Almost one-tenth (9%) of respondents intend to use their retirement savings to repay their mortgage, according to research by insurance firm Partnership.
Its survey of 1,494 people aged 40-70 in 2015 and 1,541 in 2014, found that 6% of respondents in 2015 plan to use their tax-free pension lump sum to repay an outstanding mortgage balance, down from 9% in 2014.
A further 3% intend to use their pension pot to repay their mortgage. The percentage of respondents that planned to do this in 2014 was 5%.
The research also found:
- 71% of 2015’s respondents will make monthly repayments until their mortgage is repaid, up from 58% in 2014.
- 25% plan to make an additional lump sum repayment and 8% will use an inheritance to pay off their mortgage.
- 5% of respondents have savings or investments set aside to repay the outstanding balance, while 2% intend to take in a lodger to help pay off the balance.
- 7% of respondents to the 2015 survey do not know how they will repay their mortgage.
Andrew Megson (pictured), managing director of retirement at Partnership, said: “While it is still shocking that over half a million people in the UK intend to use all or part of their retirement savings to repay their mortgage, it has fallen from over one million in 2014.
“This is fascinating because it suggests that the pension freedoms, which allow people to access their entire pension in cash, have encouraged people to take a more holistic view of how they use their pension rather than focusing on one-off expenditure. This, in turn, appears to have focused peoples’ minds on paying off their home loan before they retire.
“While a debt-free retirement is the ideal, some people may find they reach traditional retirement age with an outstanding balance. Using their pension may well seem like an option but it is not the only option because working longer, downsizing or considering a lifetime mortgage may be more appropriate.
“Ideally, pension savings should be used to provide an income in retirement, and with the state pension only providing a very basic safety net, making this choice could lead to hardship in later life.”