using pension to pay off mortgage

[Blackpuddin]

I've got about £29k outstanding on my mortgage. How stupid would it be to pay that off from my (taxable) Standard Life SIPP, given that this pension seems to be reducing in value?

[BoRED S2upid]

Depends how long until you need the pension and what you do once you clear the mortgage? If the money you were paying off the mortgage going to be spent on Coke and hookers or putting back into your pension?

[Blackpuddin]

Well, I'm in the autumn of my life (ahem), but with no plans or even desire to stop working just yet. Being utterly ignorant financially I'm coming from the simple perspective of looking at a mortgage-free lifestyle. I have no trouble making the mortgage payments and would certainly not discount the idea of putting some of the mortgage payments I wouldn't be paying back into the pension if this made any sort of sense.

[Blackpuddin]

Any thoughts anyone? Or are all the money folk still wiping away the tears of laughter?

[superlightr]

I would and did stop (min contribution) paying into a pension to pay off mortgages and to buy other properties. I understand properties/renting.

I didnt like it that my pension was falling in value, I had no control over it - the age kept increasing, I struggle to understand a pension, I could get a better 'return' on properties.

[anonymous-user]

As it's a SIPP you could change what it is invested in but if you have a mortgage then there are far worse things to do than pay it down.

Have you used all your tax free drawdown doo-dah?

Edited by anonymous-user on Tuesday 15th March 14:19

[trowelhead]

I would. hth

[Blackpuddin]

desolate said:

As it's a SIPP you could change what it is invested in but if you have a mortgage then there are for worse things to do than pay it down.

Have you used all your tax free drawdown doo-dah?

Yup I believe so.
I must admit I thought this must be a stupid idea and was expecting a good old-fashioned PH ridiculing but maybe it's not so daft. As I say I will be paying tax on the pension withdrawal so have no idea if this makes 100% financial sense.

[anonymous-user]

Blackpuddin said:

Yup I believe so.
I must admit I thought this must be a stupid idea and was expecting a good old-fashioned PH ridiculing but maybe it's not so daft. As I say I will be paying tax on the pension withdrawal so have no idea if this makes 100% financial sense.

Well you will be paying tax on the amount as it comes out anyway unless you keep below the allowans or you snuff it and I don't suppose you are planning on doing that unless you can help it?

I suppose it depends on how easy it is to pay the current mortgage - your call really.

I wouldn't mind dying with a fk off massive mortgage, with the caveat that my nearest and dearest are financially settled.

[Blackpuddin]

desolate said:

Blackpuddin said:

Yup I believe so.
I must admit I thought this must be a stupid idea and was expecting a good old-fashioned PH ridiculing but maybe it's not so daft. As I say I will be paying tax on the pension withdrawal so have no idea if this makes 100% financial sense.

Well you will be paying tax on the amount as it comes out anyway unless you keep below the allowans or you snuff it and I don't suppose you are planning on doing that unless you can help it?

I suppose it depends on how easy it is to pay the current mortgage - your call really.

I wouldn't mind dying with a fk off massive mortgage, with the caveat that my nearest and dearest are financially settled.

That last sentence is part of it, I'm a bit older than Mrs B and would like to think she wouldn't be left in the mire if I popped my clogs, which as you say I have no immediate plans to do, but as we all know this sort of thing tends to happen when you're least expecting it.
Other attraction is to make use of a pension that, now that there's no more tax-free money to be had, is just sitting around going down in value as far as I can see. This plus the predictions of more world financial doom around the corner etc.

[gibbon]

What percentage of your mortgage roughly does the needed 29k represent?

How much is the property worth? Its hard to make a judgement without some kind of reference of what 29k means in both contexts, and to you.

[Blackpuddin]

On a good day I suppose about 6%.

[Ozzie Osmond]

Blackpuddin said:

I'm a bit older than Mrs B and would like to think she wouldn't be left in the mire if I popped my clogs

To which the answer is "life insurance". £29k of life insurance (reducing as the mortgage outstanding reduces) would be pretty cheap I expect, so don't let that aspect distort your overall investment strategy.

I don't understand when you say a pension withdrawal would be taxed. Can't help thinking it would be pretty bonkers to do that - but it would all depend on your personal tax position both now and projected into the future.

If you can avoid/suppress that tax by buying the life insurance you might well come out ahead!

[Blackpuddin]

Now, you see, you've taken me off into unknown territory there. I'm a simple soul. Can you explain how this might work?
PS According to this HMRC tax coding doc just received, £2437 of my SIPP is tax-free. Sadly not enough to pay off the mortgage.

[anonymous-user]

Ozzie Osmond said:

If you can avoid/suppress that tax by buying the life insurance you might well come out ahead!

This is not a bad idea.

Pension would be taxed if he has had all the tax free lump sum and has income from other sources.

[Blackpuddin]

desolate said:

This is not a bad idea.

Pension would be taxed if he has had all the tax free lump sum and has income from other sources.

Which I do. Through my ltd co.
How would this life insurance scheme work?

[Ozzie Osmond]

Blackpuddin said:

How would this life insurance scheme work?

Suggest you give a shout out for GingeR or Sarnie or any other adviser types on here who can give specific guidance. Life insurance is available just like any other insurance and can pay out a pre-agreed lump sum if you die. It comes in various flavours to suit individual situations/requirements.

Alternatively you can do some clicking around the internet for online service, such as on this link,
http://www.moneysupermarket.com/life-insurance/lif...

By the way Life Insurance and Life Assurance are two expressions which mean exactly the same thing.

[anonymous-user]

Blackpuddin said:

Which I do. Through my ltd co.
How would this life insurance scheme work?

Further to above it's a win, win. If you die, your wife gets paid out if you don't then even better!

If you have a ltd co it may be worth speaking to your accountant and seeing if you can buy it through the firm and get tax relief, or do something like a death in service policy where they payment can go to the firm.


Having said all that if the cover you buy is just for the 30k then the premium will be pretty low anyway.

[Jockman]

I have life assurance through my company. There is no bik to pay but you should not claim tax relief on the premiums.

[anonymous-user]

Jockman said:

I have life assurance through my company. There is no bik to pay but you should not claim tax relief on the premiums.

I think you can if you structure the policy properly, but I could be out of date