Private pension… can you spend it all before state pension age?!

[MarshaMarshaMarsha]

This is just theoretical but if you have a private pension you can access at 57, can you retire and use it as income to last the 11 years until state pension age?! And at 68 you then just live off the state pension?!

This is all theoretical as I’m sure the state pension will at some point be means tested but am just pondering?!

Yes, it would be possible to do that.

Depends on the terms and conditions of the pension.
My workplace pension can be accessed at 57 (earliest) but is calculated as a monthy amount for life, so never “all used up”. There were several payment options and once signed unable to be changed.

Yes, but OP is talking about a private pension, which is completely different to a Defined Benefit occupational pension.

Do you have any other savings? I took my (small) private pension early which gave a lump sum and a small income, but I also had fairly good savings and drew interest off them and occasionally dipped into the capital if necessary. I think you could take it all out with the current rules, but I would see how far the lump sum and annuity goes first. The state pension is pretty small if you intend to live on only that later.

Many people do this op (I work in pensions) but most have another pension kicking in at state retirement, usually a substantial defined benefit.

You can, but that doesn’t mean you should…

Yes, and depending on your wider financial circumstances you might get pension credit too.

Your later years wouldn’t be much fun, though.

Assuming it's a pot of money / DC style pension, you can withdraw any amount you wish, at any time you wish, once you achieve the right age (55, rising to 57 soon).

You will pay income tax on it (above the 25% tax free).

Note if you have a full new SP, you won't get pension credit per the current rules (if that's your logic). Only people with incomes below the level of full SP may be eligible.

Yes, my friend did this. Designer handbags, multiple expensive holidays etc. Now has state pension and gets pension credit.

Make sure you understand how much state pension you would get and how you would deal with unexpected expenses etc. I don’t think the triple lock will last forever.

Yes you can spend it all if it's in a defined contribution scheme. You can take it as one big lump sum if you want, or a maximum single payment of £30k from a defined benefit scheme (there are other conditions, you can look them up). Is it the right thing to do, probably not, for single withdrawals as you will pay a massive amount of tax. Depending on the sums involved you may need to have had advice before withdrawing. .If your scheme allows flexi-drawdown, you can take money out every year until in the end it's gone.

Yes this is definitely possible. Depending on the type of pension of course, but a defined contribution pension would allow this.

Whether it’s a good idea is another matter and you would need to consider your options carefully.

Many people do a variation of this where they withdraw more from their DC pension and savings before state pension age. Once the state pension kicks in they can maintain their same income by withdrawing less DC pension/savings. Or as a PP stated, they have a DB pension kicking in at some point and so use the DC pension to bridge the gap.

Yes and the minister who introduced pension drawdown/freedoms was that you could use it to “buy a Lamborghini”!! But just because you can doesn’t mean you should.

Yes I understand it’s not the most sensible option but was just pondering. We have no children, and that won’t change… so in theory could downsize at 70 and free up some more capital. We don’t want to have any assets left as no one close enough to leave it to!

Really??? She might tell you this but I myself don’t believe her!

Yes, thats my plan.

She definitely did. It wasn’t a massive amount, so she took it and spent it before she reached state pension age. She had some amazing holidays in places like Dubai in 5 star hotels. She was still working at the time. She carried on working for a bit once she reached state pension age then gave up. She lives in a rented property so gets her rent paid. I’m not sure if it’s all of it or just something towards it.

I wouldn’t do what she did, and I wouldn’t advise it but it was what she chose to do.

Yes

i have three pensions, one local government one teaching and one private. I’m currently doing the early medical retirement for my private with the intention of living off that until state pension age when I’ll get full state pension plus local government pension plus teaching pension.

i have been told that the teachers pension in particular are real gits when it comes to early medical retirement and that although I get pip and lcwra esa they would still fight medical retirement and it would cost me a lot in medical reports and lawyers and such like.

Yes you can, it’s in our calculations, or rather need x drawdown for x years then y when he gets state pension, once we both get state pension drawdown will only be for holidays and luxuries but (probable as age gap) once one of us passes away will have remaining pension to prop up the single state pension. We are fortunate to have savings in addition so large single costs like car replacement or boiler perhaps can come out of that

I couldn't with my deferred DB pension but I could have with my DC pension. When drawdown of DC pension first was a thing there was a worry about people spaffing it on fast cars and boats and having nothing left.

With my DB pension I did something called levelling which meant from 60-66 I had a much higher income from my DB pension which then dropped when I got the state pension so my income is lower now than if it hadn't been levelled

Yes I intend to do this with my somewhat meagre private pension, I have a substantial public sector pension I will take later.

There is a risk with any drawdown scheme that you may run out of money as none of us know with any certainty when the grim reaper will call, so they are best suited to people with substantial pension pots, remember any money left in the pot can be left to nominated beneficiaries, though it is taxable.Annuities usually stop when you die, though there are some that will pay out for a guaranteed period even if you die early or will pay a reduced pension to a partner.Pension planning is a minefield, unless your situation is very simple, so it's best to get proper advice from regulated advisor, not some bunch on the internet (and I include myself in that category)

Well, yes you can, if it’s a defined contribution pension. You can (at the moment) take a lump sum tax free of 25% (this may change though) and once you’ve ‘crystallised’ the pension, any more money you withdraw will be liable for tax (currently 20% if you are a basic rate tax payer). This occurs whether you choose to take the money in total as a lump sum or as a monthly or on an ad hoc basis.

I had a final salary Local Government pension, which I was lucky enough to access at 60 (and retired) and a defined contribution pension, which I drew down until state pension kicked in (at 66). I then decided to buy an annuity so that I had a regular monthly income until I die. (No dependents - but if you do have family and want to leave money to them, I appreciate that this may not be an option).

The current ‘new’ state pensions is better than than the old one, but is still not huge, and while theoretically you CAN live off it, it doesn’t leave much room for many things people take for granted (like running a car for example or an occasional holiday).

Better, in my opinion, to see what you are likely to receive at state retirement age (soon to be 67, and rising), any private pensions you are projected to receive, take off the personal tax allowance, and then you will know what your ‘income’ is.

Yes, anyone with a personal defined contribution pension (not defined benefits pension) can do it, but I would be conscious of the tax liable (20% if you are a basic tax payer, and higher if you are a higher earner). A pension is a privilege (if you’re lucky to be in a defined benefit scheme, and fortunate enough to pay into a private pension scheme.).

I would say use it wisely. Yes, I know anything can happen, and who knows what the situation will be in the future (I wish I had a crystal ball). Just don’t blow or spend recklessly a pension just because you can. I don’t think any Government would reduce or stop the state pension in the future (it would be political suicide to all parties) but, in my opinion, the triple lock isn’t sustainable, and pensions do need to be reformed at for every politician party who comes to power in the future.

Yes you can.
Incidentally, as you have no children, you might be interested in buying a fixed term annuity, which can span just the gap between taking the SIPP and the state pension. If rates are high it might be worth looking into - they fell out of favour when interest rates were historically low due to the paltry rates offered, but are gaining traction once again. There are many options and providers (you don't need to stick with your SIPP platform) and it can provide a level of guaranteed income not dependent on stock market investments. Depending on which type you might opt for, it could also include some index linking so income from it rises over time. If you have a health condition (hopefully not), it can boost the income rate you'd likely receive at purchase.
I'm not recommending this course of action - just suggesting it's worth looking into to see if it suits. There are specialist brokers who can find you the best rates and deals.