How does it work?

You make two payments per month. One to the lender to repay the interest on your borrowings and another into a personal pension plan. The plan is to build up your pension fund sufficiently to take out enough tax free cash to repay the loan and provide you with a retirement income.

ADVANTAGES:

1. Has tax advantages as the contributions you make to the pension attract tax relief at the highest rate of tax you pay.

DISADVANTAGES:

1. You must ensure your pension is well funded so that you have sufficient to repay your loan and provide for your retirement.
2. The lump sum is paid on retirement which may mean you are paying interest on the loan for longer than 25 years.
3. You cannot access the pension fund to repay the mortgage until retirement age.

A pension is a long term investment. The fund value may fluctuate and can go down.

Your home may be repossessed if you do not keep up repayments on your mortgage.