someone help

newyo1

I'm unsure which way to go with this one, I'm 49 on a good salary about 86K and in a final salary pension scheme. I've got a mortgage about 120K. Unfortunately im paying about 1k in maintenance a month to first wife which finishes in two years. At work we are getting a 17.5% pay rise next April and 27.5K bonus over two years, 16K in April 2019 and rest April 2020 .
Do I increase pension contributions from 1/55 to max 1/50 and start AVC's or do I pay off mortgage as soon as possible. ?
please some help

crv1963

Have a good look through some of the threads on here. Pensions gets you tax relief, but you need to know a few things like debts, what pension income you're striving for and when you want to retire? Spousal pension provision etc.

I came to this site with what I had in mind, asked lots of questions and formed my/ our retirement plans. I'm now trying to work through the plan, you get lots of helpful advice but more knowledgeable people here will need more detail than just income now.

Linton

If you expect your investments to return more than the interest rate on your mortgage it makes sense to keep your mortgage payments at the standard amount. Then you have a choice between more in your pension (or wife No 2's if there is one) and S&S ISAs.


As to whether your should put the spare money into your DB pension and AVC, or elsewhere, various factors may be relevent....

- As a higher rate tax payer it is most tax-advantageous for you to put the money into your pensions or possibly into a SIPP if the greater flexibility is useful. For example if you want to retire early but not take the DB pension until its normal date.
- If your employers pension allows you to take the DB part's Tax Free Lump Sum from the AVC you may wish to put the money there.
- The pension Lifetime Allowance may be a constraint.

Dox

This really might be a case where getting proper advice (the sort you pay for) would be worthwhile. There is so little information to go on in your question - no mention of health, current family, attitude to risk, desired retirement age....

AnotherJoe

Your mortgage is likely at 2 or 3%.
You'd be getting roughly 25% uplift on your pension contribution into a SIPP after tax (assuming you will be a standard rate taxpayer in retirement), eg 40% relief on the way in, pay 15% on the way out.
All other things being equal, not much of a decision.

You also have a "underpin" of a DB pension so its not all your eggs in one pension basket.

Your tax free lump sum could be used to pay a goodly chunk off the mortgage even if you just kept it in cash, because you can take the 25% TFLS in 6 years time.
If you put £100k in over the next 6 years that would only cost you £60k.
If you took the TFLS thats £25k free money you can pay off the mortgage. With another £15k left!

You'd have to be sure you weren't going above the limits of how much you contribute.
As said I'd pay for a couple of hours of advice on the various options.

IMO paying off a fairly small mortgage ( relative to your salary ) when you can do much better than that even without investing should be your last option.

kidmugsy

newyo1 wrote: »

I'm 49 on a good salary about 86K and in a final salary pension scheme. ... At work we are getting a 17.5% pay rise next April and 27.5K bonus over two years, 16K in April 2019 and rest April 2020.
Do I increase pension contributions from 1/55 to max 1/50 and start AVC's... ?

Earnings 19/20 = £86k x 1.175 + £16k = £117k.

You will be making more than £100k; you will therefore be in the 60% tax band even if you subtract the 1/55th. (Do you really pay less than 2% pension contribution? Golly!) Pay more pension contribution!

Study this.
https://3652daysblog.wordpress.com/2018/03/05/pension-allowance-taper/

Then observe the writer's remark that things are more complicated for people with DB pensions. Get thee to an IFA or tax adviser.

AlanP_2

kidmugsy wrote: »

Earnings 19/20 = £86k x 1.175 + £16k = £117k.

You will be making more than £100k; you will therefore be in the 60% tax band even if you subtract the 1/55th. (Do you really pay less than 2% pension contribution? Golly!) Pay more pension contribution!

Might be wrong but I suspect 1/55th and 1/50th are accrual rates as opposed to contribution rates.

kidmugsy

AlanP wrote: »

Might be wrong but I suspect 1/55th and 1/50th are accrual rates as opposed to contribution rates.

Thanks. Same suggestion though: take advice.