Very tempted to take my pensions now . Any tips ?

[InkySplott]

Hi I'm 62 and I have about 5 years before my state pension kicks in . I have two small pensions worth 70k I'm very tempetedc to take my cash lump sums and take draws downs until it's all gone by 67. My parter is the same age and he will get a government final salary pension and that comes with a small pension for me also , which combined with the state pension takes me over the tax threshold. I just think if I keep my existing pensions I will pay loads of tax anyway at 67 . What do you think I should do ?

Hi yeah just whipped out the paper work . I will only get that if he pops his clogs before me .

OP, might be worth looking at annuity rates which are high ATM. You could get one that paid out the money every month until you get your state pension. My DH is retiring early at the beginning of April. He's got part of a civil service pension of about £16k he can get from the end of September when he reaches 60. He can only get the rest of the civil service pension when 67. He's also got about £30k in a Sipp. He's going to get 25 percent of the £30k so about £7.5k lump sum in April as he retires, then he's having the rest paid into an annuity so will get about £3650 per year for 7 years. In the event he dies the annuity all gets paid to me.

Why are you ignoring people asking if you’re married? It makes a difference to how your question can be answered.

Yes we are married.

@caringcarer you husband may wish to check out the macleod ruling as he may be able to take pension at 60 without a deduction for taking it early obviously he won't be able to add to it but you will definitely need concrete advice

"Hi yeah just whipped out the paper work . I will only get that if he pops his clogs before me"

I suspected this would be the case and that you were mistaken in thinking you would get this during his lifetime.

To be blunt, it's a big mistake to make and shows a gap in your understanding of pensions.

I would definitely recommend taking financial advice on this as this could be very costly to get wrong.

A financial adviser will be able to offer cash flow modelling and talk through your options.

An easy way to look at this is to work out your number, ie, how much you need to live on and how much you would quite like coming in every month.

what kind of salary are you used to now and can you live on a lower amount?

If you were in a low paid job and possibly part time by the sounds of it, you may not have been bringing home a fantastic amount anyway.

Have you paid all your stamp? Have you checked your pension forecast?

Have you got a redundancy pay out?

Have you got any other pension income?

Yes, I would say you could draw down off your £70,000 over the next 4-5 years until SPA but keep some back for emergencies!

You could always top up with a little part time job?

Take enough income from pension each year before state pension to cover your tax free allowance (u can also ask tax office to move 10% of your spare tax free allowance to your husband so he pays less tax).

If u don't need money then invest it yourself via ISA or similar.

He's had advice. He can take his Classic pension from Civil Service at 60 and a lump sum of 25 percent of total, but he would not be wise to take his Alpha pension with Civil Service until state pension age, so when he is 67. If he wants to take Alpha early it is actuarial reduced, so he'll wait until he's 67. We've paid our mortgage off and have a btl portfolio for some investment income plus he's got his additional pension which he's buying an annuity with after taking his 25 percent tax free. I retired early and I'm drawing my Teachers Pension from 60 plus I had a smaller additional pension I bought an annuity with to be paid until I get my state pension at 67. I'm also a Foster Carer still so get a fostering allowance. We've got savings too and if money runs out we could always sell off one of the btl houses. DH is an accountant and very good at planning out money. We're actually thinking more about things we can do in retirement together.

If you can retire now before SP age, then I would say yes, do it - and enjoy your free time, fitness and health now.

That was my default situation at age 60 (also redundancy/other adverse life events) but I have totally maximised the time and freedom.

Also, for others to be aware, my own excellent health and fitness levels did change very notably in the very year that my SP finally did kick in. It’s been a very notable change. I would have felt very cheated had I waited until age 66 to start fulfilling all those dreams. Do it earlier if you can.

Thanks . I'm going to get some professional advice before I do anything. I've heard so many stories recently about people dying young and not getting to enjoy their retirement after building up pension pots . It's just got me thinking .

But the OP won't enjoy her free time much if she's struggling for money. She needs to work out 'the number' - i e. what sort of lifestyle she wants and can afford - before making any big financial decisions.

If you plan to retire soon, consider the benefits of investing some of your redundancy pay into the small pension now to receive the additional 20% tax relief uplift. This might be the most advantageous way to maximise the redundancy for living expenses

You can contribute up to the level of your net income this tax year (if you have been employed at some point this tax year).
Even if you have no earned income this tax year, you can still contribute £2880, and repeat again after April 5th into the pension, and receive the additional tax relief.

New figures on how much people need in retirement published today:
www.bbc.co.uk/news/business-68222807

31k sounds an awful lot.......

That would require a private pension of approx 300k to give a pension of 20k, with the state at 11k.

People as they age tend to do less, eat less, shop less.

But of course the pensions industry a: wants us to pay in more and b; delay taking our pensions, thats how they make more money after all.

That doesn’t sound like enough to me. You need to look carefully at your outgoings - council tax, utilities etc all need to be paid as does house maintenance, transport etc.

I retired early at 60 and am now 66. I’m really glad I did as I had a stressful job but it would have been equally stressful if we’d been struggling for money.

And 25% of your pension is tax free anyway, whenever you draw it down. So if you don’t do the much talked about ‘25% tax free lump sum’ you get 25% tax free when you draw down.

@Alexandra2001
31k sounds an awful lot.......

That would require a private pension of approx 300k to give a pension of 20k, with the state at 11k.

People as they age tend to do less, eat less, shop less.

But of course the pensions industry a: wants us to pay in more and b; delay taking our pensions, thats how they make more money after all.

Well, I'm in my 60s, still working for myself and taking an occupational pension. It's not true for everyone that you spend less. With more time, I want to travel and enjoy hobbies, not make my world smaller and stay at home.

Which is why everyone needs to work out their 'number' - if you were on modest income before and are happy to stay home and knit (although craft stuff is expensive now) and not help your kids and grandkids financially, you will manage on less. If you want to go out more, maintain your home, run a car etc, then you need more money.

There's no simple answer, everyone is different. My advice to younger people (especially women) is to think about this as early as you can as the effects of compounding make a huge difference.

@Tiffanyis As i said "tend" but the reality is that as you go into your 70s and beyond, health issues can affect how you live & what you spend.

Whatever you want to do, do it now, one never knows whats around the corner.

As you say though, we are all different.

@Alexandra2001 I agree!