Tax relief on mortgage

regprentice

Depending how long you have left to retire it may not be sensible to rely on your 25% tax free lump sum. I cant see it lasting much longer as a tax break. Imho If you are young enough to have just had your pensionable age increased to 68 you are young enough to see the abolition of the 25% tax free lump sum.

http://moneyweek.com/merryns-blog/act-on-your-pension-pot-before-the-government-does/

jamesd

There are quite a few problems with abolishing the tax free lump sum or capping it:

1. It's the main pension tax benefit for basic rate tax payers, who get taxed at basic rate on the way in and out, for no other substantial net benefit other than some of the personal income tax allowance. Other than matched employer contributions or salary sacrifice the logical response for basic rate tax payers would be mass abandonment of pensions as a retirement income method.
2. It's part of long term retirement planning, over decades, with people relying on it for things like early retirement timing when it can be used to boost income until the state pensions start.
3. It's part of long term planning for mortgage repaying, something that is good for encouraging pension use for retirement income, because 75% of the pension pot remains in the pension to provide income.
4. For all, it can be seen as a form of prize to encourage use of pensions.

That means huge penalties for those who've had plans in place for decades and long transition arrangements to avoid those huge penalties.

Abolition has often been talked about but never gone anywhere.

It's pretty much certain that without the tax free lump sum I'd be switching to telling basic rate tax payers planning retirement income sources to use means other than pensions due to the lack of benefit and decreased flexibility compared to alternatives. We don't really need yet another reason not to use pensions for retirement income provision.

TrickyDicky101

I think it more likely that higher rate relief would disappear before the 25% tax free lump sum.

jamesd

Probably, though at the last election only the Liberal democrats to my knowledge advocated it in their manifesto. It was announced in conjunction with this year's party conference that they have abandoned it in favour of using the lifetime allowance and annual contribution caps instead. They now favour a reduction in the lifetime allowance to a million Pounds or perhaps less later. A million is enough to buy £30,000 of index-linked annuity income at today's roughly 3% annuity rate at age 65.

Gary123456790

Thrugelmir wrote: »

The mortgage will come to a contractual end at the end of the term. So the lender is within their rights to seek recovery of the balance along with the exit fee. Playing games simply isn't worth the trouble nor the resulting damage to ones credit profile.

I didn't say it specifically but I didn't mean anyone should exceed the agreed term.

Lets say you pay £800 pm normally. If before your last payment you increased the term from 1 month remaining to 5 years, you would have around a £14 pm payment for 5 years. If the mortgage company wished to close the account at any point to save the administration costs they may well write off the balance and the exit fee.

This should not affect your credit profile as you are making all agreed payments on time, and leaving it up to the lender to close the account if they wish.

Gary.

Thrugelmir

Gary123456790 wrote: »

Lets say you pay £800 pm normally. If before your last payment you increased the term from 1 month remaining to 5 years, you would have around a £14 pm payment for 5 years.

To extend the term would require the lenders agreement.

So does not take you any further forward.

dunstonh

Depending how long you have left to retire it may not be sensible to rely on your 25% tax free lump sum. I cant see it lasting much longer as a tax break.

Whilst you are of that opinion, it does not match any factual information available and bucks the trend. It also benefits no-one and would damage the economy.

In 2006, the pension commencement lump sum was increased across pension contracts that either had no lump sum entitlement or a lesser amount. In 2011, flexible drawdown was announced that allowed 100% access to pension fund subject to a qualifying criteria. So, since 1988, when the 25% pension lump sum entitlement came in, there has been no change to reduce that and two changes which standardised earlier contracts (which frequently paid less than 25%)to 25%, introduced 25% entitlement to those that did not have any entitlement (such as protected rights) and increased it upto 100% if you had sufficient guaranteed income to qualify for it.

The economy benefits from putting money in peoples pockets. 25% pension lump sum does just that. Also, for as long as we can remember, many people use part of their pension lump sum to clear mortgage and debts.

http://moneyweek.com/merryns-blog/ac...vernment-does/

And you provide a link to the publication with the worst reputation going. They live by scaremongering and manipulation of facts to sell copies. They are a joke.