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Pension
How does it work?
You make two payments per month. One to the lender to repay the interest on your borrowings and another into a personal pension plan. The plan is to build up your pension fund sufficiently to take out enough tax free cash to repay the loan and provide you with a retirement income.
ADVANTAGES:
- Has tax advantages as the contributions you make to the pension attract tax relief at the highest rate of tax you pay.
DISADVANTAGES:
- You must ensure your pension is well funded so that you have sufficient to repay your loan and provide for your retirement.
- The lump sum is paid on retirement which may mean you are paying interest on the loan for longer than 25 years.
- You cannot access the pension fund to repay the mortgage until retirement age.
A pension is a long term investment. The fund value may fluctuate and can go down.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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