Pension or Property?

Cuppa_Tea_2

Currently I pay a few hundred pounds into a private pension fund. However I still have an outstanding mortgage.

Would it be better to stop my pension payments and use the money to pay off my mortgage before resuming my pension payments?

I'm just seeking others opinions on this, and no that ultimately the decision is mine. But any views from other board members would be greatly appreciated.

CT

purch

My first thought would be whether or not you expect your Pension Asset to rise at a higher rate than you are paying on your Mortgage Liability

david78

If you currently only pay basic rate tax, there is a case for clearing some/all of the mortage first, and then resume payments into the pension plan later on (when you may be a higher rate tax payer.)

Obviously you will need to make higher payments when you restart but this might be compensated for in saved interest. You need to crunch the numbers in a spreadsheet. This shouldn't be too difficult.

dunstonh

tax wrapper has little to do with it. It is the rate of return that matters and providing your rate of return is higher than the mortgage you pay, then its worth it. Especially if you invest into emerging markets. They wont be emerging markets forever and the increased potential may not exist in 10-20 years time.

Saying ignore the tax wrapper is actually wrong as if you are in receipt of working/childrens tax credits, then your pension contributions are increasing the amount you receive there so stopping the pension could see those go down.

EdInvestor

dunstonh wrote: »

They wont be emerging markets forever

Wanna bet?

jamesd

Cuppa Tea, maximising investments into stocks and shares ISA or pension investing is likely to deliver better returns over the long term than repaying the mortgage more quickly, which only delivers the mortgage interest rate as a return. Even a UK FTSE tracker has a long term average of 12% and the better managed funds in the medium risk UK equity income do 15% a year, with more potentially available from other sectors and parts of the world.

EdInvestor, how much longer do you expect East Germany, the Czech Republic and Poland to be emerging markets and growing more rapidly than more established areas because of EU infrastructure funding? What about the other emerging European countries? Think some of them may do as well out of it as Ireland did?

We're not likely to see such good opportunities from underdeveloped economies within the EU for a long time once these are gone, if ever.

Similar arguments apply elsewhere, where the initial economic development can progress more quickly than the later stages.

EdInvestor

Cuppa_Tea wrote: »

Currently I pay a few hundred pounds into a private pension fund. However I still have an outstanding mortgage.
Would it be better to stop my pension payments and use the money to pay off my mortgage before resuming my pension payments?

Depends.I'd say a gyuaranteed return of 7% on your mortgage (if you are paying that level of interest) is better than a risk based projected return of 7.5% on a bog standard equity type investment in pension or ISA.

Of course if you can choose an equity investment which will reliably perform in the double digit range, that's the best bet of all.

Re emerging markets, it's amazing how few of them seem to have "graduated" from emerging status over the years: even HK, Singapore, Korea and Taiwan are still sold as emerging markets, despite being active for 40 years or so.

And just think how many countries there are which have yet to emerge to the point whether they have a stockmarket at all? Most of Africa and the Middle East have hardly been touched, nor has Central Asia and the rest of the former Soviet Union.Nor the former Yugoslavia.How many stockmarkets do you think we will end up with in China ?

This one will run and run, believe me

purch

HK, Singapore, Korea and Taiwan are still sold as emerging markets

.....I wonder where my 'Far East excl Japan' funds are investing

Cuppa_Tea_2

Thanks for your feedback everyone. Much food for thought.