Over pay mortgage with pension?

FTB01295

I have been told that in the long run, you are better off stopping your pension and over paying your martgage with the amount that you put into your pension. The interest that you save on your mortgage will more that cover the loss of pension. When the mortgage is paid off, start putting large payments into your pension. Over the same period of time, eg 40 yrs, you would be far better off.

Is there any sense in this?

yelf

Thats a ridiculous comment - typical return of an equity investment is 7% a year, whats your current mortgage rate? Not only that but you need to have a retirement income so have to save to retirement - just focusing on one aspect of your finances will screw the rest.

large payments into your pension once the mortgage is paid off will give you less than if you paid in smaller payments throughout the term of the mortgage. compounding is the 8th wonder of the world

TrickyDicky101

You get tax relief on pension payments too (under most circumstances) and if you are a higher rate taxpayer this can be very valuable. If you are in a company pension scheme then frequently the employer will contribute a percentage of salary on your behalf in addition to the contributions you make (often the company contribution is dependent on you making your own contributions at a certain level). You would potentially therefore lose both the tax relief and the company contributions.

Also, due to the volatility of equity investments, you should be looking at a very long investment period for your pension (eg 20 years plus) - you wouldn't have this if you started paying in in your 50s or 60s and run the risk of investing at the 'wrong time'.