Offsetting Mortgage

getmore4less

Offset had their day but now tend to be quite a bit more expensive than regular mortgages.

You can get savings rates at around the best 5y deals anyway. 

£190k over 10y @ 1.5% is £1700pm.
£40k over 10y @ 1.5% is £360pm

A combination of maxing out pension contributions (especially any 40% money)
pay down the mortgage
save/spend the reduced mortgage payments.

Pangolin76

AlanP_2 said:

Pangolin76 said:

I have an offset account and will be topping it up when I can. The main reason I went for the offset was so I wouldn't need to remortgage when the times comes, I can simply let it revert to the standard rate knowing I'm fully offset. It also means I have a pot of money I can get to easily if I need it in an emergency (bearing in mind your interest rate will be the standard so much higher than a deal). As I pay the mortgage down I'll be removing a similar amount and investing that each month.

I too work in the NHS and looked into the private pension but I calculated the annual allowance and found I was quite high so I would only be able to add about £8k a year which seemed pointless...

£8k a year in to a private pension is probably more than 90% of the population are contributing.

You are in the fortunate position where that is "pointless" and are therefore prepred to forego the benefits.

Would you walk past £1.6k laying on the footpath each and every year (assuming you are a BR taxpayer) as it would be pointless picking it up?

I guess I am but then I chose to work in the public sector, forgoing the salary and bonuses I'd be earning in the private sector (which I have moved into twice and then back to PS) for the better pension, then they moved the goal posts so I won't be able to claim the bulk of my pension (as its in two pots) until I'm 67/68...it's in people's gift as to how much they save into their pension, spend the money now, have less later or save the money and have more later...

AlanP_2

Pangolin76 said:

AlanP_2 said:

Pangolin76 said:

I have an offset account and will be topping it up when I can. The main reason I went for the offset was so I wouldn't need to remortgage when the times comes, I can simply let it revert to the standard rate knowing I'm fully offset. It also means I have a pot of money I can get to easily if I need it in an emergency (bearing in mind your interest rate will be the standard so much higher than a deal). As I pay the mortgage down I'll be removing a similar amount and investing that each month.

I too work in the NHS and looked into the private pension but I calculated the annual allowance and found I was quite high so I would only be able to add about £8k a year which seemed pointless...

£8k a year in to a private pension is probably more than 90% of the population are contributing.

You are in the fortunate position where that is "pointless" and are therefore prepred to forego the benefits.

Would you walk past £1.6k laying on the footpath each and every year (assuming you are a BR taxpayer) as it would be pointless picking it up?

I guess I am but then I chose to work in the public sector, forgoing the salary and bonuses I'd be earning in the private sector (which I have moved into twice and then back to PS) for the better pension, then they moved the goal posts so I won't be able to claim the bulk of my pension (as its in two pots) until I'm 67/68...it's in people's gift as to how much they save into their pension, spend the money now, have less later or save the money and have more later...

We are the same, public sector DB pensions to come but that doesn't stop us making use of personal / invested pensions alongside. 

NottinghamKnight

There are a lot of higher rate taxpayers in the nhs too (which 'only' £8k suggests might be the case above), so double the amount lying on the footpath; the flip side is of course potential issues around breaching the annual allowance given the db scheme already in place.

csgohan4

NottinghamKnight said:

There are a lot of higher rate taxpayers in the nhs too (which 'only' £8k suggests might be the case above), so double the amount lying on the footpath; the flip side is of course potential issues around breaching the annual allowance given the db scheme already in place.

be careful with DB pensions, it is not just based on your annual contributions, but also the growth of ones pension, which is difficult to quantify due to the failures of PSCE and delaying their statements by 6-12months. 

If you are reaching almost your AA figure, you may want an IFA or accountant to guide your choices

NottinghamKnight

csgohan4 said:

NottinghamKnight said:

There are a lot of higher rate taxpayers in the nhs too (which 'only' £8k suggests might be the case above), so double the amount lying on the footpath; the flip side is of course potential issues around breaching the annual allowance given the db scheme already in place.

be careful with DB pensions, it is not just based on your annual contributions, but also the growth of ones pension, which is difficult to quantify due to the failures of PSCE and delaying their statements by 6-12months. 

If you are reaching almost your AA figure, you may want an IFA or accountant to guide your choices

Yes, that was my point,

steampowered

The problem with offset mortgages is that the interest rates are not competitive. It would probably be better to take a standard mortgage at the most competitive rate, keeping perhaps 6 months expenses to one side in a savings account aside as an emergency fund.

I'm not sure why you are averse to investments? Investments are the logical thing to do if you have no immediate need for the money. While investments fluctuate over time, the long term trend is very clear in that on average you will be ahead. The major stock markets have generated returns on average of about 7-8% per year pretty consistently, regardless of whether you are looking at the last 10 years or the last 70 years. A lower or medium risk fund might generate more like 4-6%, with less volatility than a pure stock market investment. If you are likely to pay off your mortgage before retirement anyway I would certainly consider opening a stocks & shares ISA.

As others have said, opening an additional pension could be a wise thing to do because of the additional tax relief- especially if you are a higher rate tax payer. However, you might think this is not worth the hassle as you would need to think about things like annual allowance limits.

AlanP_2

csgohan4 said:

NottinghamKnight said:

There are a lot of higher rate taxpayers in the nhs too (which 'only' £8k suggests might be the case above), so double the amount lying on the footpath; the flip side is of course potential issues around breaching the annual allowance given the db scheme already in place.

be careful with DB pensions, it is not just based on your annual contributions, but also the growth of ones pension, which is difficult to quantify due to the failures of PSCE and delaying their statements by 6-12months. 

If you are reaching almost your AA figure, you may want an IFA or accountant to guide your choices

What's PSCE?

With the LGPS it is quite easy to work out what the AA charge will be, there is even an online calculator on the main LGPS website if you can't do it yourself.

Pangolin76

AlanP_2 said:

csgohan4 said:

NottinghamKnight said:

There are a lot of higher rate taxpayers in the nhs too (which 'only' £8k suggests might be the case above), so double the amount lying on the footpath; the flip side is of course potential issues around breaching the annual allowance given the db scheme already in place.

be careful with DB pensions, it is not just based on your annual contributions, but also the growth of ones pension, which is difficult to quantify due to the failures of PSCE and delaying their statements by 6-12months. 

If you are reaching almost your AA figure, you may want an IFA or accountant to guide your choices

What's PSCE?

With the LGPS it is quite easy to work out what the AA charge will be, there is even an online calculator on the main LGPS website if you can't do it yourself.

This is something I have repeatedly complained about with the NHS, we have no decent tools for anything, there used to be calculators but these are out of date. I emailed SBS who said 'we're working on it'.......work a bit faster as its been years since we've had anything....

AlanP_2

Pangolin76 said:

AlanP_2 said:

csgohan4 said:

NottinghamKnight said:

There are a lot of higher rate taxpayers in the nhs too (which 'only' £8k suggests might be the case above), so double the amount lying on the footpath; the flip side is of course potential issues around breaching the annual allowance given the db scheme already in place.

be careful with DB pensions, it is not just based on your annual contributions, but also the growth of ones pension, which is difficult to quantify due to the failures of PSCE and delaying their statements by 6-12months. 

If you are reaching almost your AA figure, you may want an IFA or accountant to guide your choices

What's PSCE?

With the LGPS it is quite easy to work out what the AA charge will be, there is even an online calculator on the main LGPS website if you can't do it yourself.

This is something I have repeatedly complained about with the NHS, we have no decent tools for anything, there used to be calculators but these are out of date. I emailed SBS who said 'we're working on it'.......work a bit faster as its been years since we've had anything....

Unless you have had a change of circumstances since last year is it that difficult in the NHS scheme to work it out yourself?

You know last years amounts for Annual Pension and Lump Sum if applicable from statement.

You know your salary and your contribution rate.

Indexation on last year's numbers is based on September CPI as used for SP etc.

Then it is just an Excel calculation, or even a calculator and pen / paper as per formula / examples at https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/the-annual-allowance

Try it out on the last 2-3 years statements and see how your calculation compares to what they make it.