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Pension Drawdown @57

User
Posted 04 Apr 2018 at 07:40
Good morning

I am 57y/o with Stage 4, Gleeson 9 since Sept 2016, and have effectively retired supported by very modest savings. Does anyone have any information and/or experience of withdrawing their pension(s) early? I am taking a wide-ranging, pragmatic view, and obviously want to maximise our financial situation given the potential shortfall in my life expectancy. I have read very useful and detailed pension advise for those with 'normal' life expectancy on www.moneysavingexpert.com but there is not reference to those with more immediate needs. In the very near future I intend to engage an Independent Financial Advisor but would welcome any suggestions or experiences of others in a similar situation to guide this.

Many thanks

Boyd

(aka mini-thumper)

User
Posted 04 Apr 2018 at 10:51
Hi Boyd

I take it you are talking about a private pension. If the scheme allows, and you are able to persuade your Onco to confirm a life expectancy of less than a year you should be able to access your funds, with the first 25% tax free and the remainder taxed at the appropriate rate but you would need to ask your pension provider regarding their rules as it is also possible to start your pension as a lump sum of 25% and a regular income. But please take professional advice before you make a decision

All the best

Roy

User
Posted 04 Apr 2018 at 12:08

Anyone over 55 can withdraw their pension, no medical report needed, but as Roy says there is a tax penalty. I wonder if he is thinking about life insurance, as they will often pay out in advance if you are unfortunate to have had a terminal prognosis.

If you engage a financial advisor make sure you get a definite quote for the advice. Fixed fee is better than percentage.

Edited by member 04 Apr 2018 at 12:10  | Reason: Not specified

User
Posted 04 Apr 2018 at 16:20

Boyd,. I'm not sure these doom and gloom prognoses are helpful. We don't know much about your particular diagnosis, but assumptions of a year to live could be wildly pessimistic! I agree about getting financial advice, but there are an awful lot of crooks out there willing to take your money. I would pay attention to the experience of people you trust with their IFAs before engaging one.

I had already taken my pensions and enjoyed nine years of retirement before my Gleason 9 shock over ten years ago, l was saved the problems you face, but I wish you the same longevity!

AC

User
Posted 10 Apr 2018 at 12:21

I have done some reading up round this, having recently taken slightly early retirement following prostate cancer but wanting to work out how to maximise the situation for my wife retiring significantly early so we can enjoy some adventures. She is younger than me but has also had health issues that mean our window for being highly active in retirement may be shorter than for couples in optimal health (but of course we don't actually know ...)

We got financial advice, on a fee basis as recommended above. Once you have decided what to do you can operate it yourself without percentage-based fees which quickly amount to much more. His recommended investments were statistically unlikely to do so much better than my self-chosen index-tracker equivalents that they would have covered those extra costs.

Obviously your situation is unique to you, which is why no one can advise without all the information, but other people's experience might help you think about ideas. In our case my wife will have some bits of final salary pension from various past jobs but they would be seriously reduced by taking them early. Eventually though, when she finally reaches 67 and gets the state pension, those plus my pension will keep us reasonably comfortable. The question is how to get there from here.

My wife's current pension scheme is "defined contribution" which is what I assume yours is, producing a "pot" with her name on it within the company fund. Because she, like you, is over 55 she can take it as soon as she retires though for some reason not from the company scheme - she will need to transfer to a different external pension fund. The good news is that there are lots of options including several you can manage yourself for minimal fees (see the Monevator website for comparison calculations for what are called SIPPs). The deal with pension funds is that you can have 25% as a lump sum without tax, but anything after that is treated as income and subject to income tax. Our plan is that she will take the allowed lump sum and then draw down the remainder at the most you can without paying tax, i.e. just the threshold amount each year. It will leave us a little short, but we reckon we will be fine supplementing income from the upfront 25% plus the lump sum bit of my pension which is now in a building society.

There is a whole separate question of how to invest money held in a SIPP which you are planning to draw down relatively quickly. Money held as cash will get poor interest rates and lose out with inflation, but any unit trust type investment needs to be kept for at least 5 years or the short term fluctuations outweigh the potential gains (I have plumped for the relatively low risk stock-bond mix of the Vanguard LifeStrategy unit trust range). You can't take it out of the pension to put in a building society without paying tax upfront, which is what pension schemes avoid.

 
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