Pension vs Property

[The Green View]

Something I should ask a financial advisor but I thought I'd canvass some opinion here for a start.

Imagine a scenario whereby you're in schtuck financially and you face the prospect of having your home repossessed because you can't afford the mortgage payments. Imagine, also, that you have a very modest pension pot which contains sufficient funds to pay off the mortgage - in fact the 25% lump sum would do that.

My own circumstances are such that I had planned to throw up to £150k into my pension fund over the next 5 years so I had something at least reasonable on which to retire. I know once I've drawn down I'm restricted to only being able to pay in £4k pa or so therefore any plans for a reasonable retirement would be going down the pan if I dip in and take the 25%.

So, what's on my mind is should I prioritise my house over my pension or vice versa? Would be interested to hear any views.

(Thankfully, not a reality for at least another year but it's started going round my mind when I'm trying to get to sleep at night )

[WTFH]

Maybe don’t throw so much into your pension fund and reduce your risk and debt?
No point in having a massive pension fund that you won’t access and no home to live in.

[northernladuk]

You pay your home off but you've nothing to live on. Or you have some money to live off but no home. Neither of those are a good outcome so you need to look for a different solution. The obvious one would be to downsize to something that you can pay of or close and you've got both your home and your pension.

If you are not in a position to downsize and keep the pension then you've a real problem on your hands and need to some up with something even more inventive.

It's impossible to give advice as it is all based on your circumstances, equity in house, marriage status, prospect and a thousand other things.

Try telling yourself it's a pointless thing to think about (and even less pointless asking on here with no details to be fair) and try re-direct your mind to other more useful things.

[Fred Bloggs]

OP mustn't overlook that 25% tax free can be drawndown without triggering the MPAA £4000 limit. Taking even 1p more than the 25% triggers MPAA. So, drawing upto 25% to pay off a mortgage is perfectly OK and will not trigger the £4000 MPAA restriction.

[The Green View]

OP mustn't overlook that 25% tax free can be drawndown without triggering the MPAA £4000 limit. Taking even 1p more than the 25% triggers MPAA. So, drawing upto 25% to pay off a mortgage is perfectly OK and will not trigger the £4000 MPAA restriction.

Ah, ok - I didn't know that was the case. Kind of answers my question, thanks.

Of course, all subject to the govt not changing the rules. ISTR I read something about that not long ago....

[Lance]

House first. Always.... (your home that is)
It's not a problem having a mortgage (in fact it's wise to have one).

My view is to have a large offset mortgage, with a large pot of savings offsetting it. That way I have enormous flexibility as well as very low interest payments.
If I have to pay more tax to get the cash into the offset then so be it.

If I suddenly end up with no income, the offset savings pays the mortgage (that's good for nearly 10 years of payments). And the 25% drawdown (in a few years) will simply add to that offset.

In summary. Have a bit of both, but make sure you have contingency such that you won't lose your home no matter what happens.

[The Green View]

House first. Always.... (your home that is)

Yep, that's the way I feel. I've been reading some quite harrowing stories of people approaching retirement age who have lost their homes and been forced into renting.
It's one place I never want to go.

On the other hand, there are a lot of retirees who do sell up, invest the money and rent.

I just like the security of having my own roof over my head as it's something that can never be taken away. I'd rather be skint living in my own house than I would be better off but having to deal with the vagaries of the rental market.

[Lockhouse]

Having retired last year I couldn't imagine anything worse than not having my own (paid for) roof over my head. Get your property mortgage free then you can always supplement your retirement income even if it's working at Home Bargains. You don't need a lot of money to live simply but you do need somewhere warm that no-one can take away.

[Protagoras]

Having a wholly owned property at retirement offers the possibility also of using one of these equity withdrawal schemes.
There's no point having lots of property asset later in life where one has no dependents / beneficiaries.

[Fred Bloggs]

Ah, ok - I didn't know that was the case. Kind of answers my question, thanks.

Of course, all subject to the govt not changing the rules. ISTR I read something about that not long ago....

You're fine as long as you only draw the tax free lump sum. Not a penny more. This is perhaps going to be capped at some stage in the future but nobody knows.