Can I access my pension savings before I retire?

If you are over 55 and have the right pension – yes you can! This is great news for people in the UK at the moment, as the official retirement date seems to be getting further and further away.  But why would you want to use hard earned cash which has been saved for your later years? Isn’t this a bit risky?

Use the guidance of a regulated financial advisor

Clearly money put aside for your retirement years was put there for a reason. To diminish those funds could be putting your retirement in danger. For this reason, you should never mess with your pension pot alone and get the guidance of a regulated financial advisor if you are thinking of releasing money. These professionals are accountable to the FCA.  Many offer a no-obligation pension check and can help you understand the options available to you. They can let you know if releasing money is right for you or not, based on your individual circumstances. It could leave you worse off in retirement.

In other words, as you approach your final working years you can double check that your pension pot is strong enough to fund a long retirement and also consider how you can use your savings to help you with debts, treats or big buys in the here and now.

So how do you access your pension?

In 2015 the government in the UK introduced pension freedoms. They allow people to take lump sums from their pension or a regular income, from the age of 55. You can only do this with work pensions or private pensions. You cannot access your state pension or unfunded pensions. If you have a final salary pension you can transfer monies to a fund which offers access. However, be careful as you could be giving up valuable guarantees. Before you do this get guidance as to whether having access to your pension will be detrimental to your long term benefits.

What are your options?

Here are three fundamental ways in which you can access your pension savings:

  • One lump sum
  • Taking out lump sums whenever you need them
  • Income drawdown. In other words, you draw down your pension as a regular income.

The first 25% of any money you take from your pension will be tax free. Any money left in your pot will continue to be invested by your pension provider. As seen above, you can take as many lump sums – if and when you need them. With drawdown you can create an extra income for yourself which could act as a sole or complimentary income. 

Why do people access their pensions?

Throughout our working lives our hard earned cash tends to go on five specific things:

  1. Sustenance. i.e., paying for those things we need just to allow us to live comfortably
  2. Those treats we give ourselves on a weekly/monthly basis
  3. Short-term savings (i.e., that holiday to America next summer; that new sofa you have been promising the family; rainy day money)
  4. Emergency funding (that unforeseen urgent bill etc.)
  5. Long-term savings (i.e., a savings pot for retirement)

There is always going to be the time when you need that extra bit of cash urgently. It seems people access their pot for reasons 3 and 4 above. Statistics from 2018 show people tend to access their part for the following reasons:

  • 32% to tackle a debt
  • 21% to make house improvements
  • 10% to buy a new car

See here how people are using pension freedoms in the year 2019/2020.

Whatever you do – don’t go it alone. Seek out the guidance of a regulated financial advisor to ensure your pension pay-out will be maximised after any access or indeed if it is a good idea at all. Check out the FCA website to get ideas as to where to find an advisor.

If you are considering your pension, consider using a regulated pensions specialist like Portafina or, view the information guides at The Pensions Advisory Service.

Collaborative post with our brand partner. 

GransThread Jan Speedie Talks About Her New Phase

Jan Speedie: Surrey Reviews EditorRetirement is entering a completely new phase of life; I am not going to say final phase. I have to admit when faced with retirement after 30 years working in the NHS I was worried what life would bring  – daytime TV, expanding waist line with too many coffee and biscuits, aches and pains of a maturing body.

Being one of the three Grannies who helps administer the charity www.wordsforthewounded and faced in 2015 with the Mud Challenge, our fundraiser for that year, it was off to the gym to get fit and not let my team down. I remember the bemused faces of the staff at Ash Manor Sports Centre when I explained that in 6 weeks I needed to be fit and ready for the challenge – well they did it and now I am a regular at the gym and will even admit that I enjoy the hard work and friendship.

The fundraiser for 2014 was a tandem skydive: pushing 70 and strapped to a gorgeous young RAF instructor what more could a girl want – it was an amazing experience. Then there is feeding 40 people lunch at the W4W Litfest with little experience of mass catering which has proved to be an interesting and rewarding event.

Back to everyday retirement – I have 4 grandchildren who still want to be with granny, but are totally unimpressed with my technology skills – but I am learning. I have been cajoled in to doing book reviews for Frost Magazine which is great as it keeps me reading and the brain ticking over.  It’s great to be able to holiday anytime and fly off to interesting destinations – Canada, Portugal, Italy, Poland and skiing in France and soon to add Australia to my list.  Then there are days out with friends completing things on our bucket lists. I take a renewed interest in cooking, gardening, decorating and even cleaning my house. Still need to investigate U3A, the WI and many more.

Some weeks my calendar is empty but it’s amazing what turns up or just occasionally it is nice to do nothing. Remember that 70 is the new 50 so let’s go for it and enjoy.

 

 

Gransthread: Retirement by Penny Gerrard

The trouble with writing about your retirement is that it could easily come out like one of those circular Christmas letters where people vie with each other to list their family achievements – little Emily’s amazing performance at as the youngest Olympic gymnast ever, young Peter’s prowess on the Jew’s Harp and forthcoming debut at the Royal Festival Hall and smug parents’ getaways at their little place on the French Riviera.

Gransthread- Retirement by Penny Gerrard1

Nanny and Grampie with their daughter, Penny’s mother 1925
As far as my own retirement is concerned, I keep wondering when it‘s going to start.    When I visualise a proper old fashioned retirement, what comes to mind is my grandparents who,  after a lifetime of house moves, finally settled in a respectable terraced house one street back from the sea front at Westbrook in Kent.   Retirement for them was a predictable affair with their days kicked off promptly at 5 am by my grandfather who believed in early to bed and early to rise, not just for him but for anyone in his household.   Nanny, who might very well have welcomed a more leisurely start to the day, was woken by his thumping footsteps down the stairs, accompanied by loud whistling, followed shortly afterwards by his arrival in her bedroom with a cup of tea.   Just in case she wasn’t fully awake he would bang vigorously on the cup with a teaspoon and announced loudly that the day was nearly over.

Nanny’s day followed a predictable pattern of housework – my weekly run around with hoover and feather duster was not enough for her.    The house had to be cleaned daily with every ornament in the floral wallpapered rooms conscientiously dusted every day.    My grandfather’s full English breakfast had to be on the table by 7am and washing was done using an old fashioned copper once a week.    Shopping was a daily matter – done with the aid of a sturdy wicker basket on wheels which she towed along to the parade of individual shops with a careful shopping list.   The day’s meat – two lamb chops perhaps –  was bought from a butcher who knew every customer’s preferences and relished the demise of the wartime rationing which had made life so difficult for him.  Fruit and veg meant a queue and a chat with other regular customers at the greengrocers and often her list would call for visits to the fishmonger, the chemist  and maybe the haberdashers where she would replenish her supply of knitting wool for the jumpers and cardigans she regularly knitted for me and my brother.   (These had to be sewn up a second time by my mother as Nanny’s knitting was fine but the sewing up was sketchy to say the least).

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Nanny with Penny’s mother 1942

Back home from the shopping, there was dinner to prepare – always meat and two veg, and often involving suet pastry.   A pudding and custard was considered essential and so it would often be well into the afternoon by the time she had cleared everything up and my grandfather had returned to the garden which was his pride and joy.    Then perhaps there would be time for a sit down, Woman’s Hour on the radio and perhaps a visit from two friends known to all the family as “the girls” even until they were well into their seventies.     There was a time when Nanny would use this precious free time to play her piano.   She had the enviable gift of being able to play by ear – and on visits I would watch her hands effortlessly skimming over the piano keys from which poured forth wonderful music.   Less enviable was her possession of a husband who, on a whim, sold her piano without her knowledge so that her gift was left to wither.   She did not complain.

Her afternoon free time over, it was time to get the tea – a proper tea with bread and butter, home-made jam and cake – perhaps a Victoria Sponge or a lightly fruited madeira – all very decorous and eaten with wedding present cake forks from bone china plates.

Evenings meant my grandfather’s choice of radio programmes and more knitting for Nanny, but only till 9pm naturally because after all there was an early start tomorrow wasn’t there?

Finally Nanny could climb into her high Queen Anne bed, but not until she had entirely stripped it to remove the electric blanket and remade it – it not being safe to sleep on one!

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Nanny enjoying retirement at Westbrook with Penny’s mother in 1963

 

She was 75 when she died and I sometimes wonder what she would make of a modern retirement which often seems considerably busier than the working life I left behind ten years ago!   She did share my enjoyment of the knitting which keeps me occupied in spare moments, but more importantly she enjoyed the time spent with friends and family which are the most important part of my own retirement.    So perhaps we are not so different after all.

 

 

Gransthread – On Retirement

Penny Deacon’s version of retirement 
I spent my twenties living on a yacht, travelling the world. Great fun. Then I moved to teaching which turned out to be more fun than I’d expected. I also ran school libraries and wrote romantic novels. And some crime. Then I was Retired.

First there was panic. How do I cope on half my income? What am I going to DO with myself? And how will I get to know anyone since I’ve just moved house and my close friend in the area has promptly fled to London (thank you , Margaret). I imagined myself  a lonely and bored hermit.

Fast forward five years. I was swimming in the sea this morning with a friend (new). And lunched with three other friends (also new). I have lost three stone (much needed). I have been to the Galapagos Islands (dream trip)  and Orkney (another dream – despite the rain). I’m off to Italy next month. And then there’s the new kitchen …

I didn’t win the lottery. I DID get lucky – my health is good. My pension, much to my surprise, has proved adequate, and some of my savings got me to Galapagos (you can use up too many opportunities by keeping all your savings for a ‘rainy day’ which, if fate is kind, doesn’t come). I rediscovered who I was and, I hope, who I might be. Because I was in a new town I understood it was up to me to go out and find new friends (U3A and the local leisure centre gave me most contacts). It wasn’t  easy, but no harder than being a ‘new girl’ anywhere. I only bonded with one in every dozen new acquaintances, but that’s plenty to provide company and inspiration, and then some of their friends became my friends and so it goes on. Great return on a little effort and some occasional embarrassment (we’ll gloss over the time I got thrown out of the Circle of Friends for being a ‘disruptive influence’. Moi?)

The hardest thing has been finding out what my own rhythms are. I spent more than thirty years working, quite literally when in school, to someone else’s timetable. Now I have had to find my own pace. I rediscovered swimming – both in the pool and in the sea. I discovered a need to do something worthwhile and Words for the Wounded gave me an opportunity to work for a great cause and also to leap out of aeroplanes and take part in the muddiest assault course in the world.

Gransthread - on retirement Penny 3

I found that I was a natural early riser (a surprise – I’d been longing for the opportunity to laze in bed every morning and found I didn’t want it after all). I like some structure to my day or week – and revel in not being tied down to it. I do some local volunteer work but don’t want to commit to the same thing every week. But I can see a time when I might.

And that’s the most exciting thing yet: for me (and I know how fortunate I am) retirement has been an opening as well a closure, and the world is still full of possibilities.

Gransthread would love to hear of your experiences of retirement: frost@margaret-graham.com

 

 

 

Tax year end: last minute pension planning tips

  • Investors are urged not to forget the ‘forgotten’ allowances
  • Falling annual allowance emphasises the importance of making hay while the sun shines
  • 50% tax relief is only available until 5th April
  • Bed and Sipp
Use your earnings related pension contribution allowance. For the past three years, we have seen a steady erosion in pension contribution allowances, with both the annual and lifetime allowances being cut. Both the Liberal Democrats and Labour have threatened to go further and limit the rates of tax relief available on pension contributions. If you have spare capital which you are looking to invest for your retirement, then it makes sense to get on and do it before 6 April.
Tom McPhail, Head of Pensions Research “Pensions are sometimes the forgotten allowance at this time of year when attention tends to be focused on ISAs, but with retirement saving tax breaks coming under increasing pressure from the Chancellor, wise investors will make hay while the sun shines. If you don’t use the allowances now, you may not get the chance next year.”
Non-earner’s pensions
It makes sense to share household retirement savings to take full advantage of the tax free personal allowance in retirement. Non-earners can contribute up to £3,600 a year to a pension and enjoy tax relief on their contributions. With personal allowances set to rise to £9,440 in 2013/14, a couple in retirement could enjoy a household income of nearly £19,000 a year without having to pay any tax – but only if they have shared their pension saving equally between them.
It is also possible to make pension contributions for your children – an effective way to give them a head start on their own retirement saving, as well as reducing a potential inheritance tax bill.
Bed and Sipp
Use existing investments to make a pension contribution. Even if you don’t have cash available to invest in a pension, you can potentially use other investments.
For example: Peter has some shares which he bought 10 years ago for £10,000. Today they are worth £15,000. He sells the shares, realising a gain of £5,000, which falls within his Capital Gains Tax allowance of £10,600. He invests the proceeds in his pension and immediately repurchases the share portfolio within his Sipp. As well as having now sheltered his investment within a pension for tax purposes, he also benefits from immediate tax relief of £3,750 which is added to his pension. If he is a higher rate taxpayer Peter can claim a further £3,750 after the end of the tax year.
Take advantage of the 50% tax rate.
For the (un)lucky few who pay 50% income tax, it makes sense to invest in a pension before the end of the tax year. Any contributions made from 6 April onwards will only be eligible for relief at 45%. If using carry forward as well, this could mean up to an additional £10,000 in tax relief.
Carry forward unused relief to boost contributions. If you have the capital to spare, then provided you also have the earnings to justify the contribution, it is possible to carry forward unused pension tax relief from up to 3 years ago. This means it is possible to make a pension contribution of up to £200,000, which for a 50% tax payer could then result in up to £100,000 of tax relief.
Plan ahead for flexible drawdown.
You’re not allowed to make any pension contributions in the same tax year in which you start flexible drawdown. So anyone planning on using flexible drawdown may want to top up their pension with any final contributions before 6th April – any contributions after that date could mean having to wait up to another 12 months before getting full access to their pension funds.

Bob Hoskins Has Parkinson’s

Acting legend Bob Hoskins has announced he has Parkinson’s and is to retire from acting. The British actor has over 70 film credits to his name. Hoskins was diagnosed last autumn.

The 69-year-old actors publicist released this statement on Wednesday:

“Bob Hoskins wishes to announce that he will be retiring from acting, following his diagnosis of Parkinson’s disease last autumn. He wishes to thank all the great and brilliant people he has worked with over the years, and all of his fans who have supported him during a wonderful career,”

“Bob is now looking forward to his retirement with his family, and would greatly appreciate that his privacy be respected at this time.”

Other legends that have Parkinson’s include Muhammad Ali and Micheal J Fox. Micheal J Fox sometimes still acts, he was recently seen in The Good Wife.

We wish Hoskins all the best.

RETIRED NATION IS SITTING ON £96.41 BILLION OF PERSONAL DEBTS

Everyone thinks it is just the young who are in debt and struggling, but new research has shown that the retired are having a tough time too. Here are some stats, and a checklist to improve your living standards and boost your income.

· Average retired person has £8,180 of personal debt

· 178,000 retired people have personal debts of £100,000 or more

New research from retirement income specialist MGM Advantage reveals that the average retired person has £8,180 of personal debt, collectively equating to a staggering £96.41billion. The average level of personal debt for a retired man is £9,007, compared to £7,350 for a retired woman.

Around 178,000 retired people each owe £100,000 or more, and just over 729,000 owe between £25,000 and £100,000. Only 57% of the retired population has no personal debt.

Amount of personal debt

Number of retired people

Between £1 and £5,000

2.486 million

Between £5,001 and £25,000

1.094 million

Between £25,001 and £100,000

729,000

Over £100,000

178,000

None

6.776 million

Don’t know

523,000

Aston Goodey, Director, MGM Advantage said: “These figures are alarming. As the cost of living continues to put pressure on household finances, many retired people will feel under growing pressure to take on debt to fund everyday living.

“There are things you can do to minimise the chances of funding your retirement through debt. It is vital that people shop around for the best annuity rate to maximise the income they receive. The difference between the best and worst rates can be as much as 50%2. People should also make sure they are claiming all of the State benefits to which they are entitled and also ensure that they have accounted for all old savings accounts and pension plans.”

On a regional basis, the average retired person in Wales has personal debt of £13,857, which is the highest in Britain. This is followed by £11,758 in the South West, and £11,255 in London.

Region

Average amount of personal debt per retired person

Wales

£13,857

South West

£11,758

London

£11,255

West Midlands

£9,417

Scotland

£8,890

North West

£8,094

South East

£7,390

Yorkshire and Humberside

£7,353

North East

£6,511

Eastern

£4,759

East Midlands

£4,164

Northern Ireland

*Sample size too small to report

MGM Advantage has published a checklist of things for people to consider when making important decisions at retirement:

1. Claim all state benefits to which you are entitled, to check, go to www.direct.gov.uk

Data suggests that pensioners are missing out on up to £5 billion a year in unclaimed pension credit, housing and council tax benefits, as well as attendance and disability living allowances.

2. Keep a track on any old personal or occupational pension arrangements, if you think you might have lost track of an old pension arrangement, you can check via the Department for Work and Pensions tracing service here http://www.thepensionservice.gov.uk/

3. You can check if you have any old savings accounts which you might have lost touch with over the years by going to http://www.unclaimedassets.co.uk/

4. Don’t just accept the annuity rate offered by your pension provider. You should shop around for the best rate and you might qualify for an enhanced rate for pre-existing medical conditions

5. Seek professional financial advice as this will help you get the best product and rate for your individual circumstances, to find an independent adviser go to http://www.unbiased.co.uk/

6. You may have old National Savings accounts or Premium Bonds, to check for unclaimed prizes please go to http://www.nsandi.com/files/asset/pdf/Tracing_brochure_v03.pdf


For further information please go to www.retirementnation.co.uk