Firstly, apologies, my earlier post was not intended to be the advertisement it turned into.
Let me start with my story to add some perspective: I am a regulated individual and I lost my business after fighting hard against the credit crunch for two years. My business collapse left me with Personal Guarantees and other debts that I had built up during the period I tried to keep my company together. I decided to seek the advice of an IVA and debt management firm, who after a year of toing and froing and me spending £1,000 (at a time when I could ill afford to spend it), their advice was to file for personal insolvency. Such a move would have buried any chance I had of continuing to exercise my professional skill that I had successfully demonstrated for twenty years.
After much research I found out about borrowing against the value of pension and had learned about PRP schemes and their legality (or lack of). I used a pension that I had not contributed to for many years and, frankly, had forgotten about, as “security” for a personal loan and I used that loan to agreement full and final settlement with nearly all my creditors and thus I have avoided five years of an IVA agreement, or even bankruptcy. I am repaying my personal loan as and when I have capital to do so and will have certainly repaid it long before my retirement age.
So, the loan is not subject to credit score (there is affordability assessment of course), the rate of interest is favourable compared to unsecured personal loan rates from banks such as HSBC, RBS and it has the benefit of being interest only. The loan company will consider CCJ’s and IVA’s, so this is an option for those in restricted credit situations, individuals like me. The loan can be repaid at any time and if the borrower has not repaid it by the time of retirement then the tax free lump is used. Now, that tax free lump sum could rise or fall and therefore it may not be sufficient to repay the loan if the borrower has not already done so. We have seen mortgage lenders review their policy to pension linked mortgages, however, pension backed mortgages have been accepted by lenders since the 1970’s and they will still accept them as repayment method today. A mortgage is a loan, just bigger and secured.
This loan might not be right for everyone, you do have to have your pension fund in a HMRC registered scheme that is managed by the loan company’s preferred manager (but the funds are in the UK), but then the loan company wants to make sure their loan will be repaid. That does not seem unreasonable to me. The pension fund might not perform as well as others, but, that can be said of any scheme. So that is the risk, but at look at how well insurance companies have faired over the past five years, they are hardly gleaming examples of investment guru’s.
So, this offers options, an alternative to getting involved in an IVA for example. It is innovative, but not dis-similar from how mortgages have been underwritten for years. So, of course one should be wary, but as a customer it worked for me and as a result I now introduce others to this service, which, I say again, is not a pension reciprocation plan, but a fresh solution to borrowing money in a time where there is little lending around, especially for those that perhaps need it the most.
