Pension or mortgage

LesleyOz

I have £10000, yes 10k in my NEST pension as only offered  for 4 years. I’m 60 and took out a 9 year mortgage this year. Realistically is it better to draw 25% to pay off mortgage to reduce term or not. I just think the 10k is realistically worth about fiver a week if that whereas mortgage free would allow me to live ok

dunstonh

Realistically is it better to draw 25% to pay off mortgage to reduce term or not

Statistically, no.    Your bog standard middle of the road investment funds still manage to beat mortgage interest rates over the long term.   However, that is just one consideration.  i.e. you would be taking out something that averages around 5.5% a year to clear something costing you around 2% a year.

 I just think the 10k is realistically worth about fiver a week if that whereas mortgage free would allow me to live ok

more like £10 a week.    Probably around £15 a week by the time you get to the state pension age.

Are you still working?  Is the mortgage affordable?

How much is remaining on the mortgage?

What other retirement provision and savings do you have?

DiggerUK

How much is remaining  on the mortgage?
The long term benefit of a secure roof is priceless, I would aim for that. It's a guaranteed no risk asset at the end of the day. I say that  because the financial future currently has a lot of red flags flying. 

Best to play for safety rather than risk..._

LesleyOz

Well I have no other pension only state and when I reach 66 (if I do) I would still have another 3 years mortgage unless I can reduce term which is what I want to do. Am I still working? Yes for 8 more weeks, I’m private sector nurse leaving because of bullying and stress, was my life or my income basically so won’t be able to add to pension pot 

LesleyOz

I think £15 a week could be earned on a paper round so might focus on reducing mortgage  

NottinghamKnight

Wouldn't it be better to look for another job? why no other pension, were you in the nhs at any point?

saucer

NottinghamKnight said:

Wouldn't it be better to look for another job? why no other pension, were you in the nhs at any point?

I would also wonder about getting some NHS nursing work.  There are a lot of vacancies that can't be filled.  You'd get income and pension.

steampowered

If you are paying an interest rate of 2% on a £10,000 mortgage, that is £200 per year.

If you have £10,000 in a standard investment fund generating a typical average return of 5.5%, as dunstonh mentioned, that is £550 per year.

If my figures are correct, the difference is £350 per year.  The decision you will have to make is whether you think it is worth losing out on £350 per year to have the comfort of knowing the mortgage has been paid off.

You also need to check the interest you are paying on the mortgage. If you have a competitive rate, you will be paying around 2%. If you have just left the mortgage alone and have defaulted to the lender's standard variable rate, most lenders will be charging you around 4%. If you are paying a SVR then you should pay off the mortgage (or move to a more competitive product).

pjread

I think those that suggest looking to join the NHS are probably giving the best advice, it sounds like you need to do something for the next 5-6 years either way and the NHS should be crying out for experienced people.  A few years of NHS pension might well make your life after 65/66 easier too.