Overpay mortgage or other investment?

atush

With SS i would def up your pension contribs to catch up (the old adage was 35K saved by age 35)

But as it isnt accessible, putting some in s&S isas as well is a good idea.

What did you decide for your S&S isa last year? How has it done? Did you get a cheap global tracker

adonis10

atush wrote: »

With SS i would def up your pension contribs to catch up (the old adage was 35K saved by age 35)

But as it isnt accessible, putting some in s&S isas as well is a good idea.

What did you decide for your S&S isa last year? How has it done? Did you get a cheap global tracker

Yes, I definitely will up it but just trying to work out by how much.


I transferred it to HL and have invested in the following so far:


Vanguard LS 100% equity accumulation: 1.06% return
Vanguard LS 80% equity accumulation: 6.68% return


I have far more in the latter therefore the total return to date is 6.24%.

Anonymous101

adonis10 wrote: »

Yes, the lack of accessibility is basically the only reason why I am hesitant to up the conts so much. Yes, salary sacrifice. I am not a higher rate taxpayer, unfortunately, as only earn 32k.

You're doing well to save so much then. Well done for that.
Personally with such a high amount of savings at a young age I wouldn't be so concerned with starting to lock away money into my pension. You've got a good safety net of savings but every situations are different. Are you planning on moving house any time soon? Any big life changing events planned, kids, weddings etc?

Another thing to consider is that if you are likely to become a high rate tax payer in the future then it is possible to save now at 20% tax and then use your savings to contribute to a pension once you enter the 40% bracket. Tax wise this is very efficient.

adonis10 wrote: »

YOu make some valid points which I have considered - you're quite correct that in 4 years time when we have to remortgage rates may have doubled and we may wish we had overpaid by £200 for 48 months, which is why it is a difficult choice.

Exactly. However if you're remortgaging its likely that you could feed in savings which you've put to one side and got a better return on in the coming 4 years without incurring any penalty.

adonis10 wrote: »

If you were me with such a low pension provision, what do you think you would go up to in % terms? In a way I feel I need to maximise the situation I am in as, for all I know, in 3-5 years I may be in a different job with a much less generous pension offering. I guess out of £700/month, using £100 of it to overpay isn't going to make a difference to my day to day life but will start to eat into what we owe, albeit by only a small amount.

If you're company won't contribute any more than the 16% then you're already maximising their offering. To a certain extent when you're in the 20% bracket there isn't much difference between savings and pension contributions. If I were in your position I'd prob be looking to up the pension by £200 or so and split the remaining £500 between S&S isa and mortgage overpayment. Its all very personal though and does depend on a lot of other factors.

adonis10

Anonymous101 wrote: »

You're doing well to save so much then. Well done for that.
Personally with such a high amount of savings at a young age I wouldn't be so concerned with starting to lock away money into my pension. You've got a good safety net of savings but every situations are different. Are you planning on moving house any time soon? Any big life changing events planned, kids, weddings etc?

Yeah, our mortgage isn't particularly high so that's why a good chunk of my surplus is available to save.


Not planning on moving house any time soon (nice area, recently refurbished the place to our liking and prices are too high to move), personally no to kids and marriage. OH may have other ideas! Shelling out 15k for a wedding would break me emotionally, I can't fathom why people do it (unless money is no object, of course).

Anonymous101 wrote: »

Another thing to consider is that if you are likely to become a high rate tax payer in the future then it is possible to save now at 20% tax and then use your savings to contribute to a pension once you enter the 40% bracket. Tax wise this is very efficient.

No likelihood of being a higher rate taxpayer in the near future; I feel that my ability will limit me to a salary between 30-40k for life so that is fairly consistent which makes it a little bit easier to plan.

Anonymous101 wrote: »

Exactly. However if you're remortgaging its likely that you could feed in savings which you've put to one side and got a better return on in the coming 4 years without incurring any penalty.

True, we have a 5 year fixed deal as it made no sense to get a tracker in the current climate. I guess it is difficult to tell where rates will be in 4 years time therefore there is an element of gambling involved.

Anonymous101 wrote: »

If you're company won't contribute any more than the 16% then you're already maximising their offering. To a certain extent when you're in the 20% bracket there isn't much difference between savings and pension contributions. If I were in your position I'd prob be looking to up the pension by £200 or so and split the remaining £500 between S&S isa and mortgage overpayment. Its all very personal though and does depend on a lot of other factors.

True, but there are NI and student loan savings as well which makes upping the SS pension cont more appealing. An additional 4-8% will contribute between £107 and £214 so I am thinking somewhere in this ballpark.

Anonymous101

adonis10 wrote: »

Yeah, our mortgage isn't particularly high so that's why a good chunk of my surplus is available to save.


Not planning on moving house any time soon (nice area, recently refurbished the place to our liking and prices are too high to move), personally no to kids and marriage. OH may have other ideas! Shelling out 15k for a wedding would break me emotionally, I can't fathom why people do it (unless money is no object, of course).

:rotfl: We sound very similar!

adonis10 wrote: »

No likelihood of being a higher rate taxpayer in the near future; I feel that my ability will limit me to a salary between 30-40k for life so that is fairly consistent which makes it a little bit easier to plan.


True, we have a 5 year fixed deal as it made no sense to get a tracker in the current climate. I guess it is difficult to tell where rates will be in 4 years time therefore there is an element of gambling involved.




True, but there are NI and student loan savings as well which makes upping the SS pension cont more appealing. An additional 4-8% will contribute between £107 and £214 so I am thinking somewhere in this ballpark.

As I was saying regarding personal situation. Student loans are an odd one. You'll have to pay it back eventually and these are actually at much higher rates than most people realise. I'd be thinking of treating Student loans just like any other loan... i.e. the quicker you pay it off the better.

NI savings etc are certainly valid.

I think your overall increase is sensible.

adonis10

Anonymous101 wrote: »

:rotfl: We sound very similar!




As I was saying regarding personal situation. Student loans are an odd one. You'll have to pay it back eventually and these are actually at much higher rates than most people realise. I'd be thinking of treating Student loans just like any other loan... i.e. the quicker you pay it off the better.

NI savings etc are certainly valid.

I think your overall increase is sensible.

Fair point about the SL but it's written off at 65 under the current terms and I believe interest rate is currently 0.8% so it isn't on my radar to overpay. When the rate goes up significantly and/or the terms are changed for the worse, I'll reconsider.

Anonymous101

adonis10 wrote: »

Fair point about the SL but it's written off at 65 under the current terms and I believe interest rate is currently 0.8% so it isn't on my radar to overpay. When the rate goes up significantly and/or the terms are changed for the worse, I'll reconsider.

Fair enough. Fortunately I graduated in the early 2000's with a relatively small loan and finished paying mine off 2-3 years ago. Those graduating even recently with huge debts will struggle to pay them back at all.

I've just checked as I thought this was changing.
http://www.slc.co.uk/services/interest-rates.aspx
Take a look. Its certainly not a cheap loan as they would have you believe!

adonis10

Anonymous101 wrote: »

Fair enough. Fortunately I graduated in the early 2000's with a relatively small loan and finished paying mine off 2-3 years ago. Those graduating even recently with huge debts will struggle to pay them back at all.

I've just checked as I thought this was changing.
http://www.slc.co.uk/services/interest-rates.aspx
Take a look. Its certainly not a cheap loan as they would have you believe!

Indeed it is, 1.25%. I can't remember where I read 0.8% not so long ago. I will certainly be keeping an eye on this then as it may be worthwhile chipping away at it if the rate increases significantly.

kidmugsy

Are you a higher rate tax payer? Can you add to your occupational pension by salary sacrifice?

adonis10

kidmugsy wrote: »

Are you a higher rate tax payer? Can you add to your occupational pension by salary sacrifice?

No, unfortunately I don't earn enough to be a HRT. I already contribute via salary sacrifice and have the month of June to decide if I wish to up my contributions (e'er conts are maxed out so any increase will be e'ee only).