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How does it work?
You make two payments per month. One to the lender to repay the interest on your borrowings and another into a personal pension plan. The plan is to build up your pension fund sufficiently to take out enough tax free cash to repay the loan and provide you with a retirement income.
- Has tax advantages as the contributions you make to the pension attract tax relief at the highest rate of tax you pay.
- You must ensure your pension is well funded so that you have sufficient to repay your loan and provide for your retirement.
- The lump sum is currently accessible from age 55 onwards which may mean you are paying interest on the loan for longer than 25 years.
- There is a possibility that your pension fund may not have built up sufficiently to repay the loan capital at the selected retirement age.