The FSA is to fire a warning shot about firms which encourage savers to borrow money against their pensions.
Some firms are encouraging clients to borrow up to half the current value of their pension and repay only the interest. Under the agreement, the loan will be repaid from the 25 % tax-free pension lump sum taken when the person retires. However, according to the Daily Mail, the FSA now plans to look more closely at these companies. One firm called Pension Backed Loans UK charges 5.5 percentage points above the Bank of England base rate of 0.5%, the newspaper reports. Missed repayments trigger penalties which increase the total cost of the loan. Pension loan firms may take contro...
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