I phoned my bank yesterday looking for a mortgage.
“How long do you want your mortgage for Mr Tapper?”
“Fifteen years”
“I’m sorry Mr Tapper, we can’t lend on an interest only basis beyond your 65th birthday so that will have to be 13 years”
“Why’s that?”“Because 65 is when you retire”
“I retire when I want”
“But 65 is when you get your basic state pension”
“No it isn’t, I have to wait till I’m 67, I was born in 1961, I am in the transitional arrangement, I retire at 67”.
“I’m sorry Mr Tapper, we can’t lend to you on that basis”.
“Why not?”
“Because you retirement age is 65”.
Nice. Not only can’t I get my pension, but I can’t get a mortgage. I certainly couldn’t get a job as a mortgage adviser for the bank who know about a parallel pension universe to that laid down in law and operated by the DWP.
I wonder how this advice squares with the bank’s internal policies on normal retirement age? Perhaps you are not allowed to work past 65 if you work in this bank. That’s progressive.
Eventually we agree I can have a thirteen year mortgage on an interest only basis. I am asked to show evidence that I will have enough capital to repay my loan. I explain that I have money in pensions and that if you divide the amount I have already saved by a quarter (my tax-free cash entitlement), I already have enough saved to pay off my prospective loan.
This doesn’t wash. Apparently I can’t use my pension to pay off my loan- yes I know that, I want to draw the cash and then use the cash to pay off the loan.
But the cash is from the pension so I can’t use it, says the bank.
Now there are bank rules and there is the law of the land and I’m happy to be subject to both, but if I’m borrowing on an “interest only” basis, can’t I be expected to organise my finances according to my rules – so long as I’m not breaking the law of the land. And if I choose to draw my personal pension, when I chose at some time between now and my 65th birthday and use 25% of the funds to pay off my mortgage – isn’t that my business?
Apparently not.
The bank cannot give me financial advice but they can tell me financial inexactitudes. They can tell me I get my state pension two years earlier than I can in law (under their parallel social security system). They can tell me that I can’t use the tax free cash that arose from my personal pension to pay off my interest only mortgage.
My bank is a great bank, normally it is customer focussed and its products and practices suit me well. But they still seem to think about lending to the over 50s as if this was November 1993.
I simply don’t think of 65 as a relevant age for anything. Nothing changes till 67. I’ve moved on.
I think about my personal and occupational pensions as a source of pension and cash. I know the rules and organise my finances around them. Why can’t my bank lend accordingly?
I want their money, I’ll play by their rules. But I really don’t think that they know what they are doing and I certainly don’t think they can claim to be treating their customers fairly until they recognise pensions are part of the equation.
This article was first published in http://www.pensionplaypen.com/topthinking
HSBC messed me around too. They would not supply an advertised rate unless I invested £50k with them and had an extensive financial review involving my wife and both of us attending a meeting. I promptly left and arranged a 2.59% deal with Nationwide to beyond age 65. Very efficient and no fees or hassle.
The banks are not their for your benefit – they are there for their own benefit and when they have a bit of a problem you are there for their benefit. I’m surprised that you expect any more from them than you got – they have no incentive to do anything different. Sorry for being so unconstructive and cynical but …..
I expect they are working on the basis that the ability to take a tax-free lump sum might not be around in future.
Henry, I had exactly the same conversation with FD (my bank for many years) when I moved home in the summer of 2012, so they haven’t changed! It just shows how big the communication challenge is to waken everyone – from big banks to individual – to the challenges of the changing consumer requirements of the future. It’s a shame about FD as in every respect apart from this they are top notch, but they are letting themselves down in this area (or missing a trick to put it another way). I hope they don’t go down the same route as othet great customer organisations who lose touch with customer reality (M&S, Lloyds Bank to name two)
Wow! That is so right! They blame the parent. HSBC global- makes sense.. Shut up little people, we’re a big bank!
Time for the little people to stand up?
As a pensions journo, I am often surprised at how much my limited knowledge of this area exceeds that of people in jobs in other parts of financial services. People in banks understand banking technicalities, but like most of the population they do not understand the technicalities of pensions. They have put energy into going online, but not into all the changes going on in pensions. Basically its the same dullards who started trying to sell me loans I did not need from around the point Fred Goodwin got into power. In Australia where I am now write about superannuation, the banks are clued up as they have big pension businesses, the same way the insurers in the UK have pension businesses.