Getting hold of your pension then investing it

cumulus.james

I have a pension of around £90,000 and I am 5/6 years away from retirement. I had wanted to take part as a lump sum and the rest to purchase a buy to let flat but this is proving difficult, I am getting the run around and conflicting advice from people. At the moment I am told I can take about £5k out now and that is it. I’m told if I wish to buy a flat I have to take it all as an annuity then use it all to purchase the flat. I mean it is my money I should be able to access and do with it as I please! In an ideal world I would like to take £10,000 as a lump sum and invest the rest in a buy to let property.

Does anyone know if this can be done? If so how do you go about it?

Loughton_Monkey

It is not your money.

It is under trust to provide you with a pension.

Any conflicting advice you have heard is almost certainly people who claim you can take the money, take your 25% tax free lump sum, and put the balance in a SIPP. And in a SIPP, investment in property is allowed. Trouble is, it doesn't allow investment into your own BTL property.

If it's a 'Final Salary' scheme, then you need IFA advice - but none would be forthcoming because moving out would be such a bad deal. If by moving your pension your employer stops paying into it, then equally it's an extremely bad deal.

A pension is there primarily to provide you with income in retirement. That's why HMRC encourage you by granting tax relief. It's not a savings account, nor is is a loan facility for speculative ventures.

cumulus.james

I find that offensie. I chose to pay a portion of my salary into a pension scheme so how dare you imply I want to use it as a loan facility. It is part of my salary I worked to earn the money in that pension, it is therfore my money. Are you trying to tell me tha if I ut £300 into a savings account every month then those savings are not mine?

Loughton_Monkey wrote: »

It is not your money.

It is under trust to provide you with a pension.

Any conflicting advice you have heard is almost certainly people who claim you can take the money, take your 25% tax free lump sum, and put the balance in a SIPP. And in a SIPP, investment in property is allowed. Trouble is, it doesn't allow investment into your own BTL property.

If it's a 'Final Salary' scheme, then you need IFA advice - but none would be forthcoming because moving out would be such a bad deal. If by moving your pension your employer stops paying into it, then equally it's an extremely bad deal.

A pension is there primarily to provide you with income in retirement. That's why HMRC encourage you by granting tax relief. It's not a savings account, nor is is a loan facility for speculative ventures.

dunstonh

I am getting the run around and conflicting advice from people.

People that know what they are talking about?

I’m told if I wish to buy a flat I have to take it all as an annuity then use it all to purchase the flat

That is one option. Not the only one.

I mean it is my money I should be able to access and do with it as I please!

It's not your money as LM says. You gave up ownership when you put it in the pension.

In an ideal world I would like to take £10,000 as a lump sum and invest the rest in a buy to let property.

It would be a strange choice with little logic. However, you cant do it so its a non-issue.

jamesd

The money will be in a trust or comparable arrangement, held for you. As a matter of law you do not own the money. This is generally to your advantage, it's why you can get the tax relief and also allows death benefits to be paid to your nominated beneficiaries outside your estate, avoiding the possibility of inheritance tax and often paying out faster than settling an estate. Not owning it doesn't mean that you don't control it, though there are government rules that limit what you can do.

What is the £90,000? Is it a defined contributions scheme where you pay in money and select individual investments? Or is it a valuation of a defined benefit (final salary or similar) scheme?

If it's defined contribution you can take out 25% as a lump sum and the remaining 75% can be used to buy an annuity, put into income drawdown or a mixture. Not all providers offer the income drawdown option and those might not bother to mention that instead of buying an annuity you can transfer the pot to a place that does allow income drawdown. Don't accept being told that you must buy an annuity, it's almost certainly wrong.

For the 75% in drawdown you are prohibited from using the money to buy residential property, including BTL property. This is one of the government rules on what is and is not a permitted investment.

For the 25% You could use that to buy a property but using it as a deposit would usually be a better idea, in part because interest on a mortgage up to the value of the property at the time it is acquired by the rental business is deductible from rental income.

Being told that you can take out only £5,000 now implies that it is not a defined contributions scheme but rather some kind of defined benefit one. We'd need to know more about exactly what it is to make comments on whether the £5,000 is right or not. It might be a mixed final salary and AVC scheme and the £5,000 might be 25% of the value of the AVC pot.

bendix

cumulus.james wrote: »

I find that offensie. I chose to pay a portion of my salary into a pension scheme so how dare you imply I want to use it as a loan facility. It is part of my salary I worked to earn the money in that pension, it is therfore my money. Are you trying to tell me tha if I ut £300 into a savings account every month then those savings are not mine?

You might find it offensive. Tough. It doesnt change the fact that Loughton is correct.

You might have noticed that the money that accumulates in your pension fund is more than you put in. That is the tax break. It is that which makes it not your money; rather it is money held on trust for your retirement provision, whether you like it or not.

A bit of self-education and a little less kneejerk reaction to information you don't like to hear would serve you well.

Lokolo

bendix wrote: »

You might find it offensive. Tough. It doesnt change the fact that Loughton is correct.

You might have noticed that the money that accumulates in your pension fund is more than you put in. That is the tax break. It is that which makes it not your money; rather it is money held on trust for your retirement provision, whether you like it or not.

A bit of self-education and a little less kneejerk reaction to information you don't like to hear would serve you well.

Welcome back. How was Thailand?

moonrakerz

cumulus.james wrote: »

I chose to pay a portion of my salary into a pension scheme

If I was going to pay £300 a month into ANYTHING, I think I would want to understand what was going to happen to that money, rather than accuse people of being offensive when they point out what the LAW says happens to money in a pension scheme.