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.
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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).
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 email@example.com.
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