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Can I cash in my pension to pay off my mortgage?
If you are aged 55+ and have a personal or company pension you are not currently paying into or receiving, you can cash in 100% of your pension as a lump sum to reduce or pay off your mortgage – up to 25% Tax Free
Should I cash in my pension to pay off my mortgage?
Using your pension to pay off your mortgage
Mortgages are normally the biggest debt people have at retirement. Many people feel it would be best to reduce their monthly outgoings in retirement and pay off their mortgage by taking a 25% tax free cash lump sum from their pension pots. However, it isn’t as simple as that and you need to consider your options carefully before paying off your mortgage with cash released from your pension.
- You need to be age 55 or over.
- You need a Personal Pension or Company Pension you are no longer paying into or taking. These can be Defined Contribution Pensions, Defined Benefit Pensions & Local Government Pension Schemes.
- You don’t actually have to be retired and can continue to work.
Points to consider when using cash from your pension to pay off your mortgage:
- Mortgage Interest Rate – if you have a very low interest rate, it’s probably better you leave your cash in your pension because of the benefits it provides; especially if your pension fund growth is bigger than the mortgage interest rate.
- Amount of mortgage outstanding – will the 25% tax free lump sum from your pension cover your outstanding mortgage? If it’s more, then you will need to pay tax on any additional cash released from your pension, which probably doesn’t make financial sense.
- Will your pension income and benefits be significantly reduce if you release a large cash lump sum from your pension to pay off your mortgage?
- Would down sizing your home and paying off your mortgage with the cash released from the sale be a better option?
Taking cash out of your pension early to pay off your mortgage will almost certainly reduce your pension income in retirement and for most people wouldn’t be suitable, however, every case has to be treated individually and analysed. A professional adviser who specialises in pension transfers can “crunch the numbers” and work out what is best for you.
If you have a defined benefit pension, it is worth remembering that the regulator, the Financial Conduct Authority, states releasing money early from these types of scheme is probably not in your best interest.
Need advice on how to access your pension to pay off your mortgage?
If your pension pot is worth £30,000 or more you need to take specialist advice from a FCA regulated firm, such as ourselves, before you transfer or cash in your pension to pay off your mortgage or not.
We were established in 2007 so have many years of experience successfully helping 1000’s of individuals. Some of them we advised to transfer their pensions and some of them we advised to leave their pensions where they are and not transfer them.
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Free Pension Transfer Guide & Initial Consultation
Complete the form below to receive your Free Pension Transfer Guide.
If you would like to find out if transferring or cashing in your pension is suitable for you, we can provide a free initial consultation known as abridged advice.
Simply return the enquiry form included in the guide and post it back in the free post envelope provided.
As part of the consultation we will look at:
- What existing pension plans you have in place.
- Whether you have the right type of pension to transfer.
- What your plans are for retirement.
- How much cash you can release.
- Whether your existing pension remains the best fit for you.
- The likely cost of more in-depth advice.
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Defined Benefit Pension Transfer Warning
Transferring away from a defined benefit pension scheme means you will lose valuable guarantees.
Taking benefits early will almost certainly reduce your pension income in retirement and is only suitable for a limited number of people and circumstances. This should not be seen as an easy option for raising cash.
If you release all your money from your pension early you will not have anything left to provide you with income in retirement.
When releasing cash from your pension, usually up to 25% is tax free, the balance is taxed at your marginal rate at the time and could change in the future.
Watch the FCA video explaining the expectations of financial advisers when advising you on defined benefit pension transfers.
Grove Pension Solutions Ltd is authorised and regulated by the Financial Conduct Authority (Reference number 465051).
What our clients say
Grove Pension Solutions assisted in moving my company pension to a personal pension, which will allow me to retire 7 years earlier than planned.
Since the FCA have made this option very difficult, Grove made the process very swift and smooth, with true professionalism throughout the process. The communication was excellent at all times, and there was always someone to answer a question if it arose.
I would highly recommend Grove Pension Solutions for your personal pension requirements.
Grove managed the transfer of my pension swiftly and kept me in touch with the process at all times. On occasions when I telephoned with questions they were patient, and regardless of who I spoke to, the staff were knowledgeable, friendly and reassuring. Grove Pension Solutions went above and beyond to complete my transfer and I cannot thank them enough.
Nothing is too much trouble, everything was explained in plain English and I was asked several times if I wanted to go through with any information again or any questions , all staff were professional and completely “knew their stuff” they returned calls when promised such a pleasure to do business with a very big thank you
In the final stages of my transfer, throughout the process the service has been very professional, regular updates by phone and email, the advisors are very friendly and explain the process in an easy to understand way. Have recommended to two other people already, wouldn't have any hesitation to use Grove Pension Solutions again, 10/10 thank you.