31 May 2017
‘Lending into retirement’ i.e. to borrower(s) who is currently in employment but may have or will have retired before the term is scheduled to end.
At the point of inception of the loan the age of the borrower(s) at the end of the scheduled loan term should be reviewed. If the term takes the borrower(s) past the age of retirement i.e. the age the borrower(s) has told us they plan to retire or age 75, whichever is the lesser, the loan is considered to be ‘into retirement’.
Even if the applicant(s) have stated they intend to work past the age of 75, once they have passed their expected retirement age or age 75 the loan is considered ‘into retirement’ and pension income only must be considered. The loan must be affordable on pension income only.
Lending should ideally be on a capital plus interest basis. Interest only lending should only be considered where there is a credible and evidenced repayment strategy in place (see Interest Only Mortgages above).
The maximum LTV for ‘lending into retirement’ is 80%.
Where there are multiple parties to a mortgage with a mix of incomes it is important to understand and assess the source of income. Where the majority of income is derived from one party or parties falling into the definition of ‘into retirement’ then the entire mortgage should be categorised as ‘into retirement’.
If, at inception of the loan, there is less than 10 years to declared retirement age (max age at end of term is 75) and where the retirement date is prior to the end of the scheduled mortgage term:
• The Society will require evidence of current income and of pension income expected in retirement. The loan must be affordable on pension income only.
The types of evidence which can be used to verify anticipated retirement income are as follows:
• Private / Company Pension Forecast Statement dated within the last 18 months.
• State Pension Statement dated within last 18 months which must be obtained by the customer directly as an actual statement showing their name and address (this can be obtained from The Pension Service).
• State Pension Forecast statement issued to the customer directly from The Pension Service showing their name and address.
• Annuity Statement dated within the last 18 months.
If, at inception of the loan, there is more than 10 years to declared retirement age (max age at end of term is 75) and where the retirement date is prior to the end of the scheduled mortgage term:
• The Society will require evidence of current income; and
• Will require proof of the existence of a current pension (not State Pension), e.g. a payslip showing a pension deduction, pension statement or pension payment on a bank statement. If the applicant had paid into a past pension, we require confirmation of the amount of income to be paid in retirement.
This type of mortgage application should be submitted to your local Progressive branch using a paper application, and not online.