More than half a million people in England plan to use all or part of their pension to repay their mortgage, new research from Partnership suggests.
A poll of 1,541 people aged 40 to 70 shows one in ten plan to use their tax-free lump sum to repay the outstanding balance on their mortgage, while a further 5 per cent plan to use their pension pot to pay off mortgage debt.
From April next year people aged 55 and over will be able to take their entire pension fund as cash, although withdrawals will be taxed at the saver’s marginal rate.
If Partnership’s findings are mapped across the population of England, almost 600,000 people will use some or all of their pension to repay their mortgage.
Partnership head of product development Mark Stopard says: “It is worrying that over half a million people in England plan to use all or part of their pension to repay their mortgage. This suggests that the number of people who actually need to do this is likely to be far higher as unexpected events such as redundancy, illness or family financial emergencies cause issues.”
The research found that the majority of people, 58 per cent, will keep making monthly repayments until their mortgage is paid.
Around 7 per cent of respondents say they have savings or investments set aside to repay their outstanding mortgage balance.
Stopard adds: “While it is natural for people to want to retire debt-free, the purpose of these savings is ideally to provide an income for their retirement – which can last up to 30 years or more. Although the state pension will provide a very basic safety net, it is unlikely to be sufficient for people to have as comfortable a retirement as they might wish.
“This research clearly highlights that people need to focus on repaying their mortgage as early as possible and avoid traps such as remortgaging for the full period each time they take out a new deal. Even those who are currently retiring have options such as working longer, downsizing or taking out an equity release plan – all options that will help to keep their pension funds intact.”