Overpay mortgage like mad & work on pension later?

Playing_with_Fire_2

In the 40% tax bracket, I would personally put as much as possible into the pension this year, and then overpay the mortgage when there is less free money [tax relief] available.

If you don't do a self assessment, call or write to HMRC to tell them how much you will put into your pension. They will then adjust your tax code so that you don't have to wait for the end of March to claim the tax back. You can then put more into the pension (subject to allowances etc) this tax year.

Dano, have you considered that you could downsize/de-M25[move away from the London commuter belt to take advantage of lower house prices] to become mortgage free in future? You may also be able to take private pension contributions before the State Pension/Company retirement age. Not knocking your plan, just a thought. The feeling of security is a real consideration.

mgdavid

You can do a bit of both. The decision made now doesn't last for ever, it should be something you review and evaluate annually, think of it as a family finance MOT test.

Snakey

It's difficult to plan for the longer term right now - like, oh we'll do this for four years and then this for five years and then... I can't imagine that, having thrown it out there for discussion, a government of any colour is going to be able to resist the cash flow advantages of moving to a system where pensions are taxed on the way in and tax-free on the way out. Even throwing a 30% uplift in as a sweetener isn't going to cost them that much (considering how many pensions are done by employer contribution/salary sacrifice and therefore effectively get tax plus employer and employee NIC relief of well above that amount already).

A higher rate taxpayer should be making hay while the sun shines, that much is clear, unless pensions form absolutely no part of your financial planning.

dano17439

Thanks all, food for thought, forgot to mention that we already have around £750PM going into our joint pensions at the moment so its not like we have nothing going in

My wife today has been notified of a nice bonus that will take her earnings over the child benefit limit so will definitely be looking to increase contributions so we don't pay too much of the tax charge.

However, what with he imminent interest rate hike and the fact I can knock 10 years of interest from my mortgage, the security and knowledge that we'll (potentially) be £2000 a month better off in 4 years time is a massive draw for us

atush

if you are still in the HR band after paying pension contribs, the advice remains the same. Put in enough to retain CB, and to keep you both out of HR tax.

Use S&S isas as well