Should I pay off my mortgage discussion

Hi Jonbvn, DD and jamesd,

You guys have given me some food for thought here.

We should be able to pay off the mortgage soon (due to an inheritance, which will also give us a few 10sK cash "spare").

I am currently unemployed (on contribution-based JSA) and my OH will be unemployed in September. It's one of those midlife crisis/change periods where we are looking around and exploring new work options.

It hadn't occurred to me that we could have low paying jobs, and (both?) receive WTC, if we had substantial NS&I savings. But it seems that for WTC (as separate and distinct from income-based JSA, say) it's the interest from a capital sum, rather than the capital sum itself, that counts towards. Is that correct?

Also, wouldn't they check if you were a controlling director of your ltd company paying yourself a 8K salary say, before awarding WTC and surely the dividend payments would also take income over threshold?

Ah - penny has dropped - instead of making dividend payments, you do salary sacrifice and employer pension contributions. DD - Has HMRC said anything yet about what acceptable levels would be in that case?

(Not looking to pick a fight here DD - used to contract and know about all the IR35 etc . I like the pension pot challenge idea as well. How about Pension Millionaire Wannabes? OK, a million is a bit of a crazy target but Pension 500K Wannabes doesn't quite sound as groovy)

It seems to me that the key here is getting our monthly outgoings well understood and well under a 2K-ish threshold ((for a couple)) for any such approach to earnings and benefits to work

FG

Hi DD,

Yes, my OH is grumbling as well about the restrictions, but is really quite impressed as to how the mortgage balance has come down

When I first read the CRi3 idea I thought to myself that it wasn't going to work because pension savings need lots of time to accumulate (we're in the same age range BTW).

Then I realised that I'd fallen into the same "thought" trap as I would have done for my mortgage i.e. pay a bit each month for 25 years, that's just what you do.

CRi3 could mean a short burst of above average saving for a (relatively) short period of time, and, as long as there is enough time pre-retirement to let it grow, it could really make a difference.

BTW, it looks I'd already been thinking about "CRi3" a while back. I'd set myself a target two years ago of having 24K in instant access, and 100K in a "pension plan" (which is not necessarily only a pension wrapper) by 2010.

(So far I've got 10K in instant access and 25K in a SIPP so there is a fair way to go!)

Oh, and I also set myself the target of having paid of the mortgage by July 2007 (I then wrote myself a note that it would probably be July 2009 )

The problem with CRi3 is that it is unlikely that anyone, even with an IT contractor turnover, would be able to get to a savings threshold that gives you a comfortable retirement

Maybe it's Grow your Pension in Three Years (GPiT) or Grow your Retirement Fund in Three Years (GRFiTY) instead ?

FG

Methinks you need the WTC leaflet.

You can claim WTC/CTC if you are an employee or a self-employed person. I think that may rule you out if you are a company director? Maybe need to post on the pension and/or tax boards.

Contributions to any HMRC registered pension scheme (such as an occupational pension scheme, a personal pension plan or retirement annuity) should be deducted when you work out your income for a tax credit claim.

FreedomGirl, in my case the year of really aggressive pension contributions will put enough in the pension pot so that at my earliest retirement age target I'll be able to provide about one quarter to one third of my minimum target pension. A few years of that and there's a lot of pension certainty built up.

Dithering Dad, worth considering that the investments compound faster than the mortgage payments. That means that the greatest advantage in pure money terms comes from doing the pension part first. But of course it locks the money away so isn't so good for your case of income uncertainty.

I'll just try tempting you with stable looking investments to see if you bite and accept that those are worth having now... These two, for example:

BlackRock UK Absolute Alpha
CF Arch Cru Investment Portfolio (see more details).

You could always do this outside a pension. Both provide mostly capital growth so there's no tax to pay until you exceed your CGT allowance. With both looking able to pay more than the interest rate of most mortgages they look like a faster way to build up enough money to clear the mortgage than overpaying directly and both can be sold easily if necessary.

You look to be doing well on the pension side of things.