pension - stocks & shares ISA - mortgage overpayments - savings

ultrasilvam

Hi everyone. I'm trying to figure out how much I should contribute to pension/S&S ISA/mortgage overpayments and would welcome some ideas.

Thank you - I really appreciate any suggestions. 

Albermarle

As you say your pension pot is on the low side for your age , so it is good that your current level of contributions are at a reasonable level.
Normally emergency money should cover you being out of work for 6 months , although some would say 3 months is enough.
Would I be better off increasing pension contributions and reducing the stocks & shares ISA contributions?
This basically depends on when you are likely to want to take the money. If you are saving for retirement, then you might as well put it in the pension and get the tax relief benefit. Although with a S&S ISA you can withdraw from it any time , investing is really a long term project to get the best chance of a decent return .
Make sure you are up to speed as to how your pension in invested, as that can make a significant difference long term as well.

Cus

Maxing out your pension contribution so that you gain the full employer match is probably the most obvious, as this is free money. 
Then deciding on what extra to put in the pension versus ISA is a debate on when you would like to retire, and on the tax in/tax out projection. Higher rate tax payers who expect to be lower rate when taking the pension would be more efficient tax wise than ISA but you can't touch the pension till late 50's. 
For JISA, once it goes in you can't take it out, and it becomes your child's at 18, where as with an ISA you control so often people prioritise their own ISA first, and if they have used up the annual allowance then put in to the JISA.
For emergency cash, some say 6 months earnings is a good level to store, but that would include the expectation of including mortgage payments.

Albermarle

Higher rate tax payers who expect to be lower rate when taking the pension would be more efficient tax wise than ISA but you can't touch the pension till late 50's. 

This is correct of course, but the OP is only paying a small amount of 40% tax so is already getting this back with current contributions. Although if they got a big salary/bonus hike then it would be a more significant saving.

ultrasilvam

Albermarle said:

Would I be better off increasing pension contributions and reducing the stocks & shares ISA contributions?
This basically depends on when you are likely to want to take the money. If you are saving for retirement, then you might as well put it in the pension and get the tax relief benefit. Although with a S&S ISA you can withdraw from it any time , investing is really a long term project to get the best chance of a decent return .
Make sure you are up to speed as to how your pension in invested, as that can make a significant difference long term as well.

Thanks. My aim is to save for retirement in both pension and stocks and shares ISA and yes I thought maybe keep some money available, but then I already have some money available... Ideally I would like to retire earlier than 67 but I am afraid I won't be able to, not in London anyway... I would probably need to move out somewhere mortgage free well before retirement. 

Albermarle

Pensions are currently accessible from age 55 , although that is creeping up and maybe around 57 by the time you get there.
No saying that you should access it at that age ( in fact there is no upper age limit ) but it is possible.
It is necessary to have a large pot to generate a decent income from it . Typically a £100K pot could give a sustainable income of around £3500 pa 

webnibbler

ultrasilvam said:
My employer contributes a fixed % regardless of whether we contribute or not, but I am actually adding more than that... they do £350 and I do £400 net but I have a feeling I should be doing much more. Maybe I should stop overpaying the mortgage altogether and stop stocks and shares ISA contributions, and focus on growing the pension pot now?

It's worth looking closely at your employers pension to understand exactly what the contribution is from them. In schemes that use salary sacrifice the employer will sometimes add their NI savings (13.8%) to the contribution too. This can add additional money on top of their contribution.

In my case my employer matches up to 5% but also adds 100% of their employer NI savings on top, so an additional 13.8% of my contribution. Once I understood this benefit, I increased beyond the 5% in order to grab as much of that NI saving as possible.

If your employer is nice and adds this it's worth increasing for IMO.