Pension or mortgage

xleannex19

Hi everyone,

Not sure if I’ve posted this in the right place so apologies if I’ve got it wrong.

My partner and I are currently saving for a house deposit, we have decided the best way to go about this is to pay as much as possible into our current flat mortgage.

However, my partner has just had a pay increase of approx £800 per month. He is self-employed at the minute and hasn’t been paying into a pension for the last 2 years so he wants to set one up asap and possibly use some of this extra money.

My question is, bearing in mind our situation where we are trying to save a deposit, should he be putting the full amount into a pension, or maybe split half and half between our mortgage and our pension? Or is there a better way to do it?

I’m pretty sure its just down to personal opinion/circumstance but I wanted to check anyway incase anyone can advise of the most sensible way of doing it.

Any help or advice would be appreciated.

Thanks

xmodz

you have not told us your age

so the best advice i can give you is split it

20% Pension

80% Deposit

xleannex19

Sorry, I didn't think to put our ages.

I am 27 and my partner is 28

atush

I would split it between pension deposit. How much as % is up to you. I would say a min of 25% into pension if not more.

As you already own your flat, presumably you have some equity in there to go against the house?

grey_gym_sock

it all depends, really ...

pension contributions are better value if you get higher rate relief on the contributions. if you don't, but might do quite soon, then it could be better to postpone them but make bigger contributions when you get higher rate relief.

apart from that, i think it may be perfectly sensible to cut out pension contributions entirely in order to buy a house and get the LTV down to a sensible level. but to pay much more into a pension later on. ... the only problem is: will you actually do that? because some ppl find it easy to keep putting off paying into a pension, first because of the house, then because of children, and so on ... are you likely to fall into that trap? some ppl are, others aren't.

atush

I would say most are, as there is always something 'better' to spend it on. AFter a house, you might have marriage, children.......... it goes on and you find yourself getting to 50 with little to no provision.

at 28, ideally, as a start, you should be putting 14% of salary into a pension. so, if you put in 200 (and add the TR) then will that be 14%?

If you are 30, it will mean 15%, 40, 20% etc. by 40, will you be able to afford that?

grey_gym_sock

fair point ...

though really it should be about putting a certain % of income into long-term investments. pensions have some advantages as a wrapper, S&S ISAs have other advantages. or use both.