Commutation Loans

The commutation loan is an interest-only loan up to £15000 available up to three years before retirement for a member (or individual eligible for membership)  in a defined benefit occupational pension scheme. It is designed to meet the needs of pre-retirement  members who need a loan for example to finance improvements to their retirement home, or other aspects of the transition to retirement.

 

The loan is given on an interest only repayment plan with the agreement between the parties that the principal (that is the amount of the loan) will be repaid in full on the retirement of the borrower (or three years from the date of the agreement whichever is the sooner date).  The loan will usually be repaid from the “commutation” i.e. lump sum element of the pension.  Like all CMCU’s loans there are no penalties for early settlement. If during the three year period you decide to defer your retirement you can change the agreement to repay the principal but this would be at the credit union’s standard lending rate for the amount at the time.

Loan Value Monthly Interest Only Repayment
£5000 £33.00
£7000 £45.00
£8000 £49.00
£9000 £55.00
£10000 £61.00
£11000 £67.00
£12500 £76.00
£15000 £92.00

Interest is charged at 8% APR for loans up to £7500 and 7.5% APR between £7500 and £15000. The repayment is made straight from payroll and is a set figure representing 31 days interest (for months with less than 31 days the difference in interest is paid into your savings account).

EXAMPLE

Revd. Y purchased a house 10 years ago in preparation for his retirement. The mortgage repayments are £900 per month as the mortgage was only given over 13 years as he is due to retire in 2020. These repayments are steep but manageable because both Revd Y and his wife are working and have no other major financial commitments. Unfortunately the house requires some electrical work and new doors and windows in the next few months at a cost of £10,000. A standard loan for this amount would require them to find repayments in the region of £300 which would be difficult, however a Commutation Loan would cost £61 per month. As Revd Y has been a member of the pension scheme for 30 years he will receive a lump sum which is more than sufficient to repay the principal on the loan. Therefore they are able to improve the house prior to retirement without struggling through the last three years of employment.

This is a new product and if you would like to discuss it in more detail please call us on 01452 500 463 between 9.30am and 1.30pm.   The application form can be downloaded from this page. Once completed  please email it with your most recent one month’s bank statement and your annual defined benefits pension statement to loans@cmcu.org.uk.

CMCU Commutation Loan Application Form

 

Contact us today for a quote or more information:

Registered Address

3 Beaufort Buildings, Gloucester, GL1 1XB

Call Us

01452 500 463 (9.30am -2.30)

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