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More than half a million over-40s plan to use their pension to repay their mortgage

27th August 2015

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Just over half a million people in the UK, or some 631,000, are planning to use part if not all of their retirement nest-egg to help repay their mortgage balance, claims new research from specialist insurer Partnership.

The analysis found that while the majority, at 71%, of 40 to 70 year olds intend to meet their obligations via monthly repayments and additional lump sum contributions, up to 9% intend to use their retirement savings, either with their entire pot or tax free cash, to repay their home loan.

Notably this is down on the 14% recorded last year as it appears significantly more people are looking to more traditional methods to repay the outstanding balance on their mortgage.

That said, 8%, or 561,000 people, said that they intend to rely on an inheritance to repay the outstanding balance on their property and 7%, or 491,000, confess they are in the dark in regards to how they will meet their obligations.

How will you repay your mortgage?

Andrew Megson, managing director of retirement, Partnership said: “While it is still shocking that over half a million people in the UK intend to use all or part of their retirement savings to repay their mortgage, it has fallen from over a one million in 2014.  This is fascinating as it suggests that the Pension Freedoms which allow people to access their entire pension in cash have encouraged people to take a more holistic view of how they use their pension rather than focusing on one-off expenditure.  This in turn appears to have focused peoples’ minds on paying off their home loan before they retirement.

“Using their pension may well seem like an option but it is not the only option as working longer, downsizing or considering a lifetime mortgage may be more appropriate.  Ideally, pension savings should be used to provide an income in retirement, and with the state pension only providing a very basic safety net, making this choice could lead to hardship in later life.”

 

2014

2015

No. People

Keep making monthly repayments until it is paid

58%

71%

4,957,000

Make additional lump sum repayment

23%

25%

1,787,000

Use my tax free pension lump sum to repay outstanding balance

9%

6%

421,000

Have savings/investments set aside to repay outstanding balance

6%

5%

351,000

Use an inheritance

5%

8%

561,000

Use my pension to repay outstanding balance

5%

3%

210,000

Will take in a lodger to help repay my mortgage

3%

2%

140,000

Don’t know

n/a

7%

491,000

 

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