would like some advice from Dunston H and others please!

bobbymotors

Hello

I am in a very fortunate position of having a couple of small pensions (2 x £25k,so £50k pot) with GAR of almost 10%. I will be 60 next year

I know I would be daft to cash them in as its such a good GAR.

I don't particularly need the £400 month pension they would generate, but appreciate this is an excellent return. I have other income which is plenty to live on.

I would however enjoy some 'fun' money.

I can write out a cheque on my tiny home mortgage for this amount and repay at 2% interest over the rest of the mortgage term. For every £1000 I borrow the cost is approx. £8 a month, I think about 10 years left on mortgage.

Would it be a decent idea to take the annuity and use it to repay a £50k loan on my mortgage, so I have £50k in readies to blow on a car, a cruise, take the grandkids to Disney, get some teeth implants, treat the wife etc? Then at the end I still have the annuity?

Or what is the best way to do it?

thanks in advance for any help

Bob

dunstonh

I know I would be daft to cash them in as its such a good GAR.

Does the GAR increase if you defer? (e.g. if you left it to 65 would it go to say 15%?) e.g. it could be 9.6% at 60 but increase each year it is deferred or it could see the next jump at 65.

if the next jump is 65 then its usually best to take it at 60 rather than wait to 63 or 64. However, if you could wait until 65, then it may be better for that.

kidmugsy

Does the GAR apply to what's left after you take the tax-free lump sum, or are you allowed to decline the TFLS and pocket the 10% on the lot?

Interest: £50k x 0.02/12 = approx £83 per month which is indeed comfortably smaller that £400 p.m even after the latter is taxed. If you add that the £50k must be paid back over ten years that implies (approx) an extra £400 per month, though, thus wiping out the pension income. Still, it looks like a perfectly decent deal if you really do want the spending money.

P.S. Can one really get ten-year fixed rate mortgages at 2% p.a.? Coo!

coyrls

I guess the advice should be in addition to the advice you received here: https://forums.moneysavingexpert.com/discussion/5342753

bobbymotors

coyrls wrote: »

I guess the advice should be in addition to the advice you received here: https://forums.moneysavingexpert.com/discussion/5342753

Yes indeed, but am a bit clearer about it now.

Just wanted some options.

Also, no, the mortgage is not fixed, its 1.5% over base so likely to go up a bit.

And what Dunston H says is interesting... I will find out