Releasing pensions early

[Don'tcallthepolice]

I wonder how many middle aged people are dipping into their pension pots to survive these times.

I am 57 and had an idea that I would use some of this for treats and travel at this time.

Instead I am releasing just to maintain our life as standard ensuring we can have nice food, annual holiday, keep my DD hobbies going.

you’re just using it for “treats and travel” now by the sounds of it 🤷‍♀️

“nice food and holidays” isn’t that “treats and travel” 😐

A family holiday when we work full time and my DDs ballet classes were not what this pension money was intended for is what I mean.

Releasing it to pay for these things feels like a ticking time bomb if lots are?

I am 55, a few friends have started to dip into their pensions for treats.

Obviously I don’t know their full financial position, but this would be the last thing I would do. The ones who are still working are now paying more in tax which is eroding the value further.

I won’t be drawing on my pensions until I have stopped working. I would much rather cut back on spending now to try and ensure I was comfortable in later life when paid employment won’t be an option.

Other people prefer to live for today and worry about tomorrow later. That’s just not me.

how old is your daughter?

Early teens.

I guess it depends whether you'd rather have the treats now and live frugally in old age. My sil has released NHS lump sum early to help put kids through Uni.

ah… the perils of later parenthood if you’re 57 and parent of a 13 year old. So that will be a big contributory factor as to why you’re releasing your pension to pay for ballet lessons.

what are you going to do about university OP (if she goes in 5/6 years time)?

do you have no savings at all?

If you are struggling now, how are you going to manage later?
Could you not improve your income (through work) or reduce outgoings to preserve the value of your pensions into retirement?
However you feel now, it is not going to get better.

that’s what i’m thinking. what happens when the 13 year old having ballet lesson is an 18 year old wanting to go to university and the op is 62/63?

and not working or looking to cut down

No savings. I suspect we will sell the family home once she goes to Uni.

We have a decent home with a lot of equity.

But back to my point I would not be surprised if this demographic was to some extent resorting to finding money to manage today by releasing money put by for the future.

are you a single parent?

so zero savings at 57 and having to dip in to your pension to pay for ballet lessons and nice food.

OP i think you need to seriously look at your finances and how you can cut back because not like your earning potential is going to increase if we are being honest

and your teenager is only going to get more expensive

do you have any life assurances or critical illness cover?

My mil used to say you can only spend a pound once and a pound in your purse is your best friend.

Unless your daughter is planning a career in dance I wouldn’t be using my pension to pay for lessons.

My youngest is 18. He passed his driving test at 17 like his elder brother. Not many of his friends have as some families are struggling to pay the mortgage and food bill and driving lessons will have to wait.

I would dip into my pension to keep a roof over my head or to pay for
crucial medical treatment but not for holidays or hobbies.

Your point about our demographic dipping into their pensions if correct. I believe this is why the rules are changing from 55 to 57.

Some younger people are choosing to pay less into their pensions or opting out altogether where they can. For some there may be little choice at the moment. For others I think they are being very shortsighted.

When you are in you 20’s/30’s with all those years ahead of you it’s difficult to believe that one day you will be hurtling towards retirement at a rate of knots and will wish you made different choices.

I think the option to release at 55 is too tempting. It would be good to increase the minimum age by a few years.

The cost of living crisis must have meant many are tempted to release that tax free lump earlier than intended.

And live where....?

I hear this a lot but what size house are you looking to move into, will it be a cheaper area etc etc? When legal, EA, moving costs have been covered you will have spent a fair chunk of money so the savings will need to be significant for it to have a long-term impact on your retirement and Uni funding ambitions.

We could afford a flat or cottage tbh leaving us with a couple of hundred k to use for pension top up, supplementing dd at university.

But I do wonder if others are also dipping in and releasing money a bit earlier than they planned.

I am agog that you are doing this OP!

I would be very surprised if many people your age were doing this. I know everyone does things at different times, but anyone I know who is your age have children in their 20s who are self sufficient.

Like a PP, I would only ever consider doing what you are to keep a roof over my head.

I released a small personal pension pot at 55 so I could pay for both DC to do a Masters. £40k less tax. Also paid for a nice trip to New York.

My mortgage will be paid off in a couple of years and my job is very easy and enjoyable. Health permitting, I should be able to work until 65 or even 67 and I only work 4 days a week.

I should have at least £2k a month to live on in retirement, plus savings, so I’m not worried about my decision.

Releasing pension early. Yes.
But to provide additional funds enabling us to maintain a lifestyle while still working. No.

Took early retirement @57 but if finishing work early meant our standard of living had dropped or resulted in our dipping into savings/investments early then we would have carried on working.

if you are having to release early to pay ballet lessons when you are both working

then what is your plan for when you actually retire beyond selling up?

No savings but… pension??