General Chat

Opinions please...

Am enquiring on behalf of a 55 year old relative who has recently left her job where she had been paying into a Defined Benefit Pension for 11 years, as it is a relatively small pension she is considering cashing in the entire pot now that she is aged 55, she plans to sell up and buy a new house and will invest the proceeds into buying a bigger and better property, is this a wise move?

It’s impossible to say what would be right for your relative without knowing all her circumstances. She really needs to take some professional advice. Could she talk to someone like the Citizen’s Advice Bureau who might be able to point her towards some inexpensive financial advice?

I wish her luck and hope she does what’s right for her.

My personal opinion is that if she cashes in the pension now, I wouldn't overstretch on buying a bigger and better property with it, unless she really needs to do so to get the location she wants. House prices may well fall or stay static and if she relies on the equity going up for future funds that may be a problem. It depends on a lot of factors though, what her personal situation re income is, whether she will be working in the future, whether she will lose some of the money in tax. As Vera has said she needs to get some advice.

This is just via MSE but do check it out as I have no personal experience of it. https://www.unbiased.co.uk/

Having no experience of current pensions in the UK ............... my thought would be ............

would she be better advised to leave it where it is, or to take it out and invest at a higher interest rate, so that it will grow and give her a better income down the line

I know what we would do here, and in the current housing situation, I would not be investing in a larger, better property believing that I would make money when it came time to sell it.

Totally depends on the size of the pension pot and her tax position this year and next.

Small pots are worth cashing in if within the tax free allowance. Also gives the option of buying an alternative pension to draw down within a set period or letting it ride.

None of us can give definitive advice and at least three professional opinions should be sought to avoid paying commissions to a money grabber.

She's left her job, but actually has another 11+ years before she gets her state pension.
Does she intend getting another job?

Yes maggie.... she intends to work part time, she owns her home and doesn’t have any debts. Her pension pot is worth around £60.000.
Thank you all who replied for your thoughts on this, she will appreciate your opinions.

Remind her that only 25% will be tax free. She really does need professional advice.

Making long term decisions on funds in a currency which may be about to go pear shaped is not a good move. That especially includes UK property.

By and large people are reducing their exposure to sterling - it was € 1.41 / $ 1.50 before brexit. £ 60 K is not anywhere near enough for a professional funds mgr. and in any case getting sound advice right now is v difficult.

Best bet right now is probably to sit and wait, move the funds into $ US account with a major and trustworthy financial inst. which has a decent track record for small scale investors.

Shop around for advice and above all else keep control. It is all too easy to sign it away or get locked in.

When you reach 55 you can take a 25% tax free lump sum from your pension fund. The rest of the fund has to buy you a pension. I did this with an old bank pension. After my lump sum I had about £38k left. This has only bought me a monthly income for life of £100.

So not sure what income this lady thinks she will get but it wont really be a huge amount. If you want a pension income say of £300 a month, then your fund isn't going to last that many years and you are not retiring for around another 11 years.

I only cashed mine in because of my circumstances and I needed money to help me.

I used a company called Just. I had 2 long phone calls at their expense. Then they sent me various options before I decided which option was best for me.
They were really helpful.
If anyone wants the details, I can PM then.

Florence in the hebrides

In the OP, Haribo states that she hoped to put the entire pot towards a new home. Even assuming she can release it all, she’ll be taxed on 75% of it - she won’t actually get £60k.
Rolle’s advice, re investing it elsewhere, doesn’t apply if she follows her current thoughts. The holding pension provider should be to give her some figures to work with.

I'm not sure that investing in US $ is all that wise .............. the economy is being hard hit in the US by Trump's sanctions etc, he is up for re-election and is already on the campaign trail. Promises will be made that cannot be kept, and who knows where the US economy will go.

Far too risky in my humble opinion ............


but I know I will be corrected by someone who always knows better ;-)