FSAVC vs Mortgage Overpayment

Josepina

I'm hoping someone maybe able to say if this is a good or bad idea. I get really confused about pension stuff.

Currently I'm in the old style final salary NHS scheme and will have a full 40 years by the time I retire at 60. I've recently opted to buy 3 added years in order to achieve this. So I'm assuming unless things really go badly my pension is more or less sorted with this.

Anyway in 1994 I started up a FSAVC (i know they no longer exist and now have same rules as personal pension) with Standard Life.
I pay £40/month net (£50/month gross) I'm in higher tax band.
The value of this pension is currently £9658.32.

What I'm thinking is that the FSAVC pot will be a drop in the ocean so would I be better off stopping further payments and making £40/ month overpayment on mortgage?
My mortgage is 5.75% fixed for 3 years (not great I know) Is this a good idea or not?

Also what what do I do with 10k left in FSAVC.

dunstonh

What I'm thinking is that the FSAVC pot will be a drop in the ocean so would I be better off stopping further payments and making £40/ month overpayment on mortgage?

£50pm gross is £30pm net to you.

£30pm reduced from the mortage is even loss of a drop in the ocean compared to £50pm into the pension.

Your pension will be around 23/80ths. About 1/4 of your current income at 60. So its quite likely you took out the FSAVC to try and cover some of that gap. Is that the sort of income you are looking for in retirement?

Also, when do you retire? The state pension age is increasing to 68 in stages. Are you able to afford to retire before state pension age?

Josepina

£50 gross £30 net is right I forgot I claim back tax each year.

I started work at 23 so with the 3 added years I'll have 40/80's (which apparantly is right?). 37 years + 3 added = 40
I can't really remember why I took out FSAVC, I was young and finance advisers were always around, I was naive and didn't have much idea so went with the flow really.
I aim to retire at 60 which is my official age.

I suppose what I'm thinking is that it seems with investments everywhere failing at the moment at least overpaying a bit of my mortgage is a definite gain. And if I paid whole mortgage off before I'm 60 I could possibly reduce my hours or retire earlier?

As to what sort of retirement income I want / need I really don't have a clue, sorry.

Josepina

OOps sorry Dunstonh just realised I made an error in original post, by retirement I'll have full 40 years of pension

dunstonh

I made an error in original post, by retirement I'll have full 40 years of pension

Just a little one then

So you are looking at half your income then.

I can't really remember why I took out FSAVC, I was young and finance advisers were always around, I was naive and didn't have much idea so went with the flow really.

Its not a bad thing to be "forced" into doing.

I suppose what I'm thinking is that it seems with investments everywhere failing at the moment

Investments are doing what they always do. Zig zag. You are also taking advantage of this by now buying units cheaper. Just as you did in 2000-2001 when they dropped signficantly then and in every other period when there was a zag rather than a zig.

You need to average out the ups and the downs. You dont look at the down periods as bad. In the same way you dont look at the 20% growth years as being normal.

What you ought to do is get the pension reviewed. Any pre 2001 plan is worth getting reviewed to see if its still good value. Also you fund value is higher now and a bit of diversification could come into play now (assuming yours is a single fund).

Josepina

Thanks I'll look into getting it reviewed