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?

But on the whole they would have children and / or health conditions or disabilities, which you omitted in your post. Therefore they are entitled to those benefits. Unlike OP who is planning on leeching off the taxpayer by depriving herself of her assets.

Yep, planning to leach off tax payers whilst hogging your own pension for fun.

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?
It's a moral issue the second you manipulate the system designed to support people in immediate need and you are not in immediate need.

We could only afford one child—that’s it. So we have just one, even though my husband wanted another

That is correct. You cannot be forced to draw on your pension pot to live off at my age. My FA told me this, and the DWP confirmed it.
I am unsure as to what age I will be made to do this.

I had my accident six years ago, but I was only medically retired 2 years ago, and have received ESA for 6 years. The first year it was the contribution based one, then its the income based one.
This will continue until 67, or until I draw my pension.

Firstly it isn't DWP who administer housing benefit to pensioners, it is local authorities.
Secondly two state pensions would equate to around 2k a month ( assuming new state pensions). Why would a couple not be able to manage £500 a month rent out of over 2k a month income? It still leaves ( with the private pension ) slightly less than £400 a week for a couple to live off after rent paid. Obviously if they are older pensioners the state pension could be less but then again it could be significantly more also. My dad comes out with £1400 a month state pension sue to SERPS etc.

Oh, so a brand-new iPhone is suddenly an immediate need now, is it?
Maybe just leave OP alone and let her enjoy life for once

It makes sense that you don’t have to draw your pension until 67. Your pot should be left to mature.

But it sounds like you are going to use it then and not blow it all away?

Anyone that wants state pension means tested. This is exactly what people will do

I was going to say this. By retirement her pot could have increased significantly. My husband's did and he now has a reasonable income.

OP, you're getting slated here, but this is no different in principle to people earning over 100k shovelling extra money into their pensions to get the benefit of free childcare. This is seen as an astute financial decision, even though they're exploiting a benefit that was never intended for high earners. It's a good lesson for anyone reading to understand a small pension can be worse than no pension at all- if you're on a low wage and you're struggling to save the minimum 8% (5 from you and 3 from your employer) you might be better just spending your money.

In a way I can't blame people who consider themselves squeezed middle from thinking of this. We are squeezed every moment now from the day you become an adult, especially if you want to go to university. People work like slaves for ever decreasing (in real terms) salaries, struggle to put decent food on the table and can't even buy some bricks and mortar for tthem and their families these days particularly in the south. Yet they see others take take take and put nothing in. The whole system no longer works but no one had yet come up with any form of solution

People have always been told by money experts not to pay into small private pensions if it stops you getting pension credit

Having yourown money gives you security

The problem for Op and everyone else that wants "the state" to dish out money to them, is the following: -

In the 2025/26 financial year, UK welfare spending is expected to exceed income tax revenue for the first time. Reports indicate the treasury will spend approximately £333bn-£334bn on benefits—including state pensions—while raising around £331bn in income tax, highlighting a significant, unsustainable shift

At some point the tax payers will vote for any party that will slash taxes (and hence benefits). So the Op's future may not be as secure as she thinks.

I used to think that but all it seems to give me now is the right to pay tax to support scroungers like the OP because she can't have the lifestyle she wants with her own money.

And I don't care how faulty the system is, I 100% blame the people who choose to play it to their own advantage.

Haven’t read the full thread, so this might have been mentioned, but don’t forget that you’ll be taxed on your pension. So once you’ve had 25% out tax free, the rest is counted as income. I can’t see why there would be a problem in drawing down your pension for a few years before retirement, loads of people do it. Also from a morality point of view, if you were to take a liveable amount out to the pension each year directly from the fund, it would run out pretty soon anyway at that level. Tying into a low annuity that then restricts any state benefits would be a daft thing to do. You’re not responsible for the systems in place and it’s not as though it’s a big pension anyway.

Are you allowed to leave a HA property for 2-3 months? Do you live alone?

I havent read the full thread because by age 4 its repetitive.

Can i blame the OP for trying to take advantage of the situation? Not at all.

I have paid tax and invested in mortgage and pension all my life. Never had a single benefit paid. I still dont have any issues with the OP trying to take advantage. The wealthy do it 10x worse.

What i do have an issue with is the loopholes being there in the first place and its got to stop. We cant sustain this and we are finally getting to the point where tax income is being overtaken by benefits & state pension outgoings.

Go ahead and try to take advantage. I wont have a moments worry about voting for whoever promises to put people like you into card board boxes with little more than a pot to piss in when the money tree stops producing. Its getting closer by the day.

I agree. Why on earth do the government make it compulsory for people to pay into a private pension to help supplement their state pension and then allow them to blow it all before they even reach retirement age? It's just a crazy loophole. I mean i can understand it if someone is terminally ill or something but surely allowing this just means people will finish work early and live off their pension or just blow it all.

Ah yes, because the DWP are highly likely to link this account with someone making a claim for housing benefit (which is made directly to your LA, not the DWP) in 7 years time. Great point.

So one family has a single income of £105k, and another has two incomes of £70k and £80k (totalling £150k). And somehow, who gets childcare support from taxpayers—and who doesn’t—is not a flaw in the system?
And if the £105k household reduces their income through pension contributions to qualify—again, that’s not a system issue either?

Note that this statistic includes income tax revenue only.
What about revenue from dividends, capital gains, and corporation tax?
(Not to mention inheritance tax, VAT, fuel duty, etc. etc.)

We need to tax the rich to pay for benefits (which is the correct and just thing to do: income re-distribution is a moral imperative for a government in late stage capitalism).
That means taxing the ways that the rich get and store money.
Dividends should be taxed at the same rate as income. Currently, if you actually work for your money you get taxed at a higher rate than the rich who just sit back and let shareholdings pay out.
And what about introducing a land tax?

Sounds ideal. Enjoy your retirement. Not your fault it's set up like this, ignore what people think or just don't tell them.

There is no loophole. OP plans to deliberately deprive herself of assets,