some good advice I had

bobbymotors

I have two smallish pension plans with a guaranteed annuity rate of 9.5%

I don't actually need the pension payments, so was thinking of cashing out

An ex HSBC banker (old school, retired!) has suggested that instead of that I should borrow the amount of the pension fund by adding it to my small mortgage, using the annuity payments to repay the loan over 8 years.

Then at the end of 8 years sell the annuity (provided the law is changed as planned)

Cash both ends!

Any thoughts on snags with this?

kidmugsy

But why sell the annuities? Why not just keep them indefinitely? The value for selling is likely to be poor.

dunstonh

And you cant sell annuities yet and you are unlikely to get a good deal even if you could.

coyrls

You can't beat a guaranteed annuity rate of 9.5%. I think you'd be mad not to take it. If you don't need the pension payments, why do you need to borrow money? If you do need to borrow money, what's magic about 8 years?

bobbymotors

well I would be taking it in a way

I don't need £500 a month,but could have a lot of fun with £50k

I don't need to borrow any money, it would be fun money.

Sorry if I sound arrogant btw, its not that... but if I can invest at 9.5% and borrow for 2.5% then surely I should?

Thanks for replies so far, excellent to have some points of view.

I do agree that cashing out with a GAR of 9.5% is not a good option

Nothing magic about 8 years, that's just when my small mortgage will be repaid.

bobbymotors

and after 8 years, at 68, with a 9.5% GAR, if I were still in decent health I would have thought the annuity itself would still be worth several years payments? as another lump sum?

bobbymotors

sorry having re read this, I don't intend cashing out, nor selling the annuities

the idea is to keep the annuities and use the income to repay the extra loan on the mortgage

then at the end of that, either keep receiving the income or sell the annuities on if I want to (and presuming I can)

kidmugsy

You could have fun with £50k but not with £6k p.a.? You lack imagination, my boy.

bobbymotors

you have a point kidmugsy!

thanks lol

atush

Why not take the annuities, and pay the income into a new DC pension?

if you dont have enough income to cover this amt, then pay the excess into a S&S isa. In ten years, cash out the pension and S&S isa and blow the lot?