Inverse Commutation

jem16

Mr_Prudent wrote: »

Hi Jamesd. I’m afraid I am somewhat “old school” and the idea of borrowing when there could be another solution is something that is alien to me. If that makes me foolish then so be it!

Far from being foolish, I think you are being sensible to do what you feel comfortable with. There's really little point in having sleepless nights if you're just going to worry about the loan.

I do have other assets that I could call upon, but using these would only mean less return on these as opposed to less return on the pension. I appreciate that the pension is an 11% hit for life but by taking it early I would have to be into my eighties before I began to lose out.

Yes that's something you also have to consider and take into account. As you point out, most people in their eighties have less need for income than those in the sixties.

As for equity release I would have thought that this would be a “last resort” solution and many have warned against this due to the high cost of the compounding interest.

It's not something I would want to do either.

Think it may be an idea to seek out an IFA as to the best way forward, but many thanks for your input.

Go with what you feel comfortable with as that is what matters in the end.

jamesd

Mr_Prudent wrote: »

I do have other assets that I could call upon, but using these would only mean less return on these as opposed to less return on the pension. I appreciate that the pension is an 11% hit for life but by taking it early I would have to be into my eighties before I began to lose out.

So, how does the reduced return on the other assets compare to the reduced return from taking the pension early?

Mr_Prudent wrote: »

As for equity release I would have thought that this would be a “last resort” solution and many have warned against this due to the high cost of the compounding interest.

Whether it's good or bad depends on objective. For a person who wants to leave the property as an inheritance it's bad. For a person who has no inheritance motive the house is just money that they can't use to improve their standard of living while alive, so equity release is good.

In your situation there would be very little interest compounding because you'd be repaying the money from the higher work pension income once that started.

Mr_Prudent wrote: »

Think it may be an idea to seek out an IFA as to the best way forward, but many thanks for your input.

Just so you know, an IFA is unlikely to recommend equity release even if the plan is to repay. It's most likely that they would recommend using your other money and waiting until normal retirement age for the work pension.

Since you do have other money available, that's also what I suggest.