Mortgage questions and answers

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Q : I repaid my mortgage seven years ago and have maintained my low-cost endowment plan. The policy is due to mature later this year after twenty years. Can you tell me if I will be required to pay tax on the sum I receive as I no longer have a mortgage? WP

A. Endowment policies were not designed solely for the purpose of repaying mortgages. The primary purpose was to allow individuals to save for the longer term. I am therefore pleased to report that the proceeds from the Plan are not liable to any taxation regardless of whether you hold a mortgage or not.

Individuals should not assume that endowments are tax-efficient, the key reason why no tax is paid upon encashment at maturity is that the insurance company has already paid tax prior to you receiving the proceeds.

Q : I am soon to be 65 and will retire in August; a friend has told me that I do not have to take my pension from the insurance company to which I have paid my personal pension premiums for the last 14 years. Is this correct? AQ

A. Yes! Your friend is absolutely correct. The technical term for this is the ‘Open Market Option’ on your pension fund.

You can obtain an annuity, which is money that will be paid to you as an income for the rest of your life, from any pension provider.

We can look at the whole annuity providers market and find the most competitive rates to provide you with the best income available for your exact circumstances in retirement.

If we can be of assistance, please contact us at the details shown at the end of this feature. We wish you a long and happy retirement.

Q. We are happy with our mortgage repayment lender, however the life cover monthly premiums seem to be very expensive compared to similar cover our friends have. Can we use another insurance company for life cover or do we have to stay with the mortgage lender? AP

A. Prices for life cover vary greatly within the marketplace and you do not have to stay with your mortgage lender to get the best policy for you. May I suggest that you take independent financial advice to obtain a quotation for life cover, which could be a lot cheaper than you are currently paying. Any one of the advisers at this practice would be happy to do a search to find the best product for you. Contact details are shown at the end of this feature.

Our main mortgage partner is Brian Mole IFA Ltd, which is authorised and regulated by the Financial Services Authority. Answers given are for general guidance only, and specific advice should be taken before acting on any of the suggestions made.