Pension for property

davetheman007007

Hi, I am 53 and currently renting with little savings.  Ideally I am looking to purchase a property or park home, I am thinking at 55 to take 25% of my pension which is worth around 200k, so this would give me a good deposit

Is this allowed and is 25% the maximum I can take from pension, I understand the 25% is tax free, I am still working

Any suggestions / thoughts would be gratefully recieved.

Brie

What type of pension is it?  Defined contribution, defined benefit, private?

I understand buying a property - either to live in yourself or rent (though personally I wouldn't want to have rental property but that's just me).  Have some caution if looking at a park home because some have very restrictive conditions for living there, ongoing charges, issues with selling on.  No direct experience of those either but I've read some stories on MSE about problems.

Marcon

davetheman007007 said:

Hi, I am 53 and currently renting with little savings.  Ideally I am looking to purchase a property or park home, I am thinking at 55 to take 25% of my pension which is worth around 200k, so this would give me a good deposit

Is this allowed and is 25% the maximum I can take from pension, I understand the 25% is tax free, I am still working

Any suggestions / thoughts would be gratefully recieved.

Whether it's allowed depends on the type of pension scheme you are in. If it's a defined contribution scheme (likely from the sound of it) you can take 25% tax free once you reach the legal minimum pension age of 55 (rising to 57 in 2028).

You can take further funds but they will be taxable at your marginal rate - and are likely to trigger something called the Money Purchase Annual Allowance, meaning you are limited to contributions (including tax relief and any employer contributions) of £10K per annum. That might sound a huge amount and much more than you'd contribute in any tax year, but if you get any chance to rebuild your pension savings, it's a point worth being aware of.

If you are in an employer's pension scheme, check with your employer whether you would be treated as 'opting out' if you did either of the above. If you are, then you can ask to rejoin but the employer need not re-enrol you for a year, meaning you'd lose the employer contributions during that period.

davetheman007007

Brie said:

What type of pension is it?  Defined contribution, defined benefit, private?

I understand buying a property - either to live in yourself or rent (though personally I wouldn't want to have rental property but that's just me).  Have some caution if looking at a park home because some have very restrictive conditions for living there, ongoing charges, issues with selling on.  No direct experience of those either but I've read some stories on MSE about problems.

Thanks, yes ideally just want a place we own rather than paying rent, am aware that park homes have ongoing charges which is a concern

davetheman007007

Marcon said:

davetheman007007 said:

Hi, I am 53 and currently renting with little savings.  Ideally I am looking to purchase a property or park home, I am thinking at 55 to take 25% of my pension which is worth around 200k, so this would give me a good deposit

Is this allowed and is 25% the maximum I can take from pension, I understand the 25% is tax free, I am still working

Any suggestions / thoughts would be gratefully recieved.

Whether it's allowed depends on the type of pension scheme you are in. If it's a defined contribution scheme (likely from the sound of it) you can take 25% tax free once you reach the legal minimum pension age of 55 (rising to 57 in 2028).

You can take further funds but they will be taxable at your marginal rate - and are likely to trigger something called the Money Purchase Annual Allowance, meaning you are limited to contributions (including tax relief and any employer contributions) of £10K per annum. That might sound a huge amount and much more than you'd contribute in any tax year, but if you get any chance to rebuild your pension savings, it's a point worth being aware of.

If you are in an employer's pension scheme, check with your employer whether you would be treated as 'opting out' if you did either of the above. If you are, then you can ask to rejoin but the employer need not re-enrol you for a year, meaning you'd lose the employer contributions during that period.

Am not sure if it is a defined contribution scheme, presume best to contact my pension company and ask, I am currently opted out of company pension

QrizB

davetheman007007 said:

... I am currently opted out of company pension

You should seriously consider opting back in, it's free money (especially when you're in your 50s and within sight of being able to get it back out afain).

MallyGirl

How would you fund the rest of the park home purchase - most mortgage lenders will not lend on park homes.

davetheman007007

QrizB said:

davetheman007007 said:

... I am currently opted out of company pension

You should eruiosly consider opting back in, it's free money (especially when you're in your 50s and within sight of being able to get it back out afain).

I will next year, just going through final stages of divorce and the pension split is based on a percentage, so don't want my pension to increase at the moment

davetheman007007

MallyGirl said:

How would you fund the rest of the park home purchase - most mortgage lenders will not lend on park homes.

I understood that are lenders that will but at higher rate, with these being half the price of a brick property in the area, that is the appeal a mortage on a brick house would be too much per month for the years left

gwynlas

Unless you have prior knwledge of park homes I would not suggest that you go go down that route.  You might be eligible for a 25 year mortgage if you have sufficient pension income on top of statutory pension otherwise a shorter term if affordable. Some retirement communities offer cheaper accommodation to over 55s but these often have high service charges and are difficult to resell.I would advocate buying a freehold property on the open market providing it is future proof re ageing.

chockydavid1983

How flexible are you on location? £200k could be a hefty deposit depending on where you're buying.