Pension v. mortgage?

Ystrad_Lad

Why is everyone so confident that the stock market will go from strength to strength for another 3 years? It’s just a gut feel, no-one can guarantee it! It would only take a bomb on an oil pipeline for the markets to lose confidence and go into free fall.

I bought a bond (on professional advice) in 2000. It is still only worth 85% of the value of the same money in a savings account. I'm firmly of the opinion that driving your mortgage down is the safest bet as it is a certainty. This option takes much of the anxiety out of the situation especially if your job is uncertain. Having a secure home is always a priority over a pension.

Investing in a pension is something of a lottery anyway as investments can go down as well as up and what you get depends on the stock market when you retire.

If you have spare cash and are already putting something into both pension and mortgage repayments, I believe you will get more comfort from overpaying the mortgage. This may not work out to be the very best investment in the long term but there is also a non-financial bottom line which is often ignored.

FAs often give you the 'projected growth' spiel but if the market collapses they say '....well it can go down too but in the long term....' and it’s not their fault they got it wrong.

I literally watched £10,000 disappear overnight!

dunstonh

I bought a bond (on professional advice) in 2000. It is still only worth 85% of the value of the same money in a savings account.

Thats a shame. My worst performing client from 2000 is 30% up. Best has doubled. Still you dont measure the options by the best or the worst. You look at the options and the pros and cons of each. You should also invest in line with your risk profile. Too many invest above.

Had you purchased monthly, as a pension investment would, you would have benefited from the crash due to pound cost averaging.

Having a secure home is always a priority over a pension.

So, you do nothing apart from repay the mortgage. You get to retirement and the state pension is £4381 a year. You then need to release equity in your property to give you a meagre living in retirement.

You spend 25-30 years paying 2-3 times the amount you bought the house for only to then have to borrow against it again in retirement because you didnt have any retirement planning in place.

FAs often give you the 'projected growth' spiel but if the market collapses they say '....well it can go down too but in the long term....' and it’s not their fault they got it wrong.

The stockmarket suffered the biggest crash in living history over 2000-2002. It was a great opportunity for investors and those that took advantage of it have made a fortune. A crash every now and then on a regular contribution is a good thing in the early years.

Also, you dont stick all your money in the stockmarket. You spread it across the sectors and average it out to your risk profile. A number of those have no stockmarket link.

At the end of the day, ignoring retirement provision will only leave yourself out of pocket in retirement. £4381 a year is the basic state pension. Even with pension credit, you get up to just over £9000 a year. Live on that if you can.