Overpay Mortgage or additional Pension contributions

collinsca

Hi All

This is an age old question, to which i think the answer is a) no-one really knows and b) it depends on your circumstances... so... any advice at all appreciated!

The question is whether to overpay my mortgage or pay additional Pension contributions.
I then have a subsequent question regarding which Pension to choose!*

Im 40. Ive overpaid by 20k and ive got 25k left to pay. My mortgage is due to end August 2028.

*Re the Pension options - Both are via my employer, one is a defined benefit pension scheme run by my employer and the other is a Fidelity Plan (Choose Med, Low, High risk). I am making additional contributions to both. Initially i added to Fidelity simply to 'not have all eggs in 1 basket'.

I'm happy to share any details that would support in anyone being able to provide advice.

Many thanks!

AnotherJoe

Are you a high rate taxpayer ? If so top up pension. If not, top up pension anyway.
The £25k will take care of itself and your mortgage payments must be minimal anyway.

collinsca

Hi AnotherJoe - thanks.
I earn just over 40k. Mortgage payments are about £270 per month.

Thrugelmir

Any plans to move house?

What rate of interest are you paying on your mortgage debt?

Any concerns over your employment, i.e. potential loss of?

middleclassbutpoor

You are on a defined benefit scheme which means you will pay a % of your earnings to be a member. You will be paying additional premiums into an AVC of some sort. These AVCs can have good benefits attached to them so well done for doing this.

The likely benefit - without knowing your full circs is that the pension AVC is the better option if you can pay more in due to tax relief and the growth over the medium to long term being higher than that of your mortgage - assuming you are not on Standard Variable Rate?

Reasons why I may consider paying off my mortgage sooner....

- Will allow me to retire sooner.
- Will give me the ability to build up some cash savings incase I need access to this before i retire and can access my pensions
- Will ensure that I don't have to downsize or sell should my job situation change.

All of the above still may not be an issue if you pay into your pension but reality is that without someone knowing the ins and outs of your circumstances it would be difficult to give you an accurate answer.

ThePants999

Over your lifetime, paying into a pension will earn significantly better returns than overpaying the mortgage.

However, depending on your circumstances, a bit more money before retirement might be more valuable than a lot more money after. Only you can answer that

collinsca

thanks everyone. very much appreciated.

some answers to the questions!

Any plans to move house?........ No
What rate of interest are you paying on your mortgage debt? ........ 3.19% (Think it was fixed 5 years a a few years back)
Any concerns over your employment, i.e. potential loss of? ......No