Using pension to pay off mortgage...or buy physical gold

dont_use_vistaprint

If you can draw at 55, and still working/earning, HR tax payer, with high mortgage, what would be the factors to decide if you should use pension to pay off some or all of a mortgage? and then put your mortgage payments into your pension.

Would it just be comparing the pension growth forecast and risk of losses against the interest rate on the mortgage.. anything else to consider ?

Is this common?
Anyone done this or thinking about doing it ?

Also, there are people preserving wealth against risk of another crash / big reset by converting part of their pension into physical gold and paying for storage in a bank. The process costs a bit to be done properly and legally so its not just worth doing for couple of coins , but I understand its tax free, legitimately done , not some scam etc. Does this sound bonkers ? It is just conspiracy theorists doing this ?

MallyGirl

Using the 25% tax free bit would be fine if the remaining 75% would be enough for your future needs.
I have allowed my offset mortgage to grow a bit whilst I beef up pension contributions via Sal sac as I know I could get some of it back out in 3 years time if we needed to.

dunstonh

what would be the factors to decide if you should use pension to pay off some or all of a mortgage?

Investments within a pension typically return more than the interest you are paying on the mortgage. So, in the general routine of a working life, you wouldnt do it unless you money problems and wanted to reduce your outgoings. Such as being made redundant and unlikely to get work again or phasing down into retirement.

Is this common?

No. As its not normally a good idea, it is not common.

You would also remove one of the better ways to provide income in retirement (phased flexi-access drawdown).

Also, there are people preserving wealth against risk of another crash / big reset by converting part of their pension into physical gold and paying for storage in a bank.

Crashes are always coming. Ups and downs are part of investing. Trying to time the ups and downs by putting it into non-earning assets is just daft.

MEM62

dont_use_vistaprint wrote: »

Would it just be comparing the pension growth forecast and risk of losses against the interest rate on the mortgage.. anything else to consider ?

Yes;
* Beyond the TL+FLS the remainder of the withdrawal will be taxed. That'll cost ya!

* You are withdrawing money that should be returning 5% on investment to pay off a mortgage that is probably costing you around 2.5%. Madness?

dont_use_vistaprint wrote: »

Anyone done this or thinking about doing it ?

There may be those thinking about it but only the foolish would actually do it.

westv

I'm in two minds about paying off my mortgage when the fix ends next year - when I'll be 57.
It'd be arouund £77k o/s then but the lure of having the money in my hands to smooth cash flow is tempting.
However, we would like to move in the next few years so it would need to be paid off then anyway.

dont_use_vistaprint

dunstonh wrote: »

Investments within a pension typically return more than the interest you are paying on the mortgage.

My mortgage is 1.99%, my pension is below
https://digital.feprecisionplus.com/documents/aegonportal/en-GB/FRN3/FS

Looks like in general the pension is far better apart from this last year, but I guess a crash between 55 & 65 could change all that?

dunstonh wrote: »

Crashes are always coming. Ups and downs are part of investing. Trying to time the ups and downs by putting it into non-earning assets is just daft.

I fully understand that, but this is different. This is about preserving the value against a major drop in value or a fundamental reset of the value of stocks/property/currencies that some think is inevitable and because we diddnt let banks fail properly last time , printed money & haven't solved the problem, and still have incorrectly inflated values of S&S , property etc. Conspiracy theory or just rubbish ?

OldMusicGuy

dont_use_vistaprint wrote: »

I fully understand that, but this is different. This is about preserving the value against a major drop in value or a fundamental reset of the value of stocks/property/currencies that some think is inevitable and because we diddnt let banks fail properly last time , printed money & haven't solved the problem, and still have incorrectly inflated values of S&S , property etc. Conspiracy theory or just rubbish ?

It's a rubbish conspiracy theory and anyone convinced by this needs their head examined IMO. If this did come to pass, there would be serious food shortages and civil unrest. In that kind of situation, what good would a bunch of gold bars be? It's never happened before in the UK, why should it happen now?

Yes, there will be crashes at periodic points. The best way to insure against those is to use lower risk, globally diversified funds if you want to protect what you have.

dont_use_vistaprint

OldMusicGuy wrote: »

It's never happened before in the UK, why should it happen now?.

I agree, in general things that haven't happened before never seem to happen again. :-)

OldMusicGuy

dont_use_vistaprint wrote: »

I agree, in general things that haven't happened before never seem to happen again. :-)

Apologies, I was a bit too brief in my typing so I'll clarify. We have been through far, far worse times in the last 1000 years in the UK than we have now. Yet despite all of the terrible things that happened (Black Death, civil war, world wars, financial crises, political crises of all types), society never broke down to the point that economic activity didn't carry on and there were still ways to make money. Why is that going to happen now when, in times of far worse crisis in the past, it didn't happen then?

We actually live in pretty benign times right now compared to any previous period in history. Of course, conspiracy theorists and end of worlders will never accept that and want to attract their following of like-minded people.

The one looming issue that could cause serious disruption IMO is climate change, but the effects will take time to be felt so it is unlikely to result in a sudden, catastrophic economic collapse.

barnstar2077

OldMusicGuy wrote: »

Apologies, I was a bit too brief in my typing so I'll clarify. We have been through far, far worse times in the last 1000 years in the UK than we have now. Yet despite all of the terrible things that happened (Black Death, civil war, world wars, financial crises, political crises of all types), society never broke down to the point that economic activity didn't carry on and there were still ways to make money. Why is that going to happen now when, in times of far worse crisis in the past, it didn't happen then?

We actually live in pretty benign times right now compared to any previous period in history. Of course, conspiracy theorists and end of worlders will never accept that and want to attract their following of like-minded people.

The one looming issue that could cause serious disruption IMO is climate change, but the effects will take time to be felt so it is unlikely to result in a sudden, catastrophic economic collapse.

I wouldn't be so sure that climate change will be slow. Once the ice caps melt there will be nothing to stop all of the water falling off of the end of the Earth! I mean, we all know the world is flat! :rotfl:

dunstonh

Looks like in general the pension is far better apart from this last year, but I guess a crash between 55 & 65 could change all that?

Most crashes recover in under 6 months. Extreme ones take 2 years or thereabouts. A crash between 55 and 65 could be a very good thing if you are still paying into it and are not finishing until your mid to late 60s. If you are using drawdown, then it doesnt really matter.

I fully understand that, but this is different. This is about preserving the value against a major drop in value or a fundamental reset of the value of stocks/property/currencies that some think is inevitable and because we diddnt let banks fail properly last time , printed money & haven't solved the problem, and still have incorrectly inflated values of S&S , property etc. Conspiracy theory or just rubbish ?

Yet the markets have gone through far worse over the hundreds of years. World wars, edge of nuclear annihilation, UK almost getting reclassified as the first country to go from developed status back to third world status, Great depressions, hundreds of recessions, conflicts, Labour governments... etc. etc.

This is why you diversify and use multiple asset classes. If you are worried, then lower yourself on the scale. Don't go crazy.