Cash in private pension to pay off mortgage?

S

SimonP

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Hi all - just looking for some advice here...

I have a UK private pension with Zurich which has a fund value of about £110000. I haven't paid into it since 1992 and it matures (they call it a 'planned retirement date') next year when I'm 65. Their forecast at present is it would give me around €175 per month for life.

Mortgage has €55000 left and is finished March 2027 and costs me €1200 per month. Would it be a good idea to cash in some of that pension if I was able to, to pay off the mortgage when the pension is available? At present I plan to give up the job at 66 when I can claim full Irish pension and perhaps 3/4 of a UK pension.

Thanks
 
SimonP said:
Mortgage has €55000 left and is finished March 2027 and costs me €1200 per month. Would it be a good idea to cash in some of that pension if I was able to, to pay off the mortgage when the pension is available?
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I don't really understand the question(s?) as posed.
Why would you consider cashing in the pension (even if that's possible, I suspect not) to pay off the mortgage?
Are you having problems meeting your mortgage repayments?
You might want to do a Money Makeover post to give people a better picture of your overall personal/financial circumstances.
It's often impossible to answer questions like this in isolation.
 
Thanks ClubMan, no not any problems paying the mortgage, just a few ideas going through the head. I guess the thought of having no mortgage is appealing these days! Plus the Zurich pension is kind of pennies compared to the two state pensions...
 
I don't know anything about UK pensions but I presume that they benefit from tax free growth so even a small pension (and £110k isn't pennies in my opinion) isn't to be sneezed at. Even if you could cash in the pension to pay off the mortgage (and I suspect that you can't unless you have already reached the pension's specified minimum retirement age) there are probably better ways to accelerate the repayment of the mortgage. But, without more information about your overall financial circumstances it's impossible for anybody to say.
 
You could use any available tax free lump sum to reduce your mortgage. After that any further withdrawals from your pension will be taxed. If you are currently in the 20% tax band you could withdraw a further amount from your pension to take you to the maximum of the 20% band. You could do this each year. It would probably not make sense to unnecessarily pay 40% tax on pension withdrawals just to repay your mortgage.
 
This is a UK pension fund being paid to someone living in Ireland.

Do the ordinary Irish tax rules apply? That he can take 25% tax-free and "ARF" the rest?

Check that out before making a final decision.

Brendan
 
SimonP said:
I have a UK private pension with Zurich which has a fund value of about £110000.
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SimonP said:
Plus the Zurich pension is kind of pennies compared to the two state pensions...
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No, it's not.

It's £110,000

That is a lot of money to most people. You are dismissing it because you are looking at the monthly payment.


Think of it as a lump-sum and not as a monthly payment.

Brendan
 
SimonP said:
Hi all - just looking for some advice here...

I have a UK private pension with Zurich which has a fund value of about £110000. I haven't paid into it since 1992 and it matures (they call it a 'planned retirement date') next year when I'm 65. Their forecast at present is it would give me around €175 per month for life.

Mortgage has €55000 left and is finished March 2027 and costs me €1200 per month. Would it be a good idea to cash in some of that pension if I was able to, to pay off the mortgage when the pension is available? At present I plan to give up the job at 66 when I can claim full Irish pension and perhaps 3/4 of a UK pension.

Thanks
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Something is off, with the £175 per month, as this is only £2,100 per year, or just under, 2% of fund per annum. So it must be after a lump sum is paid out, which its unclear what this is ?
 
Thanks everyone for the input! very interesting... yes perhaps as S class says to take a lump sum up to the tax threshold each year might be better.
Also sorry yes (fayf) my calculations were slightly wrong, it's actually two pensions that have a total fund value of about £110000 (agreed Brendan, no, not to be sneezed at!) the monthly figure is coming out at about €268 per month at present day conversions.

Screenshot 2023-04-06 085216.jpg

There's a snip of part of one of the statements. What I find kind of interesting unrelated to my original question is how pension values and growth have changed over the years. For instance, in this pension above my employer and myself paid into it between 1985 and 1992 with a total amount of £6552. This seems quite good, and better than what I see in my current Irish employer pension scheme. I guess it's to do with the amount of time passed and the much higher interest rates etc around that time?
 
SimonP said:
the monthly figure is coming out at about €268 per month at present day conversions.
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Bear in mind that such projections are largely meaningless being based on a bunch of simplifying assumptions.
SimonP said:
What I find kind of interesting unrelated to my original question is how pension values and growth have changed over the years. For instance, in this pension above my employer and myself paid into it between 1985 and 1992 with a total amount of £6552. This seems quite good, and better than what I see in my current Irish employer pension scheme. I guess it's to do with the amount of time passed and the much higher interest rates etc around that time?
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And also other factors such as the charges that apply, what the money in invested in etc.
 
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