Pension contribution or overpay mortgage

ffor99

Hello,

Would appreciate your thoughts on this one...

I have calculated that if I were to stop paying into my work's pension (currently paying £79 per month plus employer contribution of £120) I would be physically better off by £ 55 per month although the employer contribution would be reduced to approx £60 per month.

I thought about investing the surplus £55 into over paying my mortgage which still has 24 years left with balance outstanding approx £110000 at rate of 2.99%.

In terms of comparing the overall interest saved on the mortgage term vs pension pot in 24 years time (in today's money) does anyone have any idea which one is going to save the most money?

Thank you!

dotdash79

By sticking with the pension you would be paying an extra £139 per month into that so you need to look at the possible growth of that extra fund v the money saved by paying of your mortgage early.

I take it by paying off the mortgage early you would then start chucking your mortgage payments into the pension pot?

That needs to be worked out as well, my gut says pension at the moment but if interest rates go up then mortgage payments might win out.

Thrugelmir

Throwing away free money i.e. your employers pension contribution is madness.

Move to a cheaper home if you want to save money.

dunstonh

I thought about investing the surplus £55 into over paying my mortgage which still has 24 years left with balance outstanding approx £110000 at rate of 2.99%.

So, you would save 2.99%. However, investment returns are typically double that, if not more. Despite the last 13 years being one of the worst in generations for investing, even the most basic balanced managed funds offered by insurers have managed to exceed 5% p.a. net

In terms of comparing the overall interest saved on the mortgage term vs pension pot in 24 years time (in today's money) does anyone have any idea which one is going to save the most money?

It is a crystal ball job. However, you would expect the pension to wipe the floor with the mortgage. Even without the better projected return, you would be throwing away free money from the employer. Nothing beats free money. You should always get as much of the employer contribution as you can afford. It is a total no brainer.

jamesml

Stick with your pension contributions.

Firstly, free money from your employer.

Secondly, how would you recompense the pension pot for the mortgage saving? Leaving it until you've paid off your mortgage early and then lumping payments into your pension isn't a sensible move, imo. You miss out on years of potential growth as well as the actual likelihood of going down this route.

IMO you would be better off finding somewhere else to save £55/month and overpaying the mortgage with that.

amnblog

On no account reject free contributions from your employer