Pension vs Mortgage??

Clintg

Hello

I was hoping someone might be able to help. I currently have a mortage for approx £85k and a tracker at 0.75% above base rate. I have the flexibility to make over payments and with interest rates so low I want to take advantage of this. I have some disposable income to overpay but also pay into a pension.

Would it be worth freezing my current pension contribution (£450 a month) and paying this off my mortgage for a few years?

My current pension sheme is final salary.

Thanks in advance.

Lokolo

How far away are you from retiring?

DiggerUK

Clintg,
As your on final salary pension I'd advise to leave as is.

Put all spare cash in savings that net you more than 2%, use as lump sum if times change. Otherwise make over-payments now.

You can always make alterations to pension provision if paying mortgage becomes a problem, a "plan B" so to speak. Check how this would affect your pension of course, it may be a bad move.

Best of fortune.

MikeJones_2

Hi Clintg,

Clintg wrote: »

Would it be worth freezing my current pension contribution (£450 a month) and paying this off my mortgage for a few years? My current pension sheme is final salary.

Be very careful before you 'freeze' your final salary pension.

Technically, it's called 'opting-out': i.e. when you the scheme member decide not to continue to be an active member of the scheme.

If you did opt-out, you would become a preserved member of the scheme and your pension at your Normal Retirement Date would be based upon your pensionable service and final pensionable salary at the date you opted-out (rather than at NRD), whilst the pension benefit would receive increases (called revaluation) in between the date you opted-out and your NRD rather than being 'frozen'.

Furthermore, your scheme may not subsequently invite/permit/allow you to rejoin the final salary scheme again in the future, even though you might then be in a better position to afford it.

You might instead only be offered the option to join a defined contribution scheme (money purchase) which is unliklely to match what you would have expected from a final salary scheme with similar contributions.

Finally, even if you did opt-out and your employer subsequently allows you to rejoin the final salary scheme, you might not be allowed to link the two periods of service. Under this set of circumstances you would end up with two pension benefits from the final salary scheme: one 'preserved' and one 'active'.

Hope that helps.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

dunstonh

Would it be worth freezing my current pension contribution (£450 a month) and paying this off my mortgage for a few years?

NO NO NO NO NO. (and add anything else to make it an emphatic no).

Clintg

Thanks everyone for your comments, I really appreciate them.

It looks like I will leave the pension as it is and hope I live to a good number.

I will keep tackling the mortgage with other monies.

Thanks again.

Clint