Is it possible to use a pension to pay off a Mortgage?

[54isanopendoor]

Divorcing.
Position:
55 y/o. 18 years a SAHM to two children with significant additional needs who may never leave home. Disabled myself. ExH left last year & almost no contact. Now live on DWP Carers allowance + Income Support. No pension of my own.
Family house with 6.5yrs left of mortgage. Interest only. No vehicle to repay.
ExH is 'happy to give me the house' (ie let me stay for 6.5 yrs till pension up)
No equity in house at ALL. Only asset is STBEX pension.
Lawyer is considering whether a greater than 50:50 split would be fair in circs.
I wondered if I should push hard for this & if it is enough then would I be able to 'use' that to pay off the mortgage in 6.5 yrs???

Unlikely, unless 25% of his pension is enough to pay off the mtge and if it can accessed in 6.5 years. Presumably your husband will want the other 75% to provide an income so won’t withdraw everything?

He's about to ask for medical retirement, apparantly...
(sorry, v recent so didn't include in OP)

I'm not sure it would. Ultimately division of assets on divorce is based on need and appropriate provision. If the only asset is a pension in his name but he also has medical needs and is taking medical retirement I'm not sure the court would rule in favour of more than 50/50 if his named pension is required to support his own care or housing needs, especially with children not being minors- but ultimately that is for your solicitor to correctly establish.

Who's name is the house in, and who is named on the mortgage? What is the value of his pension relative to any loan remaining on the mortgage?

Different circumstances but we used some of my DH’s 25% tax free amount to clear our mortgage.
You need a shit hit lawyer to get you as much of the pension as they can.

What a scumbag he is.

Get a shit hot lawyer and take him for most of that pension AND the house

It depends on his pension type surely?

If it's a personal pension pot, (which would be invested to provide an annuity, for example) then the "pot" might contain a capital sum large enough to repay the mortgage loan when it becomes due in 6 years. But if the pot is small and mortgage large, then Ex would have nothing to live on.

If it's a final salary pension (a fraction of his old salary, paid monthly) then there may be no cash sum to pay off the mortgage as a lump sum.

There IS no house to take. Its in hock to the mortgage lender. The borrowers have an interest only mortgage; that means in 6 years the lender wants the capital loan repaid. If OP and her ex fail to repay, the lender will foreclose, sell the house to recoup the loan.

Are you sure there's no equity in the property at all?
Would be unusual to be nothing at all assuming you took out a 10 year mortgage with six more years to run?

House bought in 2006 for £140K. Grad incr mort to £138K (work on house, debt)
Had it valued recently: a shock: £150/£150/£165! (3 local estate agents said still needs work, bad area, basement floods). So, not a pot of gold but a roof at least

Pension: 20 years local authority. Pension 'pot' is £200K atm If he took the lump sum now it would be 10K. & pay 10K pa pension but 'main loading was to be final 10 years' working but if he retires on medical grounds that's gone anyway?

so, if we divided the pension 50:50, so 100K in pot each, then each took £25K then we could jointly pay off £50K of mort? That would leave me 6.5 years to make myself mortgageable for 88K when I'm 61. Doesn't look good does it?

He's scooting off to live with his Mum in her final years (to make sure his family don't spend too much on carers so her 'house is safe financially'). Pah.

I would forget about the house it’s not possible on those figures. With two children with additional needs and you being disabled wouldn’t you be priority for social housing?

@Thebreakfastclub2023 I'm not sure 'social housing' is available anywhere really nowadays?

I think the bit I struggle with understanding is the difference between the 'pension pot' & what is available?

So, if I have £100K put into my pension pot (available to me as I am now 55) how much of this can be used to pay off a mortgage?

25 % tax free. You can’t rely on your ex doing the right thing. Do you have to stay in your area? I’m sure with disability and 2 kids with additional needs you are entitled to housing have you researched this?

No those figures don’t work. You’d have to pay a heck of a lot of tax to take that much out as cash.

So, if I have £100K put into my pension pot (available to me as I am now 55) how much of this can be used to pay off a mortgage?
25k if you don’t want to pay any tax.

Assuming he's also over 55, he can get and give you a £50k tax free lump sum, as his "need" for a house is covered by him going to live with his mum...then divide the rest of his pension 50/50 and then you pay tax on your share at 20% basic rate, so long as your total income doesn't go over the £50,270 income threshold. If it does, then the amount over the threshold will be taxed at 40%.

Also consider whether putting that much money (or whatever you can get) towards the mortgage is the best option, might you be better selling it/giving it back to the bank and then using your lump sum to start again somewhere else?

get a decent solicitor and go after as much as you need, you're being too nice!

What was the plan to pay off the interest only mortgage?
Banks require you to have something in place to pay off the balance when it's interest only?

These are the rules for taking a lump sum from a local authority pension. But if he's taking it early the whole pension - including lump sum - may be reduced.

www.lgpsmember.org/your-pension/planning/taking-a-lump-sum/

Pension 'pot' is £200K atm If he took the lump sum now it would be 10K. & pay 10K pa pension but 'main loading was to be final 10 years'

Hmm. The local authority pension doesn't have a 'pot' as such. Is this a valuation he's had for the divorce?

The lump sum for the pre 2008 section is 3x the annual pension, not the same as the pension. Later sections don't have an automatic lump sum.

And there's no 'loading', so I have no clue on that bit. He'd get a higher pension if he had a promotion in the final 10 years, but there's no automatic increase that weights pension accrual towards the final stage.

The information you've given doesn't seem to make sense. I think you need professional advice.

@BinturongsSmellOfPopcorn ah, OK.
Yes, I just have his word but I now also have the formal valuation he's had done for Divorce purposes.

@strawberry2017 we took out the mortgage in 2006. The rules were much less stringent then.

Yeah but you would have remortgaged countless times since then. No reasonable bank would let someone stay on an interest only mortgage for this many years without some sort of plan to pay off the money.

@uncertainalice any pension money would have to go straight into my pension fund for now as I am on income support. I couldn't touch it unless my circs changed & I could come off benefits to work. I always wanted to do 50:50 work & childcare with him but he always refused to hear of it. I had hoped now the kids were older that I could work again but I tried in 2018 & my Dd had a complete breakdown that set her back a great deal so it isn't possible. I asked him again recently (when it was clear that he doesnt intend returning to work full time but he's not interested in being responsible for his own kids. I have to say his announcment - just today - that he intends moving 300m away came as a shock. I knew he was selfish but I didn't think he was that selfish). If i withdrew money from my pension then I'd have to declare that & my whole position would change. I think I'm stuffed whatever happens.

I DO have a lawyer but as I'm on legal aid & possibly as there is not much to scrap over I am not getting much advice.

@strawberry2017 - not 'countless times' no. All I can say is, they have?
Obviously it's not a great idea & not a position I wanted to be in. But I didn't anticipate having 2 disabled kids, a husband on a low wage & not being able to work myself (plus a house that didn't increase in value over a 15 year period - must be the only bloody one in the UK - but flooding doesn't exactly add value)

any pension money would have to go straight into my pension fund for now

I don’t think you actually get your share of the pension transferred to you as money. You get a share of the scheme membership, rather than cash.

lgps.buckinghamshire.gov.uk/currently-paying-in/how-your-lgps-pension-works/divorce-and-pension-sharing/

@BinturongsSmellOfPopcorn Yes, that's what I meant sorry.

Further 'info' from him: he's trying for a Tier 2 medical retirement.
If he gets it he's off 300m away. If not, then not I guess?
What IS clear is that he's not fussed about his kids or he'd not consider 300m.

It seems that, if current pension pot is divided, then I could withdraw £25 to pay down some of the mortgage. Whether I am allowed to do so without it affecting my benefits I don't know. It might just have to sit in pension.
Then if he does medically retire & can do the same I will ask him to do so.
That would still leave £88K to pay off in 7 years time. Not sure how.
That's why I was asking if what would be left in my pension fund (about 60K) could be used towards this debt or not ??