The insurer’s findings suggest 631,000 will use their pension to meet mortgage obligations. The majority of 40-70 year olds intend to meet their obligations via monthly repayments at 71% and 25% plan to use additional lump sum contributions.
Up to 9% intend to use their retirement savings – whether the tax-free lump sum, or entire pot – to repay. This is higher than the number of people who will use an inheritance at 8%, with 7 % or 491,000 unclear on how they will meet their obligations.
Last year, 14% of 40-70 year olds intended to use their pension to repay their mortgage.
Andrew Megson, managing director of retirement, Partnership, said: “While it is 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 1m in 2014. This suggests 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 minds on paying off their homeloan before they retire.
Megson said the ongoing work lenders have done to communicate with interest-only customers will have enouraged more people to convert to capital and repayment.
He said: “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, as 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.”