legal/benefits-entitlements/housing-benefit/

This does raise the question of how retirement will be funded for the ticking time bomb of basically anyone born after the boomers who didn't manage to get on the housing ladder or save into a private pension. We will run out of other people's money one day. Already are.

I foresee a return to large 1970s style halls of residence esque buildings where you'll get a room on a corridor and 3 cheap meals in a communal canteen. It won't be prison, you'll be able to leave whenever you like, but you won't be able to do much on the limited pocket money the state gives you. Grim. Is that what you want, OP?

This. If you rely on benefits you’re living a life which is vulnerable to the whims of the government, whichever political party happens to be in power at any moment in time. And we all know the country is on its knees, the money’s run out and who knows what could happen in the future.

not a way any sane person would want to exist

So apparently it’s perfectly fine to claim benefits on a 35k+ salary because, of course, pets and other essential expenses must be maintained—but OP is the villain here?
Sure. Makes total sense.
Go for it, OP. The hypocrisy here is truly impressive.

The Welfare state might not be so generous in seven years time - you might regret spending all your money

So it’s perfectly fine to claim UC when you’re on 35k+ and living without any expense restrictions, but someone who’s saved all her life and avoided spending an extra penny is expected to just keep living in poverty?
Right. That seems fair. NOT

Pension pots are not worth anywhere near what they forecast, and will be means tested on all benefits. Take it out and pay off debts is my advice. If you’ve worked all your life then you’re entitled to full pension, but your pension will be taken into account so pension credit, which is what everyone gets to top up basic pension whether worked or not will be capped.

People on that salary aren’t entitled to UC, generally speaking.

The OPs pension plus the state pension will be enough to pay rent and living expenses. She thinks apparently the state should cover all her living expenses and her private pension should be for holidays amd consumer goods.

Your pension pot won’t count as “savings”, you would be taxed on the income from it, as you would any other income. (To clarify, in the U.K.) You could take a lump sum out now, of £20,000 to have a holiday/ buy a car, leaving you with £66,000. By the time you reach 67, the pot should be around £72,000 again. You could then draw down on the pension to the tune of around 4%/ year without depleting it, giving you an additional £3/ year, which isn’t much, but would help top your state pension and is unlikely to see you lose that much in state benefits, and you’d have something to leave your children in the future, if you choose to.
If you use ChatGPT ask them. Honestly, it’s really good for initial advice and can be confirmed with a financial advisor once you have a basic plan. I wouldn’t advise blowing it all without getting some advice.

There are two kinds of people:
those on high salaries who enjoy life and spend every penny (because, obviously, you need money to enjoy life),
and those on lower incomes who live modestly, don’t enjoy much, and save what little they can.
I think OP falls into the second category. Let her enjoy her life now—she hasn’t done anything wrong.
This thread honestly just reminds me that maybe I shouldn’t bother saving at all. Maybe I should work less, get a new phone (since my current one is a 10-year-old second-hand overheating mess), and replace my car because it’s basically falling apart.
And yes, I can afford it—not because I earn a lot (my salary is barely above minimum), but because I budget carefully and spend wisely. After all, I never wasted what we earned.

I do sympathise to an extent with the OP although not her tacky, selfish plan. Many of her generation have just never had a chance to access luxury that we saw (some) boomers taking as their right. Big houses, long holidays, second properties, decades long retirements with travel and no money worries - for many it’s been one economic shock after another and no chance to save or invest, leaving aside the free money that used to be available: right to buy, final salary pensions, share gains from privatization etc. it’s all gone all pissed up the wall on other people’s nasty tacky hot holidays and so on. If you’re a woman who started work in, say, 1995 your career was dogged by blatant sexism and inequality tjat is hard to imagine now, which compounds if / when you have children. I think the op’s plan is a scumbag plan. But it’s not our fault our retirements are going to be shit

Actually, there have been plenty of threads where people on even higher salaries can legally claim UC, and no one blames them—because apparently the problem is the system, not the people.
But when it’s OP, suddenly it’s a moral issue?

Money gurus warned about this situation when autoenrolment was first implemented and more and more people will do this as buying a home is out of reach for many.

Whilst in principle I disagree, I also do not blame OP as providing she ia correct about what she'll receive in housing benefit if she has an annuity, it seems to be her best financial option - this is the government's failing.

There are plenty of posters on here who lob cash into pensions so they qualify for child benefit and 30 hours childcare..

Atm my db is pissed that our ds who receives UC gets housing benefit, he thinks she's a scrounger but in 20 years time her LA pension will pay out and it will impact her entitlement to benefits. Dbro on the other hand isn't paying into a pension as he can't afford it (he co-parents, privately rents a 2 bed in SE) but will be entitled to housing benefit as he'll only have state pension.

She will have to pay tax on any income she withdraws from it. If she takes it out all at once then she will pay tax on 75% of it. In which case that will probably put her in a Higher rate tax band anyway - so she would in effect be paying more tax.

She's not talking about actual farmers, she's talking about landowners who appropriate the struggles farmers have as a way to argue they need to pay less tax. Clarkson is one, as is Lloyd-Webber.

And what the fuck is that gold chain and sovereign ring patter?

As a millennial I can tell you few people are actually doing this because, if nothing else, housing benefit won't cover your rent if you have a private landlord. The rates LAs set have little resemblance to 'market rate'.