Best use of £300 a month

kidmugsy

You could still help us, OP, by telling us the interest rate on your mortgage.

Millymoodle

Mortgage is 3.94% kidmugsy
Atush I could have a max LS of £125K and a pension of £19K. Why do you think I shouldn't retire at 55?

jem16

Millymoodle wrote: »

Atush I could have a max LS of £125K and a pension of £19K.

Is that with your actuarial reduction counted?

You may want to consider whether or not the maximum lump sum would be a good idea. The commutation rate of 12:1 is pretty dire.

kidmugsy

Millymoodle wrote: »

Mortgage is 3.94% kidmugsy

That's a bit pricey. In your shoes I'd be tempted to see whether a remortgage could drive your mortgage payments down and meantime invest in a pension to avoid those 40% tax payments.

Millymoodle

Thanks everyone, I'll check out changing the mortgage and look into additional pension too.

kidmugsy

Millymoodle wrote: »

Thanks everyone, I'll check out changing the mortgage and look into additional pension too.

It would be worth investigating whether you could extend the mortgage too: some suppliers would let you have a mortgage until 75, for instance. If you get a sufficiently low interest deal, that would leave you even more money to bung into a pension with the intention, perhaps, of paying off the mortgage early with a tax-free lump sum, but keeping lots of flexibility in the meantime. (I like flexibility: it stops me worrying.) About re-mortgaging; beware of front-end fees - they'd bear heavily on a small mortgage of £55k - and be sure to check whether there's a penalty for overpaying or for clearing the mortgage.

Millymoodle

Thank you Kidmugsy, someone at work mentioned keeping the mortgage on till I'm much older (and/or swapping for interest only?). I'll need to give that some thought. Psychologically I'd like to get rid of it so I haven't got that hanging over me but it might be worth considering.

atush

Millymoodle wrote: »

Mortgage is 3.94% kidmugsy
Atush I could have a max LS of £125K and a pension of £19K. Why do you think I shouldn't retire at 55?

1, you gave no figures- we can only make judgements on what you say, not what is in your mind.

2, you gave us the impression you would be using all/most your LS to pay off your mtg

3, 12:1 is dire

4, if you haven't saved money outside your pension up to now, means you are more likely to overspend/not be able to save during retirement.

xylophone

Just a thought, if you have only saved "a few thou" on a salary of £55000 a year, will you be able to keep up your standard of living once you are on a pension?

If you pay off the mortgage and then use the £70000 remaining to supplement your income to live as you do now, you'll quickly run through the lump sum?

kidmugsy

Millymoodle wrote: »

Psychologically I'd like to get rid of it so I haven't got that hanging over me

The purpose of wealth is to bring comfort e.g. the comfort of feeling secure. If getting rid of the mortgage would bring you great comfort, who am I to say you're wrong? Personally I'd be relaxed about a cheap repayment mortgage that I could easily afford out of my monthly income, but could repay instantly out of capital if I had to. But that's no reason to insist that you should feel the same way.