Can I cash in my pension to pay off my mortgage?

Advice you can trust

Should 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.

The question you need to ask yourself though is, should you? The short answer is probably not, however, read on to find out more:

Using your pension to pay off your mortgage

The introduction of Pension Freedom in 2015 allows people to access their pension funds early and use the cash to pay off mortgages. A recent study showed that 14% of over 55’s had mortgage debts.

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.


This service only applies to pensions in the UK. 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. Usually 25% of your pension can be released tax-free, the balance is taxed at your marginal rate at the time of release, this marginal tax rate could change in the future.

Take SPECIALIST FCA Regulated Advice

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.

As part of our specialist FCA regulated pension transfer advice we will carry out a full fact find on all your pensions, their values, their retirement benefits and your current financial situation. Once we have all this information we will provide our recommendations whether you would be better off cashing in your pension to pay off your mortgage or not.

It’s free to find out your options. Which option is best for you depends on your circumstances. We guarantee that we will present you with a clear set of recommendations in plain English, only advising you to release cash from your pension to pay off your mortgage if we believe it’s in your best interest.

You are under no obligation to proceed with any of our recommendation if you don’t want to and it will not cost you anything to find out if we can help you.



Get your free pension review and receive specialist FCA regulated advice for transferring your pension.

Receive expert advice from Grove Pension Solution for free. It’s only if you decide to proceed to full advice that a fee will be charged.

Need advice on how to access your pension to pay off your mortgage?

Grove Pension Solutions Ltd is regulated by the Financial Conduct Authority.

We specialise solely in Pension Transfer and Pension Release retirement services.

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.

So why not Get Started Today and receive your free Information Pack.