Using Pension for property purchase

bradsaw_31

I am going through a split with partner and we are looking to sell our house and move on. i will most likely be left with approx £70000 which is inadequate to buy a new property. My problem is i am almost 55 on an income of less than £10000,so would be very difficult to get even a small mortgage. What i am considering is taking the whole of my pension pot of £75000,i have been told that i will be taxed approx £15000,leaving £60000.This would leave me with £130000 in total. Now obviously i know this will leave me without a pension but i really don't see any other option? What would other people do in my situation?

xylophone

How much will it cost to buy a one bedroom property outright?

kidmugsy

bradsaw_31 wrote: »

on an income of less than £10000 ... am considering is taking the whole of my pension pot of £75000,i have been told that i will be taxed approx £15000,leaving £60000.

You can conjure up more money, approx £4k, just by drawing the pension over two tax years rather than one.

25% of £75k tax-free = approx £19k, leaving approx £56k taxable.

Drawdown (say) £30k this tax year: 20% tax = £6k.
Drawdown the balance, £26k, next tax year: 20% tax = approx £5k. Total tax over two years = £11k approx.

Is there anything you can do to increase your income? For instance, buy a two-bedroom property and take in a lodger. You could use the rent-a-room allowance to get much/all of the rent tax-free.

dunstonh

What i am considering is taking the whole of my pension pot of £75000,i have been told that i will be taxed approx £15000,leaving £60000.

By robbing your retirement, how will that affect you when you reach your retirement years and how will you address that?

bradsaw_31

dunstonh wrote: »

By robbing your retirement, how will that affect you when you reach your retirement years and how will you address that?

That's the conundrum, i need to live in a 2 bedroom house as my son will need somewhere to live when on leave from university.I simply cannot buy anything with £70000, and no mortgage company will lend to a 55 year old with low income.So do i rob myself of a pension?

Drp8713

Why dont you just rent until he moves out and then by a one bed?

kangoora

Another more drastic option, move to a different area of the country with much lower house prices. This obviously depends on if you are willing and able to do that.

Near me you can get reasonable 2 bed flats in a new-ish development for £80-90k. You can still buy 2 up 2 down terraced houses in some areas of the country for <£75k

justme111

bradsaw_31 wrote: »

That's the conundrum, i need to live in a 2 bedroom house as my son will need somewhere to live when on leave from university.I simply cannot buy anything with £70000, and no mortgage company will lend to a 55 year old with low income.So do i rob myself of a pension?

You don't "have to". He can sleep in your lounge on a sofa if he can not fend for himself. Which I would expect someone who finished uni to do.
In any case making financial life plan in a haste and stress of splitting is not a good idea. So I would advise no drastic measures for now as for example poster above shown you if you drawn that pension over two years compared to one you would have saved 10 000 in tax. Thats your whole year salary ..

atush

plus with 10K income, you could borrow 30K. So could get a 2 bed for 100K?

Or use the 30K loan, 25% TFLS, and the 70K to buy a property and leave the 75% of your pension for when you retire?

Building up new pension as you go.

agarnett

Is there no lender in UK that is on the ball sufficiently to lend against new drawdown?

gadgetmind

Given how banks are being fined for farting in the wrong key, innovative products aren't top of their agenda.