Withdraw pension to shorten mortgage??

Stivibat

(Apologies for posting elsewhere - I think I posted it in the wrong forum)


We have an offset mortgage (base rate tracker) currently at 7.09%. Still owing is £30,000. I have just used a repayment calculator and found out that as things stand we will have paid this off in 3 years. We are currently paying approx. 700 per month and then the interest on top of that.

My main pension (teachers pension) comes up in 18 months.

I have 2 smaller pensions from my handful of years in the private sector. Amounting to £18,000. These are obviously not going to pay much when I activate them.

Would it be a good idea to withdraw these two and take the tax hit of 20% and pay this money (15,000ish after tax) into the mortgage?

This would mean the mortgage would have14 months as opposed to 36 months As I work it out this would save me nearly 2 years of monthly payments of £700.00. Or am I missing something?

MWT

You should make sure that there are no special features on those old pensions before contemplating a full withdrawal...

For example one of my old funds had a 9% guarantee on the annuity rate, and another one had a 5% annual growth guarantee...

Once you know that and you can determine if the guarantees (if any) actually add value, then you can decide.

If you don't have the original paperwork you may have to ask your pension provider to confirm if there are any special features. 

Always best to talk to Pensionwise as well if you don't already have a financial advisor.

If you go ahead, you will probably find that you can take 25% of those pensions tax free and then pay tax at your marginal rate on the rest.

... that will not necessarily be 20% if you are close to or over the 20% band with your current income.

It isn't a bad idea to do what you are considering as long as you are confident that the growth rate of those pension funds is below the interest rate on your mortgage.