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sunrise27_2

In my head I know what I want to do but not sure I can get it to come across right
Hubby has a private pension he can access next year at 55 we can take a lump sum of £22000 and a yearly pension of £2545
We want to pay off £18000 on our mortgage ( figure as of yesterday £48000 . £18000 of which is on repayment and £30000 on interest only ) with 2 years this summer left on the repayment bit .
So we can claim his small pension in 2019 and pay the repayment part of the mortgage of in 2020 but we will have £18000 in Sept 2019 to pay off some of the mortgage
The idea then being in September 2020 hubby and I want to cut down hours at work using the mortgage money that we won't be paying out any more plus his small pension and putting the last bit of the mortgage which is on interest only onto a repayment mortgage over 10 years
I've done my figures and its all do able BUT if he takes the small pension In 2019 and carries on working for a year it will be eaten up by being in the 40% tax bracket , I I hope this all makes sense ? Any thoughts anyone ?

I'm thinking ( no idea if this could be done ) is that for the year we could put the small private pension into his nest pension ? As that comes out before tax etc ? But my ideal plan was to save that small pension each month just for That year and take the grandchildren on holiday ( we can add money to it but would maybe like to do euro Disney or something ) really don't want it being eaten up by tax !!!; But then if we put it into nest it's tied up in there isn't it ?

dunstonh

Hubby has a private pension he can access next year at 55 we can take a lump sum of £22000 and a yearly pension of £2545

Just because he can access the money does not mean it is the right thing to do. Also, that income figure seems to be an example rather than a real income figure as its almost half what you could expect.

The idea then being in September 2020 hubby and I want to cut down hours at work using the mortgage money that we won't be paying out any more plus his small pension and putting the last bit of the mortgage which is on interest only onto a repayment mortgage over 10 years
I've done my figures and its all do able BUT if he takes the small pension In 2019 and carries on working for a year it will be eaten up by being in the 40% tax bracket , I I hope this all makes sense ? Any thoughts anyone ?

Have you factored in the effects of inflation?
Have you considered that the money would be around double in 10 years time when retirement is more typical? By taking a smaller figure now and needing it to last longer, you are effectively taking it from later life to benefit you now. If its affordable then fair enough but is that what you really want?

I'm thinking ( no idea if this could be done ) is that for the year we could put the small private pension into his nest pension ?

For what reason?

As that comes out before tax etc ?

How does that affect a transfer?

The two biggest issues with taking pensions that early are
1) underestimating the impact on later life as the money has to last 10 years longer than originally planned
2) people ending up using the pensions as a cashpoint machine to fund holidays etc and not leaving enough to provide a suitable income. So, you get an early retirement with a consumer spending lifestyle with a backend of poverty when the money runs out.

Clearly, we dont have the whole picture as you have only mentioned a fairly small pension your husband has. For you to consider this you must have other pensions, savings and investments for it to be able to work. It may help know what they are.

sunrise27_2

He also has a nest pension but has only had that for a year, I also have a small pension but again that has only just started , by cutting hours we are only talking one day a week for my hubby and half a day for me , we will both be entitled to the full state pension and have massive equity in our house, life being stressful we just think if we can take a bit more time off work and enjoy more quality of life together it has got to be worth it , we intend to then carry on working al be it one day less a week for hubby until pension age of 67 .

sunrise27_2

If we take his small pension and then he carries on working for a year then the small pension will be eaten up by tax but we want to take the lump sum to pay off some of the mortgage

sunrise27_2

We then aim to carry on paying £80 ish into some sort of pension as we will still have 12 years or so until we fully retire ( although we will probably carry on working 2 days a week to give us some sort of routine and bump our finances up a bit

sunrise27_2

Our financial advisor gave us that figure , I think hubbys pension pot is worth £88000
The pension wouldn't be used to fund holidays etc that has all been accounted for in my budgeting

xylophone

He has a DC pension valued at £88,000?

Does the plan support drawdown?

If so (he could transfer to a drawdown provider if not), he could simply take the 25% tax free PCLS and leave the balance invested?

He could use £18,000 as required and the balance to pay for the family holiday?

And he should remember that if he takes anything over the PCLS from his DC pension he will need to have regard to the MPAA.

https://www.pensionsadvisoryservice.org.uk/news/the-money-purchase-annual-allowance-is-dropping-to-4000-how-does-it-affect

He could consider continuing to contribute to the drawdown pension ( he should contact HMRC if he is due more tax relief as a higher rate tax payer) with a view to being able to fully retire or perhaps reduce to a three day week) before state pension age?

sunrise27_2

DC pension ? No idea what that is lol and PLCS ?

In an ideal world we would like to take the £22000 lump sum and then defer taking the £2545 yearly payment e year after is that even possible ?
I think the way we're looking at it is that you're a long time dead , we could wait 10 years before we take his small pension but then we're 10 years older and you just don't know what's round the corner ? We don't want an extravagant lifestyle we're not planning on cruising ground the world we just want a little bit more time not working and a little bit more time to spend with our family. We have worked hard all our life ( and will carry on doing so ) we just want a bit more us time even if it's spent rolling round the floor with our grandchildren and the odd lunch out !!!55357;!!!56835;

sunrise27_2

And I am sure our financial advisor has talked about draw down , I just assumed that once you take the lump sum you have to take the yearly payment ? With the £22000 I have already allowed £18000 to pay off some of the mortgage , £2000 towards wedding funds for our daughter and £2000 towards a cruise lol might just have to budget a different way for the family holiday X


This was the email I got in November 2017 about hubbys pension

current pension fund of £88,057, and assuming he is age 55 he could take an income of £3,392.72 per year, alternatively you could take a tax free lump sum of £22.014 and a reduced pension of £2545.29

xylophone

Incidentally, if he is a higher rate tax payer with a NEST pension, has he seen this?

https://www.nestpensions.org.uk/schemeweb/NestWeb/public/memberhelpcentre/contents/do-i-need-to-claim-tax-relief-myself.html

sunrise27_2

So he needs to ring HMRC ?