Pension Contributions vs Mortgage Overpayments

tightasagnats

I'm in the NHS pension scheme paying 9.3% salary each month which currently is £191 every month.

I've been in the scheme for 12 years, but was employed before for only half the hours so lower contributions.

I'm wondering whether to opt out and freeze the pension and instead use that cash (minus the tax allowance on the contributions) to overpay on my mortgage (I already overpay £500 a month), which is £115000 13 yrs remaining at 2.45% at the moment. Prop value=£400000. Salary means I can't get more than about £125,000 mortgage so not enough to move up -

The idea is that the faster I pay it off the quicker I can move to a higher valued property and rent out two rooms to lodgers rather than one. This in the long run would provide more than the pension forecast (of about £5000 a year (plus lump sum about £15,000) in twenty years time.)

What do folks think? I know NHS pension scheme is highly valued. But London property is also pretty secure and no probs getting lodgers which I actually like.

Lokolo

I think there are rulse about opting out of NHS pension meaning its very difficult to get back in.

From a taxpayers point of view, opt out and risk all your money in property rental (which is unlikely to be that profitable after tax allowances and 3% stamp duty increase on 2nd purchases) would be good for me.

From a general point of view though, your idea isn't the best.

tightasagnats

Thanks, it's not a second property I am considering, it would be my main home, but an upgrade so the tax thing does not apply.

Yes you are right about not being able to get back in the pension possibly, that's why I was seeking advice in terms of general sound of it all.

somethingcorporate

It's a terrible idea - the NHS pension is gold-plated with bells and whistles. For the sake of £100+ quid a month after tax? you'd be an absolute fool to consider it. Look around the up your income board for ways to make that kind of pocket change rather than consider giving up on a pension scheme many people would give limbs to be a part of.

System

Overpayments on that pension are not as generous as regular contributions, the website has a calculator that can advise you

If you are making regular pension costs I'd usually say mortgage, because pensions come at a tine of life when money is less needed and less useful, pensions are riskae if ww3 bankrupts the country or you die too early

System

Wouldn't opt out of regular payments tho

tightasagnats

Pocket change to some perhaps, but if it allowed me to pay a few grand off my mortgage in next 3-4 years, and I buy a place with an additional bedroom, I get minimum £6000 rent before tax every year After purchase and after retirement. (For one room, so double it for two). Pension only pays out £5k yearly after retirement, and I won't lose what I've paid in for the past 12 years. The issue is whether it makes enough of a dent overpayment wise on mortgage.

Prothet_of_Doom

London Prices Right ? £400K and you only have 1 spare room ?

When I have these mad ideas I try thinking of all the other ways I could spin this.

Could I get a caravan/shed in the back garden and live in that whilst renting out my other room, could I convert the loft, could I sleep in the under-stairs cupboard, could I cut a bed room or lounge into 2.get
Could I move somewhere cheaper and larger without the larger mortgage ? Could I get more for my one room, via airbnB as a weekend hideaway ? Could I find a mate with a similar outlook and jointly by an £800K house instead and rent out 4 rooms, and convert the basement, or 3 mates and buy a £1,600,000 house with 10 bedrooms, and

Just keep thinking and DO nothing for now.

Thrugelmir

tightasagnats wrote: »

I'm in the NHS pension scheme paying 9.3% salary each month which currently is £191 every month.

Is that before or after tax relief?

tightasagnats

Prothet_of_Doom wrote: »

London Prices Right ? £400K and you only have 1 spare room ?

When I have these mad ideas I try thinking of all the other ways I could spin this.

Could I get a caravan/shed in the back garden and live in that whilst renting out my other room, could I convert the loft, could I sleep in the under-stairs cupboard, could I cut a bed room or lounge into 2.get
Could I move somewhere cheaper and larger without the larger mortgage ? Could I get more for my one room, via airbnB as a weekend hideaway ? Could I find a mate with a similar outlook and jointly by an £800K house instead and rent out 4 rooms, and convert the basement, or 3 mates and buy a £1,600,000 house with 10 bedrooms, and

Just keep thinking and DO nothing for now.

Ha ha yes, London of course, and yes only one spare room. I have thought of living in the shed. But realistically, I would like to buy a. Three bed house in my area and the step up is only £50k or so, plus fees, as our flats are very quaint and desirable and fetching high prices. It's not about making cash as much as having a bit more space and a couple of housemates which I very much like. Fairly reasonable aspirations may not be possible but worth trying. People said I'd never get this flat but I did.

tightasagnats

Thrugelmir wrote: »

Is that before or after tax relief?

Before tax relief.