Planning for retirement; property purchase

EnjoyingLife1000

I turn 55 next month so thinking best get my ducks in order lol

In the past money and me have had a bad relationship...we never seemed to last long with each other.  So one bankruptcy later and renting all my life here I find myself looking at my eventual retirement.

My take home is around £2845, with the occasional bonus once each year (yearly before tax etc  once my new inflation pay rise added will be circa £47340).

As of today my only debt is one credit card 0% until December 2025 sat at £1400; been using my spare to clear my debt eg van paid 2 1/2 years early as was a stupid 21%.

I'm living in my friends static for £600 month all in except gas bottles; use about 5 a year at £90.  The only other payment is to ex of £440 which ends July 2026.

Other from the above just a normal monthly expenditure, food, car

Save £300ish each month in savings, premium bonds.

Have one private pension which matures at 55, currently sat at 38000.  The reason this pot is low is that after 3 years starting it I stopped payments (living life to the full in my younger years).

Have a workplace pension that has a current estimate of £75000 at age 67, currently between my contribution and my employer £250 goes in each month.

The main thing I can see being a problem will be renting in my retirement, current rent where I live is around 800+ for a 1 bed flat, 2 beds terrace 1000+ etc so not a cheap area (South West with some large construction projects nearby soaking up rentals).

So the question is do I take all my private pension with the tax hit and use it as a deposit and get on the property ladder...or squirrel as much of my wages (£1500+ now with another possible £400 next year) away for a decent sized deposit in say 2 years.  I've been looking at mortgages on properties in this area and am looking at monthly payments of around £1000.

I would say my job is secure until 2030, the parent company is Dutch with this UK office.  My boss is only a few years older than me and is already starting to hand over the business to others in the other office.  After that could work remote as IT based (software/hard developer) if they decided to close my office; only 3 of us work here and all about the same age thinking of retirement before 67!

TLDR; should I use all private pension for property deposit or save for deposit over 2 years!

MallyGirl

taking all that £38k in one go would incur a fair bit of 40% tax.
Much better to save hard since you have a goal

EnjoyingLife1000

MallyGirl said:

taking all that £38k in one go would incur a fair bit of 40% tax.
Much better to save hard since you have a goal

Hmm yes you are right on the tax issue, just found a handy online calculator, looks like I'd get £27254 (give or take).  That's a hefty chunk to loose and possibly even more as any bonus is likely to stick me right on the 40% so all of the pension (minus 25%) would be hit gulp!

I wonder if I should be putting more in workplace pension then? but primarily still saving for a deposit.

EnjoyingLife1000

MallyGirl said:

taking all that £38k in one go would incur a fair bit of 40% tax.
Much better to save hard since you have a goal

Hmm yes you are right on the tax issue, just found a handy online calculator, looks like I'd get £27254 (give or take).  That's a hefty chunk to loose and possibly even more as any bonus is likely to stick me right on the 40% so all of the pension (minus 25%) would be hit gulp!

I wonder if I should be putting more in workplace pension then? but primarily still saving for a deposit.

DRS1

First thing to check is on what basis your employer contributes to the workplace pension.  Does it just pay a flat percentage of your pay or does it offer some form of matching - eg if you contribute x% the employer contributes x%?  If there is matching then you should contribute at least enough to get the maximum employer match.

Another thing is how are your contributions paid?  Is there salary sacrifice and if so how is any NIC saving split?  If not would the employer consider it? - especially now employer NICs are going up.

Saving through a pension is more efficient than saving outside even in an ISA but having money saved outside a pension can be more flexible especially if you need it for something like a house deposit.  Personally I'd make sure you were maximising your ISA contributions - although I suppose with premium bonds there is always the possibility of a big win.

Generally at your age paying more into your pension is a sensible thing to do but the pension is really there to provide an income in retirement NOT to go on a house deposit.  If you spend it all on a house what are you going to live on when you no longer work?

For that matter how will you pay off a mortgage when you are retired?

EnjoyingLife1000

Thanks, will check my work pension contributions and my contract to see how they're allocated.

With regards to using my £38k pension pot, this is with Scottish Widows and is currently sat gaining and loosing depending on the market.  Back when I took it out I set the retirement age at 55, that soon came around lol  So now ready to either take as a draw down or in part/full - that is the one I would use for the house deposit.  My workplace pension retirement is currently set at 67 so would not touch that as, like you say, need that for retirement to go along with my state pension.

To pay off the mortgage it would mean paying every penny I can between now and 67...that or win big on ernie   Would only be able to get a small place, just skip the bit about downsizing and buy a place for retirement now.  Still a big ask but if I want a retirement with a roof over my head think I need to work out a plan as renting isn't going to work.

Smudgeismydog

Your Scottish Widows pot can continue post 55, just because you set an age of 55 on it, it doesn’t mean it matures or stops at that age. Scottish Widows will contact you to ask you what you want to do with it, but you can keep it going as it is, or you may want to consider combining it with your workplace pension.

Agree with the other posters about taking a bit of time to understand more about where they both are invested.

Hoenir

Better to leave your pension invested. Compounding is your ally. The longer it remains there. The greater the amount of heavy lifting that will be achieved. Think of it as rolling a snowball. 

Albermarle

Smudgeismydog said:

Your Scottish Widows pot can continue post 55, just because you set an age of 55 on it, it doesn’t mean it matures or stops at that age. Scottish Widows will contact you to ask you what you want to do with it, but you can keep it going as it is, or you may want to consider combining it with your workplace pension.

Agree with the other posters about taking a bit of time to understand more about where they both are invested.

As above, you can take the SW pension at 55 if you want, but you do not have to. You can take it at any time between age 55 and death.
Or you could take some of it now, and the rest later.
25% of it is tax free, so if you wanted/needed it, you could just take that.

dunstonh

Have one private pension which matures at 55, currently sat at 38000.  The reason this pot is low is that after 3 years starting it I stopped payments (living life to the full in my younger years).

It's unlikely to mature at 55; it's more likely to have a 75-year maturity age. However, the scheme age for statements is likely to be set to 55.   That is not the maturity age.  Its just the selected retirement age.  You can change that.   So, if you don't need it now, then change the age to 67 or whatever.

Yorkie1

If OP took their private pension now (or, at least, more than a tax-free portion from it), might it limit how much they could pay into their workplace pension in the future?