Is there any way to access pension early

Marcon

theoretica said:

My understanding is that you can often access a SIPP early - but face considerable taxation to do so. 

You mean using a scam company, so that you end up paying punitive tax on an unauthorised payment, plus the scammer's fees, which tends to leave you with zero pension AND then a tax bill still to pay?

longwalks1

Nebulous2 said:

Most people who want to retire very early will have funds outside their pension to bridge the gap until they can access their pension. 

Using an ISA would be popular.

You can over a shortish period use debt such as credit cards but 8 years is a long time to juggle that. 

Are there any substantial assets, such as equity in a home, that could be used? 

They are starting to use an ISA, and they have approx £400k equity in their home, with a £100,000 mortgage remaining (figures something like that) 

longwalks1

Marcon said:

Two things to keep in mind: you cannot pledge your pension as security for a loan (@hugheskevi isn't suggesting that, but in case anyone reads it that way...); and the divorce route wouldn't accomplish much unless the partner is already aged at least 55. 

Thank you marcon, it could read that way but I understand it can’t be used as actual security for a loan.
Their long term partner will be 55 next year which is why it was suggested (albeit jokingly at first, then the cogs started turning). Just a difficult/awkward/unethical subject to ask about or discuss on here

QrizB

longwalks1 said:

Marcon said:

Two things to keep in mind: you cannot pledge your pension as security for a loan (@hugheskevi isn't suggesting that, but in case anyone reads it that way...); and the divorce route wouldn't accomplish much unless the partner is already aged at least 55. 

Thank you marcon, it could read that way but I understand it can’t be used as actual security for a loan.
Their long term partner will be 55 next year which is why it was suggested (albeit jokingly at first, then the cogs started turning). Just a difficult/awkward/unethical subject to ask about or discuss on here

Could they both retire and live solely on their partner's pension for the first eight years, then do some rebalancing?

longwalks1

QrizB said:

Could they both retire and live solely on their partner's pension for the first eight years, then do some rebalancing?

Their partner, who is soon to be 55 only has approx £90,000 in a SIPP.  The larger SIPP that can’t be accessed is nearer 10 times that amount

Albermarle

longwalks1 said:

QrizB said:

Could they both retire and live solely on their partner's pension for the first eight years, then do some rebalancing?

Their partner, who is soon to be 55 only has approx £90,000 in a SIPP.  The larger SIPP that can’t be accessed is nearer 10 times that amount

Maybe if their partner got their hands on nearly half a Million quid, they might do a bunk !

Where a lot of money is concerned you can never be sure what will happen.

Pat38493

longwalks1 said:

Marcon said:

Two things to keep in mind: you cannot pledge your pension as security for a loan (@hugheskevi isn't suggesting that, but in case anyone reads it that way...); and the divorce route wouldn't accomplish much unless the partner is already aged at least 55. 

Thank you marcon, it could read that way but I understand it can’t be used as actual security for a loan.
Their long term partner will be 55 next year which is why it was suggested (albeit jokingly at first, then the cogs started turning). Just a difficult/awkward/unethical subject to ask about or discuss on here

The divorce option like that comes up from time to time.  I'm not aware of anyone actually trying this, or whether there is any law that could be used to stop you from doing it in the age of no fault divorce.  However the bigger issue is that you then have no legal right to that money once divorced (even if you think it is temporary) so you have to really really trust that person.

Other than that, as others have mentioned, they only other option that comes to mind is to somehow leverage equity in the home e.g. by downsizing to fund the first years.  

Saving up money outside the pension for a few years might at least buy a few years of early retirement - this could be accelerated by leaving the existing pension scheme, but obviously you are sacrificing a lot of tax benefits and employer matching by doing that.

longwalks1

Albermarle said:

Maybe if their partner got their hands on nearly half a Million quid, they might do a bunk !

Where a lot of money is concerned you can never be sure what will happen.

Thanks Albermarle.  Fully agree, but it’d be a choice they made. I’d be overly cautious I think in that situation, but each to their own.  

Asking really to see IF it would work in principle (theoretically of course)

longwalks1

Pat38493 said:

The divorce option like that comes up from time to time.  I'm not aware of anyone actually trying this, or whether there is any law that could be used to stop you from doing it in the age of no fault divorce.  However the bigger issue is that you then have no legal right to that money once divorced (even if you think it is temporary) so you have to really really trust that person.

Other than that, as others have mentioned, they only other option that comes to mind is to somehow leverage equity in the home e.g. by downsizing to fund the first years.  

Saving up money outside the pension for a few years might at least buy a few years of early retirement - this could be accelerated by leaving the existing pension scheme, but obviously you are sacrificing a lot of tax benefits and employer matching by doing that.

Hi Pat38493

He has spoken a bit about the divorce option, and wasn’t sure if a mutually agreed ‘no fault divorce’ would allow the new husband to agree to hand over 50% of his pension to his ex-partner (whom he was with for 20 years) as almost a ‘good will gesture’.  Maybe I’ll ask for him in the ‘relationships, marriage and divorce’ forum on here regarding ‘no fault divorce’.

As for downsizing I think they wish to remain in their home and not move, but as mentioned previously there could be the option of freeing up equity via a mortgage (wrong time of the decade though for borrowing at present).

He’s started saving into an ISA and backed off his AVC’s, so only paying enough into his workplace pension now for the employer to match his contributions.

Sarahspangles

The marriage to divorce option wouldn’t be quick (supposing it’s even possible). You have to get married, be married for a year, then the process of getting divorced could easily be getting on for a year as there is a prescribed wait of 20 weeks at one step. If you need a consent order for the financial settlement that’s got its own timescale.

Since the process would straddle three tax years (ending in 2026/27) isn’t there an alternative option? This is to pay as much as possible into F’s SIPP over three years (F being female partner), with the aim of drawing all of it by the time M is able to retire. Obviously F needs to have headroom to contribute from relevant UK earnings, and the couple have to be able to live on what’s left, possibly by paying the minimum on the remaining mortgage. They also have options like downsizing at the point they both stop work, going off in a campervan and then buying a property when M can access his lump sum. However none of this is very tax efficient.

Marriage is already a good idea from an IHT planning point of view, as is rebalancing their pensions because as it stands, doesn’t F risk not being able to use her personal allowance in retirement while M could end up paying higher rate tax?