Pension or Mortgage?

Sol69

At the age of 49 3/4 I still have 13 more years left on my mortgage until it’s paid off (currently £88k). I’m also paying in around £650 per month in to my pension and receiving 40% tax relief. We all know that the current interest rates are on the up and Hammond is likely to abolish tax relief for the 40% band to plug the spending hole on the NHS; I’m now seriously considering the option of diverting my pension contributions to paying off my mortgage earlier if we loose the relief this time around in the autumn budget. Being mortgage free is a major incentive for us as it would allow us to invest the funds in second property for future rental income. I haven’t sat down and done the figures but I suspect the real term growth on my pension, the loss of tax relief and increased mortgage interest rates makes it less clear where I should focus. Any thoughts or advice welcomed.

dunstonh

We all know that the current interest rates are on the up and Hammond is likely to abolish tax relief for the 40% band to plug the spending hole on the NHS

That is how the media is speculating. However, the unnamed source they quote actually makes it sound more like the annual allowance is going to be reduced. References to targetting those that can afford to pay in tens of thousands of pounds each year.

The media have been speculating on higher rate relief each of the last 5 years.

I’m now seriously considering the option of diverting my pension contributions to paying off my mortgage earlier if we loose the relief this time around in the autumn budget.

Higher rate relief blows mortgage repayment out of the water when only looking at the financial situation. Even basic rate relief still beats it but the margin is a lot less.

. Being mortgage free is a major incentive for us as it would allow us to invest the funds in second property for future rental income.

Have you taken into account that the Govt has been targetting landlords and is expected to continue? Plus, a single buy to let is not exactly going to change things.

Dazed_and_confused

Higher rate pension relief has been about to be abolished for as long as I can remember.

What makes you think it will happen now when there were much more financially desparate times the government (both Conservative and Labour) could have opted to do it?

crv1963

Even if interest rates do rise, you could look to get a fixed rate, make hay while the sunshines regarding the current tax relief on pension contributions. Both main parties are likely to carry on targeting landlords for different political reasons.


Maybe it would be worthwhile number crunching mortgage over payment calculators vs pension accumulation calculators? Do some comparisons and get a plan.


Look at the ideas for paying both pension and mortgage not one at the expense of the other? I take the "us" as meaning you have a spouse or partner, have you looked at their pension provision? We did and in our case putting funds into Mrs CRV pension to keep our joint tax bill lower when taking the pensions. Just a couple of quick thoughts.

Sol69

I thinks a more when than if situation. Yes we’ve seen time when it would have been political suicide for any party to introduce a cut but then the wealth divide was never as great. Removing the allowance from those that have and diverting it to the have nots could be a big vote winner for those marginal left wing voters who could see conservatives being more ‘sympathetic’. I believe the last all party committee recommended abolishment of both tax relief bands in favour a simple rate for all. Who’s to say this will happen though.

Sol69

I don’t think I would every consider general letting, I’ve read too many stories of tenants wrecking the place or refusing to pay to risk it. Would be small holiday let if it was to happen.

Sol69

Mrs Sol69 is a part time nurse (30h/w), she’s been paying in to her pension since 1994. Dissolutioned with the NHS and wants out (90% of her graduate year group already left the profession) as soon as she can. She’s very much reliant on me to be the main bread winner given the very low level of pay she receives (I don’t blame her to be honest). If there was a way to offset my tax burden to improve her pension then I’d be interested to know.

louloubelle79

THE NHS allows additional payments and also AVCs via Aviva or Pru that's comes out of salary each month.

dunstonh

Removing the allowance from those that have and diverting it to the have nots could be a big vote winner for those marginal left wing voters who could see conservatives being more ‘sympathetic’.

The problem is that it is usually middle England that suffers when changes like this happen. Those earning around £50k-60k a year. Not those earning £500k a year.

of course, any change that impacts on Middle England will see Labour accuse the Tories of supporting Bankers etc despite it not being the purpose. Although, to Labour, anyone earning over £40k a year is a banker. So, it is probable that once again, Middle England will take a hit.

I believe the last all party committee recommended abolishment of both tax relief bands in favour a simple rate for all. Who’s to say this will happen though.

Think tanks have recommended a number of things. Including scrapping pensions altogether and making ISA with a bonus the option. You cannot predict. You just have to wait and see and act on the now. Perhaps making hay whilst the sun shines.

Mrs Sol69 is a part time nurse (30h/w), she’s been paying in to her pension since 1994. Dissolutioned with the NHS and wants out (90% of her graduate year group already left the profession) as soon as she can.

The grass is always greener on the other side. Every profession is suffering increasing burdens and what many consider unnecessary things they have to do. Frustrations are rife in any job. Any change should be for something she can enjoy. Not hope that an alternative will be better.

crv1963

dunstonh wrote: »

The problem is that it is usually middle England that suffers when changes like this happen. Those earning around £50k-60k a year. Not those earning £500k a year.

of course, any change that impacts on Middle England will see Labour accuse the Tories of supporting Bankers etc despite it not being the purpose. Although, to Labour, anyone earning over £40k a year is a banker. So, it is probable that once again, Middle England will take a hit.


Think tanks have recommended a number of things. Including scrapping pensions altogether and making ISA with a bonus the option. You cannot predict. You just have to wait and see and act on the now. Perhaps making hay whilst the sun shines.


The grass is always greener on the other side. Every profession is suffering increasing burdens and what many consider unnecessary things they have to do. Frustrations are rife in any job. Any change should be for something she can enjoy. Not hope that an alternative will be better.

It seems it is always Middle England, but to be fair is difficult and political decisions often have unforeseen consequences. Just look at Brexit! All we can do is work with the rules as they are, expecting some more tinkering at some point, no one has the clout to make sweeping/ massively radical pension changes at the moment.


Agreed on the making hay!


I left the NHS briefly, different issues but the private sector is also beset with problems and for nurses the pension provision is rubbish. Leaving current role in NHS for another, this time no illusions it will be any better, just a different set of problems that are not as bad for a while as the current ones!

atush

. Being mortgage free is a major incentive for us as it would allow us to invest the funds in second property for future rental income.
Have you taken into account that the Govt has been targetting landlords and is expected to continue? Plus, a single buy to let is not exactly going to change things.

Bad move. BTL is highly taxed both on income and captial plus fees and the troubles that come with letting.

Dont over pay a mtg over pension, dont use BTL instead of a pension.