Mortgage overpayments vs pension contributions?

May I pick your brains? I've just quit my part time job and will finish this summer and begin working on a self-employed basis. I'm currently teaching so have a teacher's pension but when I go self-employed I obviously won't be able to pay into that anymore.

My salary at the moment pays for childcare and savings (that will become OPs once our fix has ended next May) but when I'm self-employed we won't have childcare to pay for as I'll be working in the evenings.

Our intention is to take my earnings and use them entirely as OPs (/savings until May etc). If we do this, our mortgage will be paid off by January 2019, instead of 2042. My question is: should we OP a few hundred less each month (it would be approx. £800 instead of £1100) so that I can start a SIPP, meaning that it will take another few years for our mortgage to be paid off, or is it ok to not pay into a pension for 6 or so years and get the house paid off first, then open a SIPP once the mortgage is cleared?

Thanks if you've got this far and I hope haven't confused you by going round in circles! I just don't know which is the most sensible option long term. It scares me to think of not paying into a pension, but at the same time owning our house outright will free up so much cash each month that potentially could we catch up? Or will not having the cumulative interest work against us?
Starting Mortgage (May 2012): £116,095, Mortgage at September 2012: £115,677.14
Mortgage at March 2014: £110,671.08

Replies

  • SuziQSuziQ Forumite
    3K Posts
    How old are you? I would have thought that the younger you start a pension, the better.
    Tomorrow is always fresh, with no mistakes in it!
  • MrsP1983MrsP1983 Forumite
    96 Posts
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    I'll be 30 this summer. I've been paying into my teachers pension since I was 22-it's so hard to know which would be better long term, to pay off the mortgage more quickly (freeing up more money for pension and other retirement savings) or to pay off the mortgage more slowly but begin a new pension immediately after I stop paying into the teachers one.
    Starting Mortgage (May 2012): £116,095, Mortgage at September 2012: £115,677.14
    Mortgage at March 2014: £110,671.08
  • MrsP1983MrsP1983 Forumite
    96 Posts
    Eighth Anniversary Combo Breaker I've been Money Tipped!
    Forumite
    Cheeky bump for the evening crowd...
    Starting Mortgage (May 2012): £116,095, Mortgage at September 2012: £115,677.14
    Mortgage at March 2014: £110,671.08
  • edited 22 April 2013 at 4:41PM
    richbethrichbeth Forumite
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    edited 22 April 2013 at 4:41PM
    MrsP1983 wrote: »
    I'll be 30 this summer. I've been paying into my teachers pension since I was 22-it's so hard to know which would be better long term, to pay off the mortgage more quickly (freeing up more money for pension and other retirement savings) or to pay off the mortgage more slowly but begin a new pension immediately after I stop paying into the teachers one.

    Hi,
    most people recommend a balanced approach to pensions/OPs etc so paying less off the mortgage but keeping the pension payments going.
    if you pay into a pension you will get tax relief so £300 from you is £375 into the pension (assuming you pay basic rate tax).

    You don't say what your interest rate is but there is a decent chance your pension return will be greater than this so you get a double whammy :) the downside is it's locked away until you're 55.

    I don't want to confuse things but there is also an argument for paying into an ISA rather than a pension, there are pro's and con's and a sticky on the pension board if you have the time to go through it.

    I personally have always kept a pension payment going as I figure if I stop I might not get around to starting again.

    fyi i just did some very quick maths and £300pm for 6 years then nothing else for 30 years could add ca £50k to a pension pot in todays terms. This is based upon getting 3% on top of inflation and charges. (Best to check this though).

    Richard
  • At 30 I would pay of your mortgage first then worry about pension...
    That's what I am doing anyway..
    £176,000 January 2014
  • MrsP1983MrsP1983 Forumite
    96 Posts
    Eighth Anniversary Combo Breaker I've been Money Tipped!
    Forumite
    Hm, thanks for the responses. I'm leaning towards just throwing it all at the mortgage and viewing that as part of our retirement...
    Starting Mortgage (May 2012): £116,095, Mortgage at September 2012: £115,677.14
    Mortgage at March 2014: £110,671.08
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