Will regular lump sum payments count as income for a mortgage?

17 November 2016


I have recently retired, and I am in the process of moving my defined contribution work pension (Sipp).

One strategy I am considered is to take the 25% lump sum as a series of payments, either monthly or quarterly, over a period of up to five years.

I would then leave the rest of the money invested in a growth portfolio. Am I allowed to do this?

My reason is that it would demonstrate regular income to lenders, as I am considering applying for a small mortgage to assist relocation.



I am assuming you are moving your current workplace pension into a Sipp because either your current pension won’t allow you to flexibly access your benefits in the way you want or it doesn’t provide the investment choice you want.

The way you suggest accessing your benefits is perfectly allowable under the pension rules. This shouldn’t be a problem, although you should always check whether your product provider allows this and what charges it will apply.

From a mortgage perspective, any prospective lender would look closely at your ability to pay interest and repay the amount you borrow, including if or when interest rates rise in the future.

This makes it difficult for many older people, and especially those who are retired, to get a mortgage. If you’re relying on pension income to make mortgage repayments, you would need to demonstrate that this is sufficient to meet the payments.

Making regular withdrawals from your pension isn’t a guaranteed source of income, as you’ll be able to change the amount and frequency of these withdrawals whenever you want.

Also, as you’re only planning to make pension withdrawals for five years, does this mean you only envisage the mortgage term being five years?


If you only need a small amount to assist with your relocation, taking out a mortgage might not be the best approach anyway. It might, for example, be easier to take the amount you need direct from your pension.

However, there may be tax consequences to this, and any amounts taken from your pension will leave less available to provide you with an income in retirement, which of course is what a pension is designed to do.

The right choice for you will depend on your individual circumstances. If you’re not sure what to do, you should take independent financial advice.