Bridging loan before access to pension at 55??

dessie360

I have a crucial part of my retirement planning which I feel unsure of and would love to hear everyone's thoughts.

In brief, I have 10 years until I can access my pension at 55 (assuming they don't increase that age limit). I should hopefully have enough to live off until then and really don't want to work in that time if at all possible but it's quite tight as budgets go and, well, you never know what life may throw at you. So, I'm thinking, if I needed say £30k to bridge me over from the end of that 10-year period into pension access, would a bank or loan provider give me the money, secured against my house, that I could then repay after say 2 years from my pension pot?

I can't find any examples of such a product online but I imagine some financial firms might offer it if requested?

Has anyone had any experience of such a thing? Or any opinion on whether it's viable?

Kynthia

Could you remortgage before leaving work? Take a loan over as large a perid as possible to minimise the monthly payments. Keep it to a 2 or 3 year fix so that you could repay the balance without redemption fees if you wanted once you could access your pension.

dessie360

i've already left work. I could go back to it but really don't want to. So I'm looking for a loan that has no monthly payments.

NoMore

0% Credit cards ? Will still have to pay minimum off each month then can pay balance off when you have the money, as long as 0% is long enough to cover you.

Mojisola

dessie360 wrote: »

In brief, I have 10 years until I can access my pension at 55 (assuming they don't increase that age limit).

I should hopefully have enough to live off until then and really don't want to work in that time if at all possible

So, I'm thinking, if I needed say £30k to bridge me over from the end of that 10-year period into pension access, would a bank or loan provider give me the money, secured against my house, that I could then repay after say 2 years from my pension pot?

It wouldn't take many hours a week to earn £3k - could you find a part-time job that you enjoy to tide you over or run a small business from home?

Brynsam

Be aware that you can't 'pledge' your pension as security for a loan. If you do (technical term is 'alienation'), you could lose your pension. Sounds draconian? Yes, it can be - so don't!

A personal loan secured against your house (albeit repaid when you start to receive your pension) sounds perfectly viable, although whether it is the cheapest option is another matter.

ProDave

There is talk or raising the pension access age to 57. Don't bank on it still being 55 in 10 years time.

atush

Sounds to me like you quit too soon. Should have worked and saved for another year.

dessie360

Thanks so much for the replies, guys. It's VERY much appreciated.

I think I should probably have clarified my situation, or my approach, a little more...

-I've already left work. (For now at least - could return if need be, of course, but...)
-I really REALLY don't want to return to work, EVER, in any capacity, if I can help it. I hate it. It's the last option for me.
-I earn a couple of £Ks per year easy enough from matched betting and other hobbies / fun activities but wouldn't want to engage in any proper work beyond this.
-I do think I have enough to live off until 55 (c. £150k) , but you just never know, right? So the hypothetical £30k is exactly that. Hypothetical, unknown, safety net stuff. I like to do ERE in a fairly aggressive manner
-I'd be prepared to cut my expenditure in half to hit my budget. But...
-Looking at worst-case scenarios, I may still get hit by a series of big bills or market dips in the last 2-5 years. You never know.
-In which case, I might prefer to take on a chunky loan with interest over 2+ years rather than return to work or cut the budget even more drastically.

So, I guess that's why I'm interested in the loan product without monthly repayments. Happy to take a
big hit on interest rates. For me, it's worth it.

Would love to hear of any financing plans / loans that would suit my approach, which I'm starting to think is an unusual one

ukdw

In a slightly similar position to you at the moment - self funding before reaching 55 and it is surprising how many financial products are unavailable when you are living off a pre pension drawdown. Hopefully in the next few years innovative financial institutions will recognise this gap in the market and launch some appropriate products.

Other thoughts are:

Do you really need a loan without repayments - Or could you consider taking a slightly larger than £30k loan with a long term and then use the excess amount to make your payments during the first two years? Or alternatively could you take out one or more smaller loans based on your £2k+ income:

Do you have any assets other than your pension or you could use you persuade a family member or friend who trusts you to co-sign the £30k+ loan?

Once your savings are almost depleted you could start looking for job and then apply for benefits.

If you havent already been through university then an expensive but probably quite rewarding strategy could be to enrole as a mature student at university and therefore get access to student loans. Depending on your income post retirement you may not be liable for very large repayments.

Could you stretch out your £150k further by either changing your accomodation to somewhere cheaper or by making money from your existing house if you own it or living for 2-3 years in a very cheap country.

Could you make one of your fun money making hobbies into a small business and then apply for some sort of business loan?

Finally sounds from your figures that you expect to be able to live on £15k a year from your savings and have simply divided your £150k by 10 and multiplied £15k by two to get your £30k requirement without including growth or personal inflation. If so it would be interesting to do some 'safe withdrawal rate' type calculations to map out the 10-12 years including a few different inflation, annual growth and income factors as you may find quite a few that stretch your initial £150 well beyond 10 years.

Malthusian

ProDave wrote: »

There is talk or raising the pension access age to 57. Don't bank on it still being 55 in 10 years time.

Indeed. The OP says she has ten years before she turns 55, so presumably she turns 55 in 2028, which is the year the pension access age is to go up to 57. So she may be unable to, or may have a very narrow window in between her 55th birthday and the day the limit goes up to 57, which is most likely to be 6 April 2028.

Although none of this is official legislation yet, this is because the Government has another ten years to do the paperwork and it has other things on its mind. There is no indication that there will be any change to the plan to raise the minimum age to State Pension Age minus ten in 2028.