Bridging loan before access to pension at 55??

[dessie360]

I have a crucial part of my retirement planning which I feel unsure of and would love to hear everyone's thoughts.

In brief, I have 10 years until I can access my pension at 55 (assuming they don't increase that age limit). I should hopefully have enough to live off until then and really don't want to work in that time if at all possible but it's quite tight as budgets go and, well, you never know what life may throw at you. So, I'm thinking, if I needed say £30k to bridge me over from the end of that 10-year period into pension access, would a bank or loan provider give me the money, secured against my house, that I could then repay after say 2 years from my pension pot?

I can't find any examples of such a product online but I imagine some financial firms might offer it if requested?

Has anyone had any experience of such a thing? Or any opinion on whether it's viable?

[George the original one]

IMHO, if you're borrowing to bridge the gap, then you're not ready to retire.

In the USA, untapped credit secured against your house is called a Home Equity Line of Credit (HELOC). If you get one, it is best to do so while still employed. I've used one in the past for the purposes of home improvement. If they're available in the UK, read the terms carefully. Typically one has to make payments the instant you tap into the credit... one way to deal with that is to borrow more than you need so that there is a lump of money that will be used to make the payments.

Otherwise, a high limit credit card is probably your next option.

[Bankai]

You still need regular income to qualify for home equity loan. The same with credit card. You could take either of these while still working, but this would only generate interest since you will only need extra money during last few years.

[dessie360]

Thanks so much for the replies, guys. It's VERY much appreciated.

I think I should probably have clarified my situation, or my approach, a little more...

-I've already left work. (For now at least - could return if need be, of course, but...)
-I really REALLY don't want to return to work, EVER, in any capacity, if I can help it. I hate it. It's the last option for me.
-I earn a couple of £Ks per year easy enough from matched betting and other hobbies / fun activities but wouldn't want to engage in any proper work beyond this.
-I do think I have enough to live off until 55 (c. £150k) , but you just never know, right? So the hypothetical £30k is exactly that. Hypothetical, unknown, safety net stuff. I like to do ERE in a fairly aggressive manner
-I'd be prepared to cut my expenditure in half to hit my budget. But...
-Looking at worst-case scenarios, I may still get hit by a series of big bills or market dips in the last 2-5 years. You never know.
-In which case, I might prefer to take on a chunky loan with interest over 2+ years rather than return to work or cut the budget even more drastically.

So, I guess that's why I'm interested in the loan product without monthly repayments. Happy to take a
big hit on interest rates. For me, it's worth it.

Would love to hear of any financing plans / loans that would suit my approach, which I'm starting to think is an unusual one

[DutchGirl]

As an alternative plan... You're in the UK I assume. Have you looked into any social support / wellfare that you might be able to tap into if you run out of money?

An even "alternativer" plan could be to sell your house and move to a smaller, cheaper one if you run out of money.

[saving-10-years]

@dessie360 I would suggest you keep careful records of spending and see how low you can go so you know what your buffer is. If you own your own home and have spare rooms then you could work out how much you could rent out for to bridge gap. We have had student lodgers in the past and also for several years ended up having good friends stay with us during the week because we were near to work. This need not be at all unpleasant and did not feel like work (we were not charging commercial rates in the case of our friends but it helped cover bills). If you own your own home and its bigger than you need then you could rent this out and more somewhere smaller (vans may be mentioned in this forum but that may be not what you want). This is if you don't want to sell as @Dutchgirl suggests.

I would not want to get into any loan situation once retired. I realise this question is a case of seeing what you can do if the unexpected happens, but ERE advice tends towards being in control of your finances and not having risky loan arrangements (once not working). Especially if you don't want to work again.

It might help you to post something about how you plan to live (what sort of income sources and what sort of amount). The people in these forums are very good at pointing out whether or not you have your bases covered.

[dessie360]

Thank you all for the continued insights and views. loving it and it's hugely appreciated.

In posting on here these last couple of days, I've found it really fascinating how everyone has slightly different approaches towards retirement. It's also made me realise I probably have far more of a 'loose' approach than most I guess don't really see retiring as a hard cut-off point or a set of rigid numbers but more a work in progress, since life is very much like that.

Just to fill in some gaps... I have around 550k across pension and non-pension. No mortgage or dependents. For me, the big picture is, this should be sufficient to generate enough passive return to sustain my current level of spending forever more - which is, 1500 per month (500 bills, 800 living, 200 irregular or unforeseen extras). I consider myself already retired, as I've stopped working. The potential challenge is that 'only' 150k of this is non-pension (plus 10k in cash), which is my 10-year (9.5 to be exact) pre-pension fund. I'm assuming a spend of around 1500 pm, as above, growing in line with inflation with investment growth on the 150k of 3% above inflation. I could easily live off half this spend if I wanted to or had to but it'd be good to know what a plan might look like if I wanted to continue or even increase expenditure ahead of pension access and/or in the last 2 years, where budgeting needs to be tighter, I had a succession of unforeseen events - the roof comes off the house and the car gives up the ghost etc etc...

I have been doing a lot of reading into the pension access age changing to 57. If they do switch it to mirror the state pension age increase, fingers crossed I'd just make the cut as I turn 55 in 2027. There's a good chance it won't happen IMO. Talking to contacts in the public sector, legislation progress in this area seems to have hit a real roadblock these past 12 months as government has had other erm priorities. We'll see. Interesting times!

[saving-10-years]

@dessie360 most people here once they get to FI stage are at the work in progress/flexible mindset too. You said you don't want to work ever/at all - the 'hard' mode - so that certainly coloured my advice.

Sounds like you have a local government/public sector pension pot and are currently around age 45? Its usual in these to only pay out early (say 55) with some actuarial reduction. Eg. for this NHS scheme members catake pension at 55 but may lose as much as 40% of the pension they would get if staying til state retirement age. https://www.nhsbsa.nhs.uk/sites/default ... 9%20V7.pdf As many schemes are regarded as under-funded now they seem to be not only pushing back the age they will pay at (government changes of rules), but also the amount you can get paid (provider changes in rules) so you need to keep a close eye on things. UK university staff are currently in strike negotiations about their USS scheme recommending changing to a scheme based on stock market performance (rather than career average salary).

You may also want to look at the effect of early retirement on state pension (I know that's a long way off). If you are contracted out then your payments from this will be reduced and its also based on 35 years contributions so that will also affect it.

Good luck with enjoying many years of retirement.

[DutchGirl]

Here in the Netherlands pension age was rather suddenly increased from age 65 to age 67. This happened over the last 5 years or so, catching a lot of almost-retirees by surprise. So I wouldn't bet on things staying the same for the next ten years. I would make sure to have a good, sturdy plan ready to make sure you're going to be okay, whatever the government decides.

[classical_Liberal]

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