Withdrawing from pension at 55

[AAAAYY]

I am 55 & have 4 pensions worth approx £70k. This is split 4 ways 1- £4900 2 - £5200 3 - £28,000 & 4 - £32000. My daughter is starting uni this year and would like to take out 25% to help her with accommodation and I have some other debt I would like to pay off. My current salary is £56k (if that's relevant). I am fortunate in as much as dad is downsizing his house next year and is going pay her accommodation from then and give me a lump sum from the sale so I will be able to pay this back onto my pension (or invest in an ISA - I'll speak to an IFA when I receive this) then and I will also be paying any future bonuses in from next year.

Before anyone comments, I know my pension isn't much at the moment but I should be able to build this up before I retire (hopefully 65ish).

I have no idea the best way to do this - in as much do I cash in the small pots or leave these and take from larger pensions.

Any advice would be great. TY

If you withdraw from a pension, check how much you can contribute to your pensions afterwards - IIRC it's capped at £10k per year which might make it more difficult for you to rebuild.

I wouldn't use my pension to do this. Your pension is for your retirement and needs all the compounding and contributions it get at this stage.

Why isn't she paying for it with her student loan?
Can you afford, from wages, a small monthly contribution to her to top up her loan if it isn't enough and she doesn't have savings?

You cannot just take out 25% as a tax free amount. You would have to withdraw say £10,000 and then you would receive £2500 as a tax free amount. The £7500 would then be classed as taxable income.

Thank you.

So if I were to take out £18,000 - £4,500 would be tax free and I would pay tax on the rest of the amount.

I know this wouldn't be a great idea for some so I am looking for logistics rather than opinions.

This.👍
A pension is not like a bank account where you can pay in & withdraw at will.

I think you need to talk to an IFA to discuss your options.

You can indeed take a lump sum tax free (did it myself last year) but OP please do talk to pensions advisor before you decide anything. Pensionwise will give you a free chat about your options.

You can take 25% tax free from each pension….it makes no odds which one (or combination of ones) that you take it from. Once you take it out of pension you can’t recycle it back into another pension to the best of my knowledge.

On the lump sum, I’d forget all about that until the cash physically lands in your account.

Understand you’re looking to help/support DD but I think this is the wrong way to go about it. Same with your debt.

What’s your overall financial position aside from pension/s? You have debts as mentioned, can you look to budget and get those paid off? Do you have any sort of emergency fund for yourself?

As the saying goes, put on your own oxygen mask first.

@Parky04 That's not correct. You can take just the tax free lump sum, at either 55 or 57 and the remaining 75% will go into drawdown. If you take anymore than the tax free 25% then you will trigger the MPAA and then only be able to contribute a maximum of £10K per year rather than £60K or your full salary.

For those who have asked about my current financial situation, after many years of putting up with a feckless ex (hence debt) I am managing to get myself back on my feet.

I'll make an appointment with pension wise and see what they advise.

OP - your pension is not in a great place so I would think long and hard about withdrawing from it currently.

Could your DD get a maintenance loan this year to cover her costs and then your DF fund her from the following year. That way she would only end up with a small amount of student debt. You can always help her a bit from any spare income and she could also get a job to further reduce the amount she would need to borrow.

As PP said, fit your own oxygen mask before helping others.

Thanks again - I think guilt plays a huge part in this as my daughter has always been great and never asked for much and ex was such a selfish man and has given her (and me) as little as he possibly could over the years.

I have made an appointment with pension wise and I'll go with whatever the advise.

This.

Thank you!

Pensionwise won't advise btw. They will explain the practicalities and options open to you.

@Chewbecca - thank you, good to know.

Yes and you’ll pay at your marginal rate which I assume is 40%. I cannot stress enough what an AWFUL idea this is.

She gets a loan. You top her up out of your salary. Don’t consider anything else.

Can you add it to a mortgage rather than lose your pension? Can you take in a term-time lodger?

Does she need to live away or is she just doing it for the experience? I think it is often a vastly overrated part of the student experience.

Seriously what’s the problem with her getting a loan? She’s presumably getting one to cover her fees?

I’m the same age. And with DC at uni. Given your modest pension I really wouldn’t touch it…. You’re going to need it in retirement.

Don't do it. You're gonna need t hat money for yourself. Your daughter has got her whole life ahead of her to build up wealth.

I echo others, please don’t do this. I’d be mortified if my parent had done this for me with such limited funds. Uni wasn’t affordable to me, so I found a different way in life with no regrets (employer sponsored uni education related to my career). Please protect your retirement.

This is a financial disaster waiting to happen. You already have a small pension, with another 10 or so years to increase it as far as possible. Your DD has years and years to pay back any student loan she takes out - many students never pay it back as they earn below the threshold.
As others have said, she should max out her loans and you can subsidise her on a monthly basis.

Completely incorrect.

Thanks everyone -

So i spoke to my dad last night who agreed with you all that this is a bad idea, so I am abandoning my earlier plan.

What I would like to do is get all my old pensions in one place - does anyone know best way to do this? I've seen Pension Bee (and other places) do this but not sure if there is another way to go about this.

TY