Loan security

Using your benefit as security for a loan

You may be able to use your benefit in the scheme as security for a loan. However, the lender is not entitled to make a claim against the scheme until a benefit becomes payable. The loan agreement must include a term to this effect.

If you use your benefit as security for a loan, a charge will be registered against your benefit in the scheme. If a benefit – including a partial withdrawal – is paid from the scheme, the outstanding amount of any charge may have to be paid first.

The scheme is not a lending institution and must follow the rules set out in the Financial Markets Conduct Act 2013 and in the trust deed.

A registered charge may slow benefit payments

A registered charge gives the lender the option of having any outstanding balance repaid at the time you make a withdrawal from the scheme. When you apply for a benefit, Mercer contacts the lender. The lender assesses the security of the loan and either authorises Mercer to process the payment or contacts you if an amount needs to be repaid or retained in your account as security. If there’s a charge against your account, Mercer needs to follow this process whether or not you have repaid the loan. Expect your payment to be delayed by up to a week while the charge matter gets sorted.