Lost Pension Policy used to back a mortgage paid off years ago

Roger175

LHW99 said:

Interesting Roger 175. We have never had such a product, but I do remember when we were looking at a new mortgage in around 1986 that there were such things being talked about in some of the financial magazines. Unfortunately we ended up with an endowment that fell short - despite saying to the salesman, what happens if it doesn't make enough to pay off the morgage... "Oh it always does" was the reply.

Endowments, great weren't they!

When we took out our very first Mortgage, we struggled to get a repayment type. We had to argue vigorously with the Abbey National who were hell bent on us having an Endowment. We eventually got the repayment type, but we actually started an endowment as a separate plan, almost as a bit of an experiment. The sales people were very convincing and we thought, well if they're as good as they say, we might as well have one as an independent investment, albeit we weren't prepared to stake the house on it.  Ours was a 20 year plan with a 10 year break clause ... needless to say, we jumped ship after 10 years, the performance was abysmal!

Marcon

Roger175 said:

dunstonh said:

Are you sure it wasn't an Endowment policy?

That is a very good question.

Section 226 RACs didn't have 25% tax free cash.   That came with the introduction of PPPs.    The OP says it was mid 80s. So, that would make it an S226, if it was a pension.
S226 could pay a tax free cash of three times the annual annuity.  So, not really suited for debt repayment.

The concept of using a pension to pay the mortgage didn't really start until PPPs were introduced with their fixed 25% TFC.

I'm not sure if it was the same thing, but in 1987, we took out a mortgage which was definitely backed by a pension.  The circumstances were this:- Our previous mortgage was a staff mortgaged from Barclays, who my wife worked for at the time. We then wanted to borrow some further money against the house for use in a property development. Barclays refused to extend the staff mortgage, so we temporally changed to Lloyds for a couple of years. Lloyds initially suggested an endowment backed mortgage, but we refused so they offered us a similar type mortgage backed by a pension and I took out a specific new pension for this purpose. We were told the Pension couldn't be assigned to Lloyds in the way an endowment could, and so they took possession of the original pension documents and these were stored safely and returned to us when we cleared the mortgage only two years later (to return to the Barclays staff mortgage arrangement).

I have never heard of anyone else who had this 'Pension Mortgage' arrangement, but I can categorically confirm it was a thing.

I continued pay into the pension for a few years and subsequently transferred it to my main scheme. It was actually a very worthwhile way to back the mortgage for a temporary period, as I still have that money (+40 years of growth) in my pension pot and given that I was in my early 20's at the time, I probably wouldn't have otherwise made those pension contributions. 

Fascinating post. Nothing quite as interesting as someone doing something which 'technically' wasn't possible...! I have to ask - were you self employed at the time you took out the pension policy? 

Roger175

Marcon said:

Fascinating post. Nothing quite as interesting as someone doing something which 'technically' wasn't possible...! I have to ask - were you self employed at the time you took out the pension policy? 

No, I was an employee at the time. it was shortly before the time I became a salaried partner of the practice that I subsequently bought into, but I'm pretty sure my status at that time was still employee.

As I say, I have never heard of anyone else having been offered this type of mortgage, but it was a thing and it may well be what the OP is referring to. 

Hoenir

dunstonh said:

Are you sure it wasn't an Endowment policy?

That is a very good question.

Section 226 RACs didn't have 25% tax free cash.   That came with the introduction of PPPs.    The OP says it was mid 80s. So, that would make it an S226, if it was a pension.
S226 could pay a tax free cash of three times the annual annuity.  So, not really suited for debt repayment.

The concept of using a pension to pay the mortgage didn't really start until PPPs were introduced with their fixed 25% TFC.

Recall Allied Crowbar promoting pension backed mortgage repayment back in the mid 80's. Actually dissuaded somebody from taking that route. 

dunstonh

Hoenir said:

dunstonh said:

Are you sure it wasn't an Endowment policy?

That is a very good question.

Section 226 RACs didn't have 25% tax free cash.   That came with the introduction of PPPs.    The OP says it was mid 80s. So, that would make it an S226, if it was a pension.
S226 could pay a tax free cash of three times the annual annuity.  So, not really suited for debt repayment.

The concept of using a pension to pay the mortgage didn't really start until PPPs were introduced with their fixed 25% TFC.

Recall Allied Crowbar promoting pension backed mortgage repayment back in the mid 80's. Actually dissuaded somebody from taking that route. 

I remember them being pretty big with it post April 1988 when personal pensions were launched.  I cannot speak before then but the S226 only allowing three times the annual annuity as a lump sum would have been a pretty difficult way to justify it.   Then again, since when did Crowbar ever need justification for doing what they did!!

Roger175

dunstonh said:

I remember them being pretty big with it post April 1988 when personal pensions were launched.  I cannot speak before then but the S226 only allowing three times the annual annuity as a lump sum would have been a pretty difficult way to justify it.   Then again, since when did Crowbar ever need justification for doing what they did!!

Actually now that you say that, I'm thinking maybe it was 1988 and not 1987. I recall there being talk about the pension having to be the new style type. In fact that's probably why I took out a new pension for the purposes rather than use my existing one. It was all a long time ago, that I can't recall the exact details, all I can say is I'm very grateful for having done it, as it gave me some decent early contributions which I wouldn't have otherwise made.

Edit - and yes I agree with your comments about Allied Crowbar. One of their reps lived a few doors up the road from me at the time and tried to get me to do everything through him. He promised he would share half his commission with me in cash! 

Marcon

Roger175 said:

dunstonh said:

I remember them being pretty big with it post April 1988 when personal pensions were launched.  I cannot speak before then but the S226 only allowing three times the annual annuity as a lump sum would have been a pretty difficult way to justify it.   Then again, since when did Crowbar ever need justification for doing what they did!!

Actually now that you say that, I'm thinking maybe it was 1988 and not 1987. I recall there being talk about the pension having to be the new style type. In fact that's probably why I took out a new pension for the purposes rather than use my existing one. It was all a long time ago, that I can't recall the exact details, all I can say is I'm very grateful for having done it, as it gave me some decent early contributions which I wouldn't have otherwise made.

Edit - and yes I agree with your comments about Allied Crowbar. One of their reps lived a few doors up the road from me at the time and tried to get me to do everything through him. He promised he would share half his commission with me in cash! 

That would make more sense, especially as you weren't self employed - and the S226 product was very much aimed at the self employed market.

DRS1

Going back to the OP's original question - does your friend have any old accounts/tax papers?  I seem to recall having to fill in forms for the Inland Revenue showing contributions to section 226 policies where I had to name the insurer and provide the policy number.  If he has any copies of such forms then it should give you an answer,
Alternatively any old bank statements might show the payments going out and give some clue where they went.

LHW99

I know the OP said they had blitzed insurance cos, but one name I remember from around that time was Winterthur Life. I think they only operate through advisers now (possibly then too) - have they been included?

dunstonh

LHW99 said:

I know the OP said they had blitzed insurance cos, but one name I remember from around that time was Winterthur Life. I think they only operate through advisers now (possibly then too) - have they been included?

Winterthur's book was split and went in two directions depending on the plan.  Phoenix and Aviva (via AXA and then Friends Provident/Friend Life to end up with Aviva).