Approaching 55 and need some guidance

Beatle_Ray

Hello,


Need some guidance please, I'll be 55 in October, I have a pension with Standard Life through work which at current value stands at £91,700, I contribute £100 a month and my company match that so total monthly investment is £218, at the moment I have £17K worth of debt and I'm struggling to pay this off and its a burden/worry a lot of the time, by the time the opportunity to take some tax free money out of the pension is available I estimate the pension to worth approx. £93,500, if I took the full 25% that would reduce the pension to £70K, does it make sense to do this and also do I get the opportunity to say what happens to the remainder of the funds, if I did take the full 25% that would leave me with £6K to tidy up the house and have a holiday which I haven't done in four years, welcome any advice,
Thanks

Linton

You need to check with your employer as to whether they will continue paying into your pension if you take some money from it. Depending on the Ts&Cs of your pension you may need to transfer it elsewhere to access the 25%.

Having taken the 25% you can buy an annuity or go into drawdown which will let you take money from your pension, taxed as PAYE income, whenever you want, the rest remaining invested. However if you do ttake any money beyond the 25% your annual total contribution allowance is reduced from £40K to £4K which is close to your current total contributions.

Do you have other savings/pension to support yourself in retirement?

HappyHarry

Beatle_Ray wrote: »

Hello,


Need some guidance please, I'll be 55 in October, I have a pension with Standard Life through work which at current value stands at £91,700, I contribute £100 a month and my company match that so total monthly investment is £218, at the moment I have £17K worth of debt and I'm struggling to pay this off and its a burden/worry a lot of the time, by the time the opportunity to take some tax free money out of the pension is available I estimate the pension to worth approx. £93,500, if I took the full 25% that would reduce the pension to £70K, does it make sense to do this and also do I get the opportunity to say what happens to the remainder of the funds, if I did take the full 25% that would leave me with £6K to tidy up the house and have a holiday which I haven't done in four years, welcome any advice,
Thanks

You might want to have a chat with pensionwise, who can talk through options with you: https://www.pensionwise.gov.uk

dunstonh

You may not be able to take the 25% on that particular pension plan as it would be required to offer drawdown. Most workplace plans do not. So a pension transfer to a plan that does may be required.

that would leave me with £6K to tidy up the house and have a holiday which I haven't done in four years,

Although you will berobbing your retirement fund of £6k that your older self may not thank you for. (it wont be just £6k as the growth on that by retirement will probably be around £12k-£15k. That is around £15k your retired self will have less to spend in retirement.

atush

I agree that while you may want a holiday and to tidy the house, these a re retirement funds- not savings.

While paying off the debt is a good idea- how did you get into debt? Will you get into debt again (as you were living above your means)?

After you pay off the debt, you should save into an emergency cash fund or your pension if you still hvae the 6K) the amount you used to service the debt with.

Otherwise you'll never retire, or be over SPA when you do.

Number75

I don't know about taking some of the 25% TFLS to pay off debt.
But I wouldn't use it for home improvement or a holiday!

People have varied reasons for debt so my apologies if this doesn't apply to you - but, don't fall into the trap of it's there so I'll spend it. You're only going to leave yourself short in retirement.

If you're no longer serving £17K of debt, you'll easily be able to save for a holiday. I really wouldn't take any more than is needed for the debts.

Beatle_Ray

Thanks for the reply Linton, no that is the only form of financial support during retirement, ideally we would downsize the house and that will release some equity, I have 34 years of NI contributions so that should get me a state pension but not until 67, ideally I would like to have the house paid off and no debt by then and have approx. £10K pa to live off, all that I have read about an annunity is not attractive so I would prefer to keep the money invested where it is, would that be possible?

Beatle_Ray

Thanks for the replies, I agree I think I'm falling into the trap of taking it because its there, if I just took the figure to pay off the debt I should be OK, I can live off my income and save for the holiday, I'm looking forward to being debt free for the first time in almost six years

xylophone

You can get a new state pension statement to establish your "starting amount" and help you plan.

https://www.gov.uk/check-state-pension

dunstonh

ideally we would downsize the house and that will release some equity,

Problem with that is that unless you move to a significantly cheaper area, it rarely provides the capital expected after you pay for estate agents, legals, stamp duty, cost of moving etc.

Also, a very common theme is that once you start looking at smaller places, you may not like the more confined space.

ideally I would like to have the house paid off and no debt by then and have approx. £10K pa to live off,

You wouldnt be using the pension to pay the mortgage would you?

all that I have read about an annunity is not attractive so I would prefer to keep the money invested where it is, would that be possible?

Annuity is just one of the options. Leaving it invested is another.

Beatle_Ray

No the mortgage would have been paid off from the monthly salary, I'm making a small over payment each month