Pension loan

kaymensah

Advice needed.

I am public servant on a    defined benefit pension. I plan to retire in 4 years time when I reach state pension age. I have paid off my mortgage. I want to borrow £72k against my pension lump sum. I intend to make monthly payments of £500, and pay off the balance when I retire. Is there such a product on the market?

GrumpyDil

Probably not. Problem of using your pension lump sum, without wishing to sound morbid is what happens if you pass before you claim your pension?

Yes, you may well have some form of death benefit available but, whilst you can nominate who you would like to receive the money that is discretionary and I suspect any nomination to a financial institute would be rejected.

Have you considered re-mortgaging your house as I suspect that is a more likely option?

kaymensah

@GrumpyDil, thanks for the advice. I hadn't considered the option to remortgage because I thought you could only remortgage for a property that had a mortgage.

Flugelhorn

kaymensah said:

@GrumpyDil, thanks for the advice. I hadn't considered the option to remortgage because I thought you could only remortgage for a property that had a mortgage.

no you can mortgage a property you own outright - I did it once about 20 years ago, just rang up the bank and it all got sorted out, money went into our bank account

CliveOfIndia

kaymensah said:

I thought you could only remortgage for a property that had a mortgage.

A mortgage is simply a loan secured against your property.  Yes, it's more commonly used to purchase a property, and tends to run for a much longer period than an unsecured personal loan, but in essence it's just another loan.  You can apply for a mortgage against a property that you own outright at any point, and they'll just assess your application against their usual criteria - affordability, income, credit history, etc.

The only thing to bear in mind is that if you default on an unsecured loan, it'll trash your credit file, but no big deal in the grand scheme of things.  Default on a mortgage and you risk losing your home.

kaymensah said:

I intend to make monthly payments of £500, and pay off the balance when I retire.

Obviously, if you do go down the mortgage route, you'll have to make the monthly payments as stipulated by the lender - though you can usually make overpayments if you wish.

On that note, and also applicable to "paying off when you retire", just check whether there are any early redemption or overpayment penalties.  With mortgages there's often an early settlement penalty if you choose a fixed-rate deal, less so if you opt for the lender's SVR.  But do make sure you read and understand the small print before signing on the dotted line.

horsewithnoname

kaymensah said:

Advice needed.

I am public servant on a    defined benefit pension. I plan to retire in 4 years time when I reach state pension age. I have paid off my mortgage. I want to borrow £72k against my pension lump sum. I intend to make monthly payments of £500, and pay off the balance when I retire. Is there such a product on the market?

Have you considered partial retirement? You can access your lump sum that way.