Many clients have dealt with the banks directly in recent years to restructure their mortgage debt and have been offered split mortgages, term extensions and part capital and interest deals from their lenders. While this keeps the roof over client’s heads it often leads to 2 main financial planning issues.
- Life Insurance Shortfalls
- Future Residual Debt
While the clear and obvious benefit to accepting one of these deals is that there is now no immediate threat to your home, it is important to complete the process prudently. By this I mean plan for the future and address the likely shortfall in your life insurance and consider how you are going to pay off the balance of your mortgage. The mortgage has not been written down, just restructured. You still have to pay it, just in a different way now.
Insolvency is a structured deal with creditor’s arranged through a PIP and pension assets can often be used as part of the deal. Sometimes our clients are happy to do this and other times they are not.
To avoid your retirement assets being on the table when it comes to negotiating a deal with creditors it is important to consider what form they are in. Different pension structures allow for different drawdown dates which means that simply changing the structure of your pension could be difference between gaining some value from it or not.
Pensions do allow for some degree of control over when your retirement assets become realisable so please get in touch before you make any decisions regarding insolvency and your retirement assets.
Pensions are largely protected when a client enters a bankruptcy process assuming you don’t have access now or will have access to you pension in the next 5 years. There are however still significant risks that clients should be aware of. Clients often believe they don’t have access to their pension but have found out too late that in fact their pension was fully accessible and as such was lost when they went bankrupt.
Clients who have pension assets that are realisable in the years to come have lost all of their monies when they felt there was no risk at all.
For example clients can have their pensions invested in a buyout bond which can give access to retirement assets from 50 can be at risk when they feel there pension isn’t realisable until they are 60. Some occupational pension schemes allow for early retirement too.
It is crucial to plan for bankruptcy and your pension assets can play a huge part in the planning process
Please just get in touch and we will be happy to assess your situation for you.