How to get the cash out of your Pension

Bedrock Barney · Post by **Bedrock Barney** » 14 Nov 2007, 15:39

littlejimmy wrote:Apologies if this is a really styowpid question:

Is there any way I can use my pension fund (including a large portion of protected rights) to pay off debts? If not, why not?

I had a load of pensions just floating around (having been a bit of a job hopper), and have a few debts that would be cleared if only I could use the pension money.

I've been looking into this myself. Sadly you can't extract your pension money until you hit retirement age (20 years away for me). Even then I believe the you can only get 25% out as a cash sum. The rest has to be drawn down as an annuity payment per annum based on the remaining fund value. In the end I've transferred my 3 market investment based pension funds into secure cash growth funds whilst I take stock of the whole SIPPS situation (which is madder than a barrel of monkeys I far as I can make out). The cash fund is not what you would normally be advised to do but I have grave doubts about the strength of the markets and the eventual value of my fund if left alone. Even the cash based funds could presumbly go belly up if TSHTF big time. I'm now only paying nominal amounts into the cash fund (?50 a month).

snow hope · Post by **snow hope** » 30 Apr 2008, 10:06

My pension advisor has confirmed I can buy land with my pension through a SIPP, but "it has to be approved by the SIPP trustee and has to be providing rental income at a commercial rate". I was also told, "If you can find other like minded people you can jointly purchase land with several sipp holders."

Is anybody interested in going down this route - if so please pm me?

It occurs to me that if anybody owns land, but they need/want to raise some capital, they might be open to selling some land and then renting it back.

This is not an area I know much about, so any thoughts and advice would be welcome.

Post by **mikepepler** » 01 May 2008, 07:30

I happened to mention this idea to a pension advisor yesterday. He said that it is possible but complicated and expensive. He thought it wouldn't work unless you had a couple of hundred thousand in the pension fund. That's just one opinion though, and was off the top of his head.

Joules · Post by **Joules** » 01 May 2008, 07:38

mikepepler wrote: He thought it wouldn't work unless you had a couple of hundred thousand in the pension fund. That's just one opinion though, and was off the top of his head.

This is what my advisor told me too... something to do with the ratio of setup costs to fund value. Setup costs above (maybe) 1% of value is deemed to be expensive. I suspect that an IFA may open himself to criticism if he allows someone to spend over 1% on setup costs, so they're unlikely to encourage it.

not_terry · Post by **not_terry** » 16 May 2008, 14:29

Hi - my first post - so be gentle!

I'm really interested in this SIPP - I'm frustrated that I have had 32k in a pension for years, it has gone down but hardly up at all. I can draw out 25% cos I just turned 50 now but then I actually have to start drawing the pension which will give me abot ?20 a week.

Im moving to Egypt and 32K would get me an apartment I could rent out for 3-400 ?pm as well as capital appreciation at between 10-20% paso 32K could earn me over 6000 pa !!!

Would this be eligible for a SIPP

a being abroad
b being a non commercial property
c the comments made that if charges are ove 1% of value they may not be approved
d any other reasons

is there any other way I could get my money out

tnx

PaulS · Post by **PaulS** » 16 May 2008, 15:05

Hi Terry and welcome,

You cannot invest SIPP cash in a residential property.
You can invest it in commercial property (perhaps a workshop, a bakery, etc, which you could then rent out) or land (agricultural/ forest/ etc) and other investments.

Whatever you invest the cash in, remember that the income from that investment belongs to the pension fund, not you personally.

However, what you can do is to invest it in something that you yourself need for your work: a workshop for you to work in, land for you to cultivate, etc. That way your pension helps you to earn your living.

Another thought, if you are emigrating, it is probably possible to transfer your pension into another pension scheme under Egypt law, and then you that will decide what you can and cannot do with it.

Post by **kenneal - lagger** » 17 May 2008, 02:09

Hi! Paul

How does it work when you retire and start drawing the pension, not that I will be able to afford to retire? I've only got seven years to retirement age. If I bought land with my SIPP I would wish to keep the land after retirement. Also what happens to it on my death? Does it become part of my estate to be left to my children? I would probably have to supplement the cost of the land I want with other funds as well.

Any help would be appreciated.

Ken

Bedrock Barney · Post by **Bedrock Barney** » 17 May 2008, 10:19

kenneal wrote:Hi! Paul

How does it work when you retire and start drawing the pension, not that I will be able to afford to retire? I've only got seven years to retirement age. If I bought land with my SIPP I would wish to keep the land after retirement. Also what happens to it on my death? Does it become part of my estate to be left to my children? I would probably have to supplement the cost of the land I want with other funds as well.

Any help would be appreciated.

Ken

I'm also interested in this concept. Would love to offer to buy the 10 acres or so to the south of our garden using my pension fund. But would I own it? Do I retain total control, ie I hope I would have total autonomy regarding retaining the land or then possibly disposing and reinvesting elsewhere. Also what if the SIPP manager goes bust? Can the investment, be it land or a building, be taken away?

PaulS · Post by **PaulS** » 21 Dec 2008, 00:33

Bedrock Barney wrote:
kenneal wrote:Hi! Paul

How does it work when you retire and start drawing the pension, not that I will be able to afford to retire? I've only got seven years to retirement age. If I bought land with my SIPP I would wish to keep the land after retirement. Also what happens to it on my death? Does it become part of my estate to be left to my children? I would probably have to supplement the cost of the land I want with other funds as well.

Any help would be appreciated.

Ken
I'm also interested in this concept. Would love to offer to buy the 10 acres or so to the south of our garden using my pension fund. But would I own it? Do I retain total control, ie I hope I would have total autonomy regarding retaining the land or then possibly disposing and reinvesting elsewhere. Also what if the SIPP manager goes bust? Can the investment, be it land or a building, be taken away?

Sorry, I haven't noticed the questions.

1. You can change the SiPP manager (pensioneer trustee) any time you like, so if he goes bust you just appoint somebody else.

2. You retain complete control within the law (e.g. no investment in residential property, art, yachts, etc). I used the SSAP scheme, which is a company scheme, through my small business. The advantage of that is that it is outside the scope of inheritance tax. The scheme belongs to the trustees. So you can add your favorite kids to the scheme and when you die the remaining trustees simply continue to own the scheme! Brilliant.

3. Retirement: I do not plan to retire. Although I am nearing 60 I know that 'retirement' as a concept will hardly exist for most people.
But you have two options:
Either you rent your investment out and live on the rental, leaving the pot to your kids.
Or the pension scheme sells the asset and buys an annuity for you (although watch out for hyperinflation!)

4. On our farm we bought some of the land with through our SSAP scheme and the rest privately. So you can supplement the pension funds by buying the land in two pieces.

Hope that helps

MisterE · Post by **MisterE** » 21 Dec 2008, 11:00

My head hurts now. I pay hardly nowt into a pension and being self employed I get most of that back too. I think I'll stick with Plan A, work your tits off, buy 2 houses and rent them out. I love the idea of controlling your own pension but if this thread has taught me anything its that there is a mssive amount of money to be made in one area, massess of free money, and thats setting up your own bloody pension company, those fees are crazy, no wonder all our pensions dont move. I mean c'mon if you could not double someones pension on oil, copper, gold, silver alone then you must be a muppet - most of us are good at our jobs, so why are there so many dire investers out there!

Good luck gang with investing yourself, imagine if you spent time learning markets from the age of 20 ie same as you did for your job, you'd all be millionaires, so what are these clowns doing with our coin. Looking forward to reading more posts on this, even if it is taxing on my head

emordnilap · Post by **emordnilap** » 06 Apr 2009, 16:46

I have three separate pension funds, two closed and fairly small, one larger (but still small by pension standards) and all have lost around a third of their value.

There's years and years to go before they'd normally be transferred into 'safe' funds (I think that happens around 10 years before retirement) and there's not enough in total to look at buying land with them, though the option does exist in Ireland. Apparently the management fees are serious on those schemes, so it's only for big money people.

I'm going to have to do something with them. I could just carry on contributing and do the BAU-mentality though I think those days have gone. To be honest, there's not so much money in the funds that I'd be worried one way or the other about it - but no-one likes to see money down the drain.

All these contributions over the years have brought down tax and social insurance contributions but I would have been better off today if I'd took the tax hit and just put the money into Premium Bonds (Prize Bonds in Ireland)!!!

Anyone got any strategy worth me thinking about?

Andy Hunt · Post by **Andy Hunt** » 06 Apr 2009, 17:09

Invest in bank shares whilst they are rock bottom?

(Warning: I have no idea what I am talking about)

Post by **kenneal - lagger** » 06 Apr 2009, 17:27

I've stopped paying into my pension fund and am putting the money into an tax free ISA instead. The ISA money is available at short notice and I've already withdrawn some to buy some PV panels. I'll probably use the fund to buy other essentials as time goes on.

emordnilap · Post by **emordnilap** » 06 Apr 2009, 17:34

kenneal wrote:I've stopped paying into my pension fund and am putting the money into an tax free ISA instead. The ISA money is available at short notice and I've already withdrawn some to buy some PV panels. I'll probably use the fund to buy other essentials as time goes on.

Good idea. I'll have to find out if the equivalent or similar is available in Ireland.

PaulS · Post by **PaulS** » 06 Apr 2009, 21:25

emordnilap wrote:I have three separate pension funds, two closed and fairly small, one larger (but still small by pension standards) and all have lost around a third of their value.

There's years and years to go before they'd normally be transferred into 'safe' funds (I think that happens around 10 years before retirement) and there's not enough in total to look at buying land with them, though the option does exist in Ireland. Apparently the management fees are serious on those schemes, so it's only for big money people.

I'm going to have to do something with them. I could just carry on contributing and do the BAU-mentality though I think those days have gone. To be honest, there's not so much money in the funds that I'd be worried one way or the other about it - but no-one likes to see money down the drain.

All these contributions over the years have brought down tax and social insurance contributions but I would have been better off today if I'd took the tax hit and just put the money into Premium Bonds (Prize Bonds in Ireland)!!!

Anyone got any strategy worth me thinking about?

Have a look at my original post from July 2005 (!). The point is that if your pension fund is invested in shares or related products, they will go down. I expect the FTSE to eventually reach about 1000, that's 90% drop from the peak. That calculation is based on the type of P/E ratio likely to apply in a Era of Decline, which we have just entered. The markets do not yet realise that, traders (and eveeryone else) believe that recovery will come soon and stocks will bounce up. Wrong. As soon as recovery starts, oil will shoot up, energy costs, food and everything else will follow and any recovery will be strangled at birth. That's why you want any existing pension out of shares, out of cash (hyperinflation) and in something real. The set up costs are about £1200 and annual costs about £500 - a lot, but less than loosing 90% of your pension pot.

These pensioneer trustees are charging a fortune for doing nothing (one letter a year in my case). Makes me wonder if there is someone amongst us who could perhaps qualify as a pensioneer trustee. Alternatively, how do you become one?