Ipswich Building Society has announced that it will allow more flexibility for older borrowers when assessing SIPP/pension funds in affordability calculations for over-55s.
The society will take 80% fund value of a pension fund that is not being drawn, divide it by the mortgage term and use this as gross income to support the affordability assessment, and the background loan to income calculation.
However, borrowers are entitled to have withdrawn the 25% tax free amount, or more, should they choose to do so, before the remaining pot is used in calculations.
Ipswich has stipulates this does not apply just to uncrystallised pension pots, meaning if an applicant is drawing a minimum amount from their pension due to having other income, or is still working and therefore only needing a top up, it will still consider what they could sustainably take from the pension over the term of the mortgage. If this is more than the current drawings, the assessment would use the higher amount – making sure only 80% of the fund value over the mortgage term is used.
Validation of the fund value will be required via a recent statement from the pension provider, the society stated.
Ipswich head of intermediary relations, Charlotte Grimshaw, commented: “This is the latest change in our campaign to improve the options for those borrowing in, or into, retirement.
“By accepting pension assets as part of our affordability calculations we are recognising that this ‘available income’ can, and should, be taken into account when assessing an applicant’s future ability to repay their mortgage.”
Grimshaw added: “We believe this approach is the right way to go to ensure later life borrowers are not penalised for choosing to leave their pension savings invested for the potential of future growth. We know that older borrowers are taking a more rounded approach to their finances and, as a mortgage lender, we must do the same.
“We hope that by taking available pension funds into consideration and not just standard pensionable income, that a greater number of creditworthy older borrowers will be able to access a mortgage.”
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