Pay off mortgage using tax free pension

kinger101

DRS1 said:

Given that you are already over the £268k LSA with your pension (and no-one really expects that £268K to be increased any time soon) there must be an argument for extracting the £100k tax free lump sum as soon as you can and putting it to good use.  Paying off the mortgage when it goes to a variable rate (presumably higher than the fix) sounds like a good use to me but then I was brought up to avoid debt in any form so its more a gut instinct than a number crunching decision.
The £268k (£168K after the withdrawal) is going to form a hopefully ever decreasing percentage of your pension pot.

I agree with this one.  The true value of the 268K is declining every year due to inflation.

kinger101

ali_bear said:

The cap on TFLS could increase in the future. Has anyone said it will definitely be frozen? 

I think it's a risk planning on what might happen tomorrow.  Equally, it could be reduced or abolished.

leosayer

ali_bear said:

The cap on TFLS could increase in the future. Has anyone said it will definitely be frozen? 

The cap is a fixed amount in legislation.

leosayer

OP,  what is your current fixed mortgage rate?

No point paying it off if you can earn more after tax.

NoMore

ali_bear said:

The cap on TFLS could increase in the future. Has anyone said it will definitely be frozen? 

It could but since every chancellor is always looking at pensions and their cost to the treasury, not increasing it and letting fiscal drag happen is an easy way to claw something back with very little push back from the electorate. 

Aretnap

leosayer said:

ali_bear said:

The cap on TFLS could increase in the future. Has anyone said it will definitely be frozen? 

The cap is a fixed amount in legislation.

Though legislation can be altered, and is every year by the Finance Act.

That said given the state of the public finances it's probably reasonable to assume that it will not increase for many years - increasing it is unlikely to be a priority for any government in the foreseeable future.

Triumph13

kinger101 said:

ali_bear said:

The cap on TFLS could increase in the future. Has anyone said it will definitely be frozen? 

I think it's a risk planning on what might happen tomorrow.  Equally, it could be reduced or abolished.

It currently is frozen and I'm not aware of anyone talking about increasing it, nor any widespread complaints that it is too low.  On the contrary, various think tanks have called for it to be reduced to £100k, which probably is a reasonable level if you were designing the system from scratch -  but not when people have based their plans on £250k+, especially those planning to use it to repay mortgages.  I think decreases are, therefore, unlikely too. 

No-one knows for sure, but I would lay pretty good odds that it is simply allowed to erode with inflation for a good few years, quite possibly until it does get closer to £100k in real terms.

ali_bear

OK but I think we could agree that for the reasons stated above, the TFLS will not be abolished or even reduced without a lengthy period of consultation, so we would have plenty of time to adjust plans accordingly. 

Would be nice if they could round it up to a nice even figure we can recall more easily 

kinger101

ali_bear said:

OK but I think we could agree that for the reasons stated above, the TFLS will not be abolished or even reduced without a lengthy period of consultation, so we would have plenty of time to adjust plans accordingly. 

Would be nice if they could round it up to a nice even figure we can recall more easily 

What is the point of us all agreeing on something we have no real control over?

ali_bear

kinger101 said:

What is the point of us all agreeing on something we have no real control over?

What is the point of arguing about it?