Extension use pension?

Nickyno

We are currently having some improvements done to our home however we don't have the full amount in cash to get it all done.   If we save to do it, it will take roughly 3 years.  We are both working and over 55 and could release 25% of a private pension which would enable us to complete the works.  Do we take the pension?
We are wanting to enjoy the improvements while we can. 

Albermarle

OP - You will get better answers, with more detail about your overall finances, retirement plans etc.

In simple terms, if you are sure that you will have enough income in retirement, even without that tax free 25%, then it is a reasonable idea to use it to upgrade your home. Two points to consider;
It maybe possible not to take the full 25% if you do not need it all.
If it is from one of your current active workplace pensions, you need to check it is allowed.

Section62

Nickyno said:

...
We are wanting to enjoy the improvements while we can. 

Bear in mind building projects almost always end up costing more than people think they will at the start.  How likely is it you'd be able to afford to finish the project if you use the whole of the 25% released but find you still need more to complete it?

Understandable that you want to enjoy the improvements, but there are few things more miserable than having a home turned upside down by building works, especially unfinished building works.

If the above suggests either of you have a life-limiting condition where waiting three years (to save up instead) would make a difference then you may need to think carefully about how much of that time you want to spend on a building site, and also whether there are other things the money may be needed for.

moneysaver1978

How much is the extension? Can it be done in stages?

3 years doesn't seem that long to save.

Bigphil1474

Can you mortgage/remortgage to cover that amount and overpay your mortgage by what you would have been saving?

Ectophile

The big question is - can you afford to have 25% less pension when you retire?

Also check the rules on continuing to pay into your pension after you have taken that 25%.  You may find that you are only allowed to pay in a limited amount each month.  It's a rule that was introduced to stop people paying their salary into a pension tax free, then taking it straight out again tax free.

ic

Are you actually all planned and ready for the extension?  I found it took a year to get plans drawn up, planning permission, building regs and prices agreed with a builder (with ensuing changes to the plans as it all cost more than we could afford).  We then had to wait a few more months for the work to start.  In that time, and during the months of the build we were essentially able to continue "saving" (topping up) so I never used everything available in the bank.

Albermarle

Ectophile said:

The big question is - can you afford to have 25% less pension when you retire?

Also check the rules on continuing to pay into your pension after you have taken that 25%.  You may find that you are only allowed to pay in a limited amount each month.  It's a rule that was introduced to stop people paying their salary into a pension tax free, then taking it straight out again tax free.

If you only take the tax free part, then it makes no difference to what you can still pay in to a pension in future.
If you take just one penny of taxable income then the MPAA kicks in and you are limited to £10K pa ( includes tax relief and employer contributions).
The other issue is recycling ( which may have been what you were referring to ) but that would only be an issue if the OP increased their pension contributions significantly following taking the tax free cash. Also it is not clear that HMRC actually ever pursue anybody on this recycling issue.

Nickyno

Are you actually all planned and ready for the extension?  I found it took a year to get plans drawn up, planning permission, building regs and prices agreed with a builder (with ensuing changes to the plans as it all cost more than we could afford). 

We should have the plans within 2 weeks.   The loft conversion doesn't need planning permission and we can pay that straight away.   The extension will need planning permission, but we hopefully should get that within 4 - 6 weeks.  We will continue saving till we need to pay.

Section62

Nickyno said:

Are you actually all planned and ready for the extension?  I found it took a year to get plans drawn up, planning permission, building regs and prices agreed with a builder (with ensuing changes to the plans as it all cost more than we could afford). 

We should have the plans within 2 weeks.   The loft conversion doesn't need planning permission and we can pay that straight away.   The extension will need planning permission, but we hopefully should get that within 4 - 6 weeks.  We will continue saving till we need to pay.

You'll need building regs approval, and (if you haven't already) you'll need to locate a decent builder who can fit you in.  Ones that can fit you in soon probably won't qualify as 'decent builders'.

Good builders also look to phase projects so weather-dependent tasks are done when it is more likely there is likely to be good weather - e.g. they will typically start extensions in the Spring/early Summer so the groundworks and bricklaying are done in fine weather.  This way they will have internal works to do by the time the weather gets wet.  Loft conversions typically major on internal work, but if a significant part of the roof needs to come off then a good builder will try to work that as a summer project. Therefore when you are ready and able to proceed may not coincide with when a good builder has availability and wants to be doing that kind of project.  Planning ahead - for example getting on a good builder's list for Spring 2026 - typically ends with a better result, rather than going with the cheapest builder or one who can start next month.

Albermarle

Nickyno said:

Are you actually all planned and ready for the extension?  I found it took a year to get plans drawn up, planning permission, building regs and prices agreed with a builder (with ensuing changes to the plans as it all cost more than we could afford). 

We should have the plans within 2 weeks.   The loft conversion doesn't need planning permission and we can pay that straight away.   The extension will need planning permission, but we hopefully should get that within 4 - 6 weeks.  We will continue saving till we need to pay.

Although the loft does not need planning and the extension does, usually a loft conversion is a more technical job than an extension, and building regs supervision and final approval is critically important.
It is important with an extension as well, but usually less technical with the structural engineering etc .