suspending payments to private pension to overpay mortgage

simonr1100gs

Good morning, my first post so go easy.

This may seem like a silly question given the tax incentives you get from paying into a pension, but here goes.

I have an offset mortgage, have small savings in the account, currently overpay a nominal amount and am in the process of increasing my overpayments, I have considered suspending the payments into my private pension which I have had since I was 18 (now 40) and putting the money into my mortgage, This I think will make me mortgage free in 7 years max. I will then be able to start paying a lot more into my pension / possible other investments.

Like most I cannot stomach paying interest and feel that this may be a better use of funds, getting my house in order given the times we live in.

Thanks Simon

RenovationMan

Sorry, but I think you'd be doing the wrong thing. Stick the pension, the house will be paid off eventually anyway, but that pension will always have a 7 year dent in it.

Wh05apk

The money going into your pension currently has tax benefits, and any funds purchased currently are at very low values, so have far greater growth potential, presumably your mortgage is at a relatively low rate, so the benefit you gain would only be 3/4%?

Personally I would stick to the pension, possibly even increasing your contribution to take advantage of the current poor state of the markets (unless you think they have further to fall!)

dunstonh

Interest rates on borrowing are at an all time low and investments appear cheap for the long term and volatile markets are great news for regular contributions.

When you look at investments you have the following plus points:
Earnings are growing, and in most markets faster than average.
Corporate debt is low and trending lower.
PE ratios are near 15 year lows.
Equity dividend yields are well above 15 year average.
Price to book ratio near 10 year lows.

Yes, there will be short term volatility but longer term, the figures all appear attractive. Plus, if the employer makes contributions, then you would be throwing away free money. Nothing beats free money.

opinions4u

Unless the rate on the mortgage is particularly high, I'd stick with the pension.

simonr1100gs

Thanks all, pretty much as I thought, was living in hope.

Thank you

Simon

RenovationMan

Putting all of your money into a single asset is never a good idea. Better to spread your money into different pots and you'll be wealthier and more financially secure over the long-term.

Thrugelmir

What rate of interest do you pay on your mortgage?

How much do you contribute to your pension?

Do you consider your employment safe ( i.e. for the foreseeable future) ?

Thrugelmir

dunstonh wrote: »

When you look at investments you have the following plus points:
Earnings are growing, and in most markets faster than average.
Corporate debt is low and trending lower.
PE ratios are near 15 year lows.
Equity dividend yields are well above 15 year average.
Price to book ratio near 10 year lows.

Some debate as to which way markets will go, as the impact globally of Governmental cut backs takes hold. Along with the deleveraging by the indebted Western consumer.

simonr1100gs

Thrugelmir wrote: »

What rate of interest do you pay on your mortgage?

How much do you contribute to your pension?

Do you consider your employment safe ( i.e. for the foreseeable future) ?

I am self employed, pay in a nominal amount, have other investments.
Remortgaging, may offset fix for a couple of years at 3.09%.
Did not know if there was some software somewhere that could calculate this equation. Thanks

dunstonh

Self employed means you get a lower state pension as you only qualify for the basic. That is around £3500 a year less than an employed person earning the same amount. In pension terms, you need around £125k in a pension just to make up that difference.

So, stopping the pension is a bigger risk for a self employed person.

You are only paying 3.09%. Even the bog standard balanced managed fund sector average has been exceeding that over the last 10 years and that is quite a bad 10 year period.