Pay Mortgage up and put money in Pension ? 28 December 2021 at 3:13PM in Mortgage-free wannabe 1 reply 62 views

eastie_2

Hi,
 I have just been left some money from my late mother and as I am hoping to  retire in 2 years .
Question I am asking is 
 Should I clear my Mortgage of £25,000 off at the end of my deal in April 2022 saving me £400 a month and pay the £400 into my Post Office Pension for the 2 years , or wouldn't it be worth it with only 2 years before retirement.
Many thanks

savingholmes

Only you can weigh up which is best. In terms of return 

Your mortgage gives you certainty - if you pay it off - it's done. You know exactly how much £ a month that would free up.

If you put it into your pension if you are a basic rate tax payer - you will get roughly 25% uplift from the government in tax relief- far outstripping the interest rate your mortgage costs. So that would be around £6.2K If you are a higher rate tax payer the uplift is even more.

The risk with putting it into your pension if you are on a Defined Contribution pension is that your pension could go down or up and there is no way of knowing which it will do over a 2 year time frame. If you were able to buy added years as part of a Defined Benefit pension scheme - and the additional money was guaranteed - then that could be a real winner. You've not really given enough information.

Do you have any debt? Do you have a 6-12 month emergency fund? These are also important things to consider.

Only you know your personal circumstances and how much risk you can afford to take. I am not an IFA.