Overpay mortgage or other investment?

dunstonh wrote: »

Does that put you on track for your retirement needs or still leave you short?

Are you married or have a partner? How is their provision compared to yours (remember you both get a personal allowance in retirement - so dont waste them).

It won't put me on track by a long shot as I have started so late.


Have a partner who is a teacher so her provision is in far better shape!

Opened a HL stocks and shares isa, now to decide between the multitude of funds to invest in! Minefield.

I thought I would revisit this as I am now in the month long window of opportunity to increase my workplace pension contributions. As I said before, it is currently 8% e'ee and 16% e'er and this the max the e'er will contribute.


My current monthly budget leaves £700 for savings and investments so I feel that I could comfortably up my pension contribution given the level of cash I have at present (obviously not a fortune but not really worth topping up at the expense of pension/s&s isa). I am also paying £120/month off interest free debt which should be clear in 12 months so I figure I can afford more as when this is done that will be another £120 to save/invest. I have played with the numbers on a salary calculator website and going up by 4% adds £107 to my pot whilst my net pay only goes down by £63. I could probably go up by 8% which would bring my net down by £128 (£214 into pot) and when the debt is paid off my surplus will be back to what it is now, give or take a few quid. With 57k cash and 5k s&s, there is more than enough for an emergency fund and a holiday if we decide to have one this year, so I am struggling to see a downside to doubling my contributions.


FYI, pension is currently 12k and is the only one I have (almost 34 y/o) so I am playing a serious game of catch up which is why I am considering this.


Any thoughts?

Anonymous101 wrote: »

Pension's are the most efficient way of saving from a tax point of view, however you've the issue of accessibility which I'm sure you know. You benefit from a good workplace scheme with employer contributions being much higher than average. Is your contributions via a salary sacrifice scheme? This is often a very good way to reduce your tax bill especially if you're a higher rate payer which i'm guessing you are.

Yes, the lack of accessibility is basically the only reason why I am hesitant to up the conts so much. Yes, salary sacrifice. I am not a higher rate taxpayer, unfortunately, as only earn 32k.

Anonymous101 wrote: »

With regards to over payment on mortgages: A lot of people usually advise to not over pay mortgages with the suggestion that you could get a better return elsewhere on your investment. While I agree you are likely to receive more than the 2.14% you'd save on the mortgage debt I don't think its as straight forward as that. For example. Mortgage rates may rise (once you're out of your fixed term) and investment values can fall suddenly. While you could save in a higher interest account and then look to overpay the mortgage at that point there's often rules on over payment allowances etc.
I'm a fairly adventurous investor but I still think that its worth reducing the capital amount on a mortgage loan, to a degree, even if it doesn't immediately give the best return.

YOu make some valid points which I have considered - you're quite correct that in 4 years time when we have to remortgage rates may have doubled and we may wish we had overpaid by £200 for 48 months, which is why it is a difficult choice.

Anonymous101 wrote: »

Given your current pension pot size I'd be wanting to prioritize this but make overpayments on the mortgage over and above your pension contributions.

If you were me with such a low pension provision, what do you think you would go up to in % terms? In a way I feel I need to maximise the situation I am in as, for all I know, in 3-5 years I may be in a different job with a much less generous pension offering. I guess out of £700/month, using £100 of it to overpay isn't going to make a difference to my day to day life but will start to eat into what we owe, albeit by only a small amount.