Interest only mortgage + pension

dimbo61

Are you sure you will be able to take your pension at 60?
Many pension schemes are now making the retirement age the same as the Old age Pension which is now 68 but could rise too 70
Still think you are better off saving for a deposit and then overpaying every month.
The 5% deposit scheme might help you get a property and gives you 5 years to build up equity to repay the Loan part

mixmastermike

I can retire at 55 under my company scheme.

I am still exploring options and it's gonna take me at least a year or two before I have enough for a deposit, anyway.

I'm just trying to think of the most efficient way to do things.

I also like taking risks

mixmastermike

Then again, how much notice do they need to change the minimum retirement age for company or private pensions?
That could really screw me over

katejo

I can still have access to my pension at 60

mixmastermike

hugheskevi,

Do you have any concerns that the government may reduce the allowed 25% tax free lump sum? and do you have a backup plan if this happens?

hugheskevi

Do you have any concerns that the government may reduce the allowed 25% tax free lump sum? and do you have a backup plan if this happens?

Yes, it is a big concern.

However, in such a circumstance there may well be transitional protection for existing pensions, and there would also probably be quite a bit of notice, probably 5-10 years.

Even if the age were increased (or pension commencement lump sums abolished, which I don't think will happen but you have to prepare for the worst), you can adjust by running the mortgage over a longer term, to age 75 potentially, and using the pension income to pay down the mortgage after retirement.

In general, money is money, and it is simply a question of rearranging assets and income and liabilities to make it all balance out. A pension turns capital/income from now to future income whilst a mortgage turns future income to capital now, so they are very complementary vehicles.

Just don't get too nailed into any one particular plan, build up other assets as well, and it should be fine in just about any scenario. The main risk is getting too greedy and trying to do too much through the pension at the expense of other assets which give much needed flexibility.

mixmastermike

Thanks again. Yes it's very tempting even without a mortgage to chuck a load of money at my pension. The lure of tax relief is massive but you're right, if I can't touch it for 25 years it offers no flexibility really

Thrugelmir

mixmastermike wrote: »

Inflation won't matter because the £250k capital borrowed will still be £250k

My point is what will the remaining pot buy you in terms of a pension?

mixmastermike

No. That projection was just for the surplus contributions. That figure would be in addition to what I would need for retirement. So currently 27% of my gross goes into my pension and none of that would be used to repay the capital. What I am suggesting is to add another say 8-10% (<6% net pay) and that portion alone would be for the mortgage repayment.