55 next year, unable to work, need pensions advice please

Iwanttobefree

Hi.

Not been able to work for quite a few years due to numerous health problems and it's unlikely I will be able to again, (but there's always hope)

I am 55 next year and have looked at all my pensions.

I have this years statements for them all.

Pension 1:
Current Value £74,555
Estimated pension if I retire aged 65 (2029) the equivelent of £2,870 today or £239 per month

Pension 2:
Current value £10,600
Estimated pension if I take it next year when I'm 55, £377 per year or £31 a month

Pension 3:
Current value £170
Estimated pension if I take it next year when I'm 55, £3 per year

State pension based on current laws/rates etc:
Retiring at 67

With current NI contributions (2 years short), £8,275 a year or £689 per month

or

If at some point I manage another 2 years work, £8,575 a year, £714 a month.


My current situation is I am not capable of working but don't pass the DWP test, hence am currently getting zero benefits (surviving just on wife's earnings). Please keep this to pensions only, I've discussed my situation and the benefit system to death elsewhere.

Looking at those 4 pensions, one of them is pointless, might as well cash it in for the full approx £170.

I'm thinking of also cashing in the full amount of pension 2: the £10,600 pension, I know only 25% is tax free, but with zero benefits/earnings, I wouldn't hit the threshold for paying tax anyway.

I'm basing this on the following. Our car is 14 years old, really is on it's last legs and will need replacing fairly soonish and my wife needs it for work. We are only just managing to survive on her earnings (in 5 years time when the mortgage is clear, we will be a lot better off). We need to do various bits of maintenance to the house. Taking the max I can out of this pension will hopefully allow us to do both.

By doing this we will loose £31 a month, but we will need to get the car and house sorted somehow

That will still leave me at age 65/67 the two remaining pensions.

Pension 1: £239 a month
State Pension £ £689/£714 a month

Total £928/£953 a month

Does that look sensible to you kind people (taking the full £10k fro pension 2:)?

On top of that we will have my wifes state pension which I presume will also be around the same as mine as she would have made all necessarry NI contributions.

Without the mortgage she is currently paying, based on those figures, we will be better off than we currently are.

atush

Has she been using the married allowance to lower her tax? As you are not using your PA

It is a shame you dont qualify for any benefits at all, as that would mean you'd be picking up Nics.

can you do any part time work at all?

What is your wife's pension like?

Iwanttobefree

atush wrote: »

Has she been using the married allowance to lower her tax? As you are not using your PA

It is a shame you dont qualify for any benefits at all, as that would mean you'd be picking up Nics.

can you do any part time work at all?

What is your wife's pension like?

Yes she's using the married allowance.

Currently have just been allowed an appeal in the upper tribunal for reinstatement of ESA Support, if I win (which knowing the system I may not) then hopefully I will get it for at least two years to fulfill NI contributions.

At the moment part time work is impossible.

While I genuinely appreciate your help, I don't want this thread to turn into people suggesting this and that as possible job suggestions, as I've already been through all that elsewhere.

To quote the last sentence my GP letter she recently wrote "I attach a copy of his current medication and due to the complexity of his problem, I believe that he is not able to work for the foreseeable future" and that letter was sent to my creditors and they wrote off my £10k outstanding credit card debts due to my health and the unlikelyhood of me working. Those creditors included Capital one, debt collection agencies etc, they are not going to write it off if they think there's any chance of me working, only saying this to sort of show that discussing me working at the moment is pointless (nothing would please me more than to be able to go out to work)

Wife will only have a full state pension. But we own our own house that will be mortgage free in 5 years.

.

xylophone

Wife will only have a full state pension.

Her employer doesn't offer a pension?

kidmugsy

Iwanttobefree wrote: »

I am 55 next year
Pension 2: Current value £10,600

Pension 3: Current value £170 ... might as well cash it in for the full approx £170.

I'm thinking of also cashing in the full amount of pension 2: the £10,600 pension, I know only 25% is tax free, but with zero benefits/earnings, I wouldn't hit the threshold for paying tax anyway.

I'm basing this on the following. Our car is 14 years old, really is on it's last legs and will need replacing fairly soonish and my wife needs it for work. We are only just managing to survive on her earnings (in 5 years time when the mortgage is clear, we will be a lot better off). We need to do various bits of maintenance to the house. Taking the max I can out of this pension will hopefully allow us to do both.

That seems to me to make a rational case for emptying those two pensions, certainly all of #3. Personally I'd want to be so certain of not paying tax on pension withdrawals - after all, you might conceivably find a bit of work - that I might split the withdrawals between pensions #2 and pension #1 so that I used a somewhat higher amount of TFLS and a somewhat lower amount of taxable drawdown. Whatever! The point is to get the detail right so that you don't pay a penny of income tax.

Iwanttobefree wrote: »

Pension 1: £239 a month

Can you tell us more about this one? Is it an ordinary DC pension or is it DB e.g. Final Salary?

If it's DC, you could consider drawing out £2,880 of its tax-Free Lump Sum next year and recycling it into a personal pension of some sort. It would gain tax relief even though you are not a taxpayer, and would be equivalent to your making £720 p.a. "free money". In the next three years, when you won't have pensions (2) and (3) being drawn down, you could take the £2,880 from the crystallised taxable bit and, of course, pay no tax on it. Again recycle it into a personal pension.

You could also consider drawing down more pension in tax year 20/21 onwards with a view to paying the mortgage off faster. What is the interest rate? If it's very cheap this may be a poor idea.

Or you might draw a little bit of pension just to stop the shoe pinching so much, as it were.

One last point, this one speculative. Money is obviously tight for you. Are you happy with what pension #1 is invested in? Does it perhaps make you more exposed to the stock market than you would like to be? Might there be a case for drawing out a big chunk of lump sum and paying the mortgage down ASAP i.e. next year? If there is, is there a case for moving about a quarter of the capital into a low risk investment now?

kidmugsy

xylophone wrote: »

Her employer doesn't offer a pension?

Then maybe you should consider drawing down enough pension in the future to let your wife contribute into a pension. She'll get tax relief on any gross contribution as long as it's less than her annual earnings. Depending on her age this might be another useful way of picking up "free money".

kidmugsy

xylophone wrote: »

Her employer doesn't offer a pension?

Then maybe you should consider drawing down enough pension in the future to let your wife contribute into a pension. She'll get tax relief on any gross contribution as long as it's less than her annual earnings. Depending on her age this might be another useful way of picking up "free money". (By "depending on her age" I mean that if she's a lot younger than you you might be reluctant to tie the money up until she's allowed to take it out again.)

atush

Iwanttobefree wrote: »

Yes she's using the married allowance.

Currently have just been allowed an appeal in the upper tribunal for reinstatement of ESA Support, if I win (which knowing the system I may not) then hopefully I will get it for at least two years to fulfill NI contributions.

At the moment part time work is impossible.

While I genuinely appreciate your help, I don't want this thread to turn into people suggesting this and that as possible job suggestions, as I've already been through all that elsewhere.

To quote the last sentence my GP letter she recently wrote "I attach a copy of his current medication and due to the complexity of his problem, I believe that he is not able to work for the foreseeable future" and that letter was sent to my creditors and they wrote off my £10k outstanding credit card debts due to my health and the unlikelyhood of me working. Those creditors included Capital one, debt collection agencies etc, they are not going to write it off if they think there's any chance of me working, only saying this to sort of show that discussing me working at the moment is pointless (nothing would please me more than to be able to go out to work)

Wife will only have a full state pension. But we own our own house that will be mortgage free in 5 years.

.

My question about part time work was in reference to the 2 years nics you need. Which you probably cant afford to pay volunatirly (as you already have spending needs for the pension you wish to take).

So hopefully your appeal will be sucessfull.

But we also need to talk about wifes pension as asked above.

molerat

Does your state pension forecast give any cheap part filled years to buy ? It can be handy having an option B so if it does tread carefully and come back with a full breakdown of your statement as buying those may or may not be beneficial. Have you had a state pension forecast for your wife, nothing can be assumed.

Iwanttobefree

Thanks all

My wife is self employed (hair dresser).

Our main mortgage is clear in 6 years and from 1st Sept is 4.24%

Also have a second mortgage at the same rate which goes on for 16 years, (both are standard repayment mortgages) and at the current rate, the second mortgage is £126.68 per month

Details about my pension no 1, Each year I get a letter from a broker.

Here's part of this years

Personal Pension Plan Current Unit & Contributions Details
(FORMER PROTECTED RIGHTS BENEFIT ONLY)

Closing Unit Balance As At 8 June 2018

SEDOL Pension Fund    Units     Value

xxxxx  Managed AP          319.18  £44,887.16
xxxxx  Equity AP           140.48  £29,668.67

                             Total £74,555.83

Illustration date 8 June 2018 Retirement date xxxxxx 2019 (age 65)

Your estimated pension is equivalent to a yearly income of £2,870 today.

Your Illustration Assumptions

The illustration of 'what you might get when you retire' uses the following assumptions:

- Your retirement fund will grow at 2.6% after inflation each year.
we assume different growth rates depending on the fund/s your plan is invested in.

- Future inflation will be 2.5% each year

- The scheme will continue to be a registered pension scheme

- Your pension will be paid at the start of each month for your lifetime and will increase by 2.5% each year - no spouse or civil partners pension will be payable

Last years statement, the total value was £69,237.29

I'm interested in what Kidmugsy says, although I don't understand how I will make money, I always thought the first few years of a pension the broker gets most of it?

atush

Your wife should start contributing to a Personal pension as soon as she can.