Pension Backed

This is an interest-only mortgage, with the principal being paid off through a pension plan. It’s only an option for someone who is either self employed or in non-pensionable employment.

A personal pension plan is designed to pay a tax-free lump sum (25%) on retirement in addition to a monthly pension income. It is the lump sum that is used to repay the mortgage debt. The advantage of this type of repayment method is that the pension contributions attract tax relief at the saver's highest rate of tax.

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