Pension or mortgage?

Slashman808

Hi there,
I'm new to all this so hopefully I've posted this in the correct place!
My quandary is I have a very low interest rate (for life) on my mortgage (0.58 above base rate) & have over paid by £300 for the past 5 years, which has seriously reduced my amount owed. At the current rate I will pay off my mortgage in 8 years (5 years earlier than predicted).
Now, I'm I better paying the £300 into a pension? I've 20 years until retirement age (although I'd like to retire early!), or pay off the mortgage & then pay into the pension?
My mortgage is a repayment if this helps. I also have a pension pot of £150k but, my wife has only £30k in hers.
I look forward to your wise words...

nicknameless

Overpaying that mortgage at that rate is foregoing potentially higher investment returns within or outside of a pension. Current accounts paying better interest than that. I am on a similar rate and wouldn't dream of overpaying.

Where you put that money depends on a few things, what other savings you have and when you want to retire and how you intend to fund that.

ViolaLass

nicknameless wrote: »

Where you put that money depends on a few things, what other savings you have and when you want to retire and how you intend to fund that.

Indeed. Have you done any calculations on how to fund your retirement?

nicknameless

ViolaLass wrote: »

Indeed. Have you done any calculations on how to fund your retirement?

Presumably you're asking the OP not me :rotfl:??

But the answer is yes for me - occupational pension, SIPP and S & S ISAs with no mortgage overpayments unless interest rates rocket.

pathtofreedom

Look for a thread called "the number" and work out what yours will be. Then see what you have so far, and if one of you died would the other still get all of it or not. You might need some life insurance as well as other investments to cover that.

Then once you have your number you have to guess how long you think you'll live, and also if you early retire or semi retire you'll need even more cash to fund that. You could leave the pensions to grow more though, and even defer your state pension to get more from that if you think you'll live a good while. That would mean to early retier though you need other investments to pay out to fund the years in between. So people use S&S isa's, btl and other investements to get them through until the pension kicks in.

Have a play with some compounding calculators, and figure out is it better to have an extra 300 tax free compounding for 20 years, or 300 after tax in an isa or a bit of both.

You have to spread your assets and investments as well so just having your mortage fully paid, but no pension your mrs can access means if something happened to you and there was another property crash, she'd lose a chuck of the investment if she needed to sell the house.

No one can answer your question 100% as it depends on your circumstances and you could be hit by a bus tomorrow, but spreading the risk across pensions, house and other investments seems to be the safest way to go. You never know what the next gov will do to change taxes or pensions either, so by doing this you might help protect against their next idea.

ViolaLass

Sorry nicknameless, I was agreeing with you and then asking the OP about their pension. Appreciate it wasn't clear!

Slashman808

Wow! That was quick ... Good info, thanks
Nicknameless - I've around 3,000 shares in GSK (£45k) & around £20k in an ISA (instant access as its our emergency fund) & £5k in a 5yr bond (5%).
Keep the advice coming ... & I will have a look at 'the number'

Thrugelmir

Any plans to move house? Or other reason to have access to the cash.

Slashman808

would love to move but, my wife loves where we live, also I've my own business that's still building up.
I like to have 4-6 months cash as back up. The ISA is also where I put my tax owed.

kidmugsy

OP, do you pay higher rate income tax?

Slashman808

No I dont ... My business is in gardening, I decided to leave the treadmill of work & do what I love!