Could it ever be a wise move to borrow to invest in your pension?

RogerPensionGuy

Just reviewing this thread and a reasonable example in my head would be.

Remortgage a house maybe on a 5 years fixed in 2021 @ 1.5% interest only maybe. 

Use paid employment for any income over 50K via a smart pension arrangement. 

So not paying 40% income tax and 2% NI and possibly up to a 10% or 12% uplift on the smart contributions and possible child benefits maintained. 

If cash needed soon, maybe plonk pension inputs in to sterling money markets or whatever you fancy. 

Regarding the mortgage debt at 1.5% or 7% is pretty immaterial when you do the numbers, obviously 1.5% is the 🍒 on the 🎂 👍 

Albermarle

So if you borrow money, and put it in your pension, you still owe money. It needs to be paid with a fee/interest over time with other money (as you can't spend what is in your pension without huge penalty.)

You are assuming that anybody involved in doing this is a younger person. However many people tend to really start loading up their pensions in their 50's, so if the worst worst came to the worst, they could get their money out of the pension to payback any loans etc .without too much delay/or any delay.

kinger101

Albermarle said:

So if you borrow money, and put it in your pension, you still owe money. It needs to be paid with a fee/interest over time with other money (as you can't spend what is in your pension without huge penalty.)

You are assuming that anybody involved in doing this is a younger person. However many people tend to really start loading up their pensions in their 50's, so if the worst worst came to the worst, they could get their money out of the pension to payback any loans etc .without too much delay/or any delay.

A key point - some even use their TFLS to pay off mortgage (though they may end up paying more tax this way in the long run).

On the original question, as well as opting to invest in pension rather than overpay mortgage, one can also purchase a leveraged ETF which is somewhat akin to borrowing to invest.  Certainly not something I'm recommending, but just highlighting another mechanism.