Cashing in Pension Pot

Marathonman1026

Hi if your in your 70s and still have an invested private pension pot of £85K not used
whats the best way of getting it out esp if your in poor health.

Brie

Can you do drawdown with it?    You may need to stage it over a few years to ensure you don't pay too much tax but are likely to be able to get something like 25% of it tax free.  Are you able to just get that initially?  

Do you need it?  Could you just leave it to be inherited by someone (you say you're in poor health) or do you need some to pay for your care?    

Alternative would be buying an annuity - poor health and in your 70s should get you a good rate, I think.  Maybe put a guarantee on it so it will def run for 10/20 years - again it basically means you would be passing it on to someone else when you die.

Marathonman1026

Hi drawdown would be an option or they could leave it in but my feeling is they should get some benefit themselves they have no children and  they say they dont need the money as they live modestly.thanks for reply.

Marcon

Marathonman1026 said:

Hi drawdown would be an option or they could leave it in but my feeling is they should get some benefit themselves they have no children and  they say they dont need the money as they live modestly.thanks for reply.

Your feeling might be that (and I can see why), but what do they actually want to achieve? 

Brie

If they don't have a lot of money and health is poor how likely will they need to go to the local authority to get help with care costs (in home or otherwise)?  If that's likely then having a pension pot might be included in the list of that individual's assets - so no help until all the £85k is gone.  At least I think that's what they might do.

But if it's an annuity all they can do is look at the monthly income received rather than the entire pot.  The LA can't make someone unwind something like this.

Brie

Sorry - and just checking - poor health may mean they are eligible for attendance allowance.  That has nothing to do with income but might be a handy extra £100ish a week.

Marathonman1026

I dont think they have any idea what to do with it they say they dont need it , however it could pay for help like cleaners gardners etc. If it goes towards care costs in future I think thas fair enough.

LHW99

Brie said:

If they don't have a lot of money and health is poor how likely will they need to go to the local authority to get help with care costs (in home or otherwise)?  If that's likely then having a pension pot might be included in the list of that individual's assets - so no help until all the £85k is gone.  At least I think that's what they might do.

But if it's an annuity all they can do is look at the monthly income received rather than the entire pot.  The LA can't make someone unwind something like this.

I think (no expert) that the government assign a nominal "income" from an unused pension pot. So the total isn't actually counted as capital as such. People on the benefits board may know more.

Albermarle

LHW99 said:

Brie said:

If they don't have a lot of money and health is poor how likely will they need to go to the local authority to get help with care costs (in home or otherwise)?  If that's likely then having a pension pot might be included in the list of that individual's assets - so no help until all the £85k is gone.  At least I think that's what they might do.

But if it's an annuity all they can do is look at the monthly income received rather than the entire pot.  The LA can't make someone unwind something like this.

I think (no expert) that the government assign a nominal "income" from an unused pension pot. So the total isn't actually counted as capital as such. People on the benefits board may know more.

That is the case regarding eligibility for benefits. Not sure a local authority would assess it in the same way. Do not know really.

Albermarle

Marathonman1026 said:

I dont think they have any idea what to do with it they say they dont need it , however it could pay for help like cleaners gardners etc. If it goes towards care costs in future I think thas fair enough.

The easiest thing could be to leave it where it is, as they have no objective for how they want to use the money. 
You can leave an unused pension pot to a beneficiary, do they have any relatives or charities they might like to leave it to? In any case they should have filled in an Expression of Wishes form to name a beneficiary(s). Pensions are not included in wills.

However if they needed to cash it in quickly due to some major expense ( like a care home) they might get hit with excessive income tax that year.

Effectively there is no right or wrong answer.

MallyGirl

I'd be tempted to at least get the 25% tax free out if they are younger than 75 as the rules change for it being inherited at that point