Pension release

tattycatt

Hi All 

I'm looking for opinions from some of the wise bods on here.

My husband is 58. He has 2 main pensions including a decent final salary pension which seem to be ticking over.  He also has 2 smaller pensions from employment years ago totalling approx 59000.

We have this idea of combining the 2 small pensions (via pension bee) and then release the 25% tax free to invest in the house and helping future proof it by adding a downstairs loo.  

Is this a viable option? Is it a good idea? 

I'd really appreciate some pension savvy opinions on this as although I'm fairly savvy with money, pensions are a whole new ball game.TIA

tacpot12

Adding a downstairs loo is a useful change that will help you, but I would try to save up the money to do this, or DIY it. I did it myself when the builder I asked to quote quoted well over £2000.

It would be better to leave his pension savings invested until he needs them for his retirement. Lots of people take the 25% tax free without really considering how short it will leave them in their retirement. 

QrizB

Your thread title had alarm bells ringing for a moment!

"Pension release" usually means some wide-boy has cold-called you and said he can get your pension money out for you even though you're not of pensionable age yet. All he needs is a few % of your pot ... then you end up with no pension and a huge bill from HMRC.

tattycatt said:
Is this a viable option? Is it a good idea?

Do you have a robust, budgeted plan for funding your retirement, including if Mr tattycat pre-deceases you? Does that plan rely on the ~£15k of tax-free cash you are planning to take from his pension?

If the answers to my two questions are "yes" and "no", your proposal might have legs.

xylophone

Both Defined Contribution  pensions with no guarantees of any kind?

tattycatt

Thankyou for the rapid and thoughtful responses

@tacpot12. & @QrizB

Sorry to be misleading   

I understand what you are saying. The changes are going to be necessary in the future due to arthritic knees but doing now will 'hopefully' have the dual benefit of making life a little easier and 'hopefully' helping add future value to our property.


 Mr Catts other pensions project an income of around 65% of his salary. The smaller pensions are not doing well at all and have a projected income of approx 1500 py combined.  So my thoughts were it wasn't a big gamble to lose 25% of that as it would take a long time to get that back in pension.  Therefore it seemed a good idea to put it in our house which would make it a better investment should we decide to downsize later. 

I hope this clarifies my thoughts. As I said before, I am really uneducated when it comes to pensions but If this "has legs" as a plan,do you know if it's as simple a process as described. Or am I incorrect in my understanding of it. 

Again, any feedback is very much appreciated 

Pat38493

If he has a large DB pension accrued, and this pension will be enough live on, then yes it is feasible to do this.  Who are the 2 existing pensions with? 

Are the 2 smaller pensions Defined contribution money pots?  You would need to check whether there are any exit charges on the other pensions, and whether they have any guaranteed benefits built in to them.

You could also check whether rather than moving them both to Pensionbee, you could just keep one of them and transfer the money from the other in there - some pension providers like to try to imply in their marketing information that they are the only ones who can give you access to your 25% tax free cash - this is rubbish - all the modern platforms allow this.   Therefore it might be easier just to transfer one of them into the other and take the tax free cash.

Transferring pensions is normally pretty easy to do as long as there are no guaranteed benefits.

Beyond that, you don't say anything about your own pension arrangements but if your husband predeceased you, have you both thought about whether you would then have enough money - DB pensions often provide a spouse pension if the member dies, but it's usually 50% of the prior amount.  In any case if you need to make the home improvements for health reasons it may still be something that you need to do. 

Albermarle

When looking at your long term pension planning ( as suggested above before making any decisions about taking the tax free cash) also think about these three points:

Your husbands DB pension will almost certainly have an option to take some tax free cash when he takes the pension. Taking this will mean a reduced annual pension, so that is another decision whether to take it or not.

You will both ( hopefully) get a full state pension at some point ( have you checked?). In which case you will need less money after receiving that than before it. ( assuming he has stopped work before then) 

When does he plan to retire?

You do not need to go into minute detail but best to have a plan, rather than just tackling each question ( like should I take this tax free cash now) as it comes.

LHW99

Also, what is your own position? Do you have any work pensions in addition to the State pension?

You would inherit his DC pensions, but probably only 50% of the DB pension.

Would you have enough on your own if the proverbial bus came along for him? If not, then a bit more planning may be needed.

xylophone

Have you both obtained state pension forecasts?

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

Do you have pension provision other than state provision?

Your husband has a defined benefit pension and three other pensions, two of which are of modest size.

If your state pensions, the DB pension, the largest DC pension and the residue of the other two pensions will be enough to keep you comfortable, it seems to me that using just the PCLS from the combined modest pensions to finance the downstairs loo is a good idea.

Adding a downstairs loo/shower/utility was one of the first improvements I made to my property - it has proved a boon.

tattycatt

Some great advice and thinking points. 

The two smaller pensions are with Sunlife and Aviva. I will look into guaranteed benefits and extra charges.  Good idea about looking into possibly transferring one to the other.  

I'm 52 with no private pension. Mr Catt is 58.  I have checked and we are both up to date for state pension contributions

The plan was for him to retire at 67 with the larger pensions (plus state pension) but if he continues to have good health 🤞 he may continue to work reduced hours as he is in IT.  Hopefully build up equity in the house to then downsize at a later date to release a small lump sum for extras.  I will look some more at the benefits should the worst happen.  

Again, many thanks 

Albermarle

tattycatt said:

Some great advice and thinking points. 

The two smaller pensions are with Sunlife and Aviva. I will look into guaranteed benefits and extra charges.  Good idea about looking into possibly transferring one to the other.  

I'm 52 with no private pension. Mr Catt is 58.  I have checked and we are both up to date for state pension contributions

The plan was for him to retire at 67 with the larger pensions (plus state pension) but if he continues to have good health 🤞 he may continue to work reduced hours as he is in IT.  Hopefully build up equity in the house to then downsize at a later date to release a small lump sum for extras.  I will look some more at the benefits should the worst happen.  

Again, many thanks 

Although you have no earnings, you can contribute £2880 per tax year to a pension and £720 in tax relief will be added on. Assuming you do not have any taxable income later until the state pension arrives, you can most likely withdraw all this smaller pension pot tax free.
Free money.....

Be aware that downsizing is not as easy as it sounds. Often you start looking at nicer areas ( sea view?) and very little money is actually released.