“How long do you want your mortgage for Mr Tapper?”
“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”.
“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?
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