Save £500pm or overpay Mortgage?

Albermarle

and it is designed to taper as I get close to the point of needing to use it. 

You need to keep an eye on this, as these so called Lifestyle pensions, often taper/derisk too much, or too little

If you plan to buy an annuity, then it should pretty much 100% derisk to cash during the last few years. However if you plan to drawdown ( or just leave it alone) then it is better left mainly invested.

Also there will be a selected retirement age ( probably 65) that it will use . You can change this if you intend to retire earlier or later.

Perhaps with a substantial pot being built up, you may wish to revisit the IFA at some point or take a more closer interest yourself. Investment decisions can get more critical near/in retirement, than when you are still working. Also tax issues can play a part, something I know you are sensitive about 

boomboomboom

Albermarle said:

and it is designed to taper as I get close to the point of needing to use it. 

You need to keep an eye on this, as these so called Lifestyle pensions, often taper/derisk too much, or too little

If you plan to buy an annuity, then it should pretty much 100% derisk to cash during the last few years. However if you plan to drawdown ( or just leave it alone) then it is better left mainly invested.

Also there will be a selected retirement age ( probably 65) that it will use . You can change this if you intend to retire earlier or later.

Perhaps with a substantial pot being built up, you may wish to revisit the IFA at some point or take a more closer interest yourself. Investment decisions can get more critical near/in retirement, than when you are still working. Also tax issues can play a part, something I know you are sensitive about 

Haha damn tax

From speaking with the three IFAs I ended up talking to it seemed that an annuity was less popular these days - we didn’t discuss at any length as to the suitability for me.

Invaluable information thank you.

I had it in mind that I would keep it invested and draw down the amounts needed.

But with 15 years to go assumed I had some ten years before I start wondering about it. How close to the final age do they trigger derisking?

bostonerimus

Overpaying a mortgage or saving isn't a binary choice, you can do a bit of both. If you have a workplace pension that would be my priority because of the employer's contribution and tax advantages, but overpaying the mortgage can be useful as part of an overall plan to financial freedom if it allows you to reduce expenses and the pressure to produce income later in life.

Albermarle

boomboomboom said:

Albermarle said:

and it is designed to taper as I get close to the point of needing to use it. 

You need to keep an eye on this, as these so called Lifestyle pensions, often taper/derisk too much, or too little

If you plan to buy an annuity, then it should pretty much 100% derisk to cash during the last few years. However if you plan to drawdown ( or just leave it alone) then it is better left mainly invested.

Also there will be a selected retirement age ( probably 65) that it will use . You can change this if you intend to retire earlier or later.

Perhaps with a substantial pot being built up, you may wish to revisit the IFA at some point or take a more closer interest yourself. Investment decisions can get more critical near/in retirement, than when you are still working. Also tax issues can play a part, something I know you are sensitive about 

Haha damn tax

From speaking with the three IFAs I ended up talking to it seemed that an annuity was less popular these days - we didn’t discuss at any length as to the suitability for me.

Invaluable information thank you.

I had it in mind that I would keep it invested and draw down the amounts needed.

But with 15 years to go assumed I had some ten years before I start wondering about it. How close to the final age do they trigger derisking?

Annuities are less popular since the taking of DC pensions became more flexible/easier to drawdown. Also in recent years annuities have been very expensive ( as in a large sum of money would only generate a modest income) . However they are slowly becoming cheaper due to market conditions. In this case the attraction of a guaranteed income with an annuity, will probably become a bit more popular again. It is possible to have an annuity with part of the pot and drawdown for the rest.
Some people never touch their pot and/or still have a lot left when they die. Passing on a DC pot ( as opposed to other assets ) can be a way of reducing inheritance tax .
Yes at 15 years you will still be too far out to worry about it . Different lifestyle pensions derisk at different times, but typically between 5 and 8 years ? The details will be somewhere on the SW website I presume.

boomboomboom

Thanks again @Albermarle great reading thank you. I do have the info pack on my pension so I’ll dig it out. I might take the rest of the year off from thinking about money, pensions, investments and yes tax because I’ve spent the first half of this year getting everything in order and automated (DDs, pens contribs, removing debt etc) so I am going to take that first advice you offered and relax a little knowing I’ve done pretty well. As for the £500 I think I am going to force it to be £1,000 and go the flexible Cash ISA route for the next year because whilst it’s a little lower than the mortgage rate admittedly, in the grand scheme of things over one year it’s only £50 that I’d be missing out on and the money is there if I need it and there’s no pesky tax to mess about with.

MEM62

boomboomboom said:

MEM62 said:

Overpay your mortgage and the £500 per month saves you 1.64%.  Invest that in equities and a moderate-risk portfolio should return you 5% in the long term.  Even if the investment under-performs it is still likely to earn you more than you save by paying off your mortgage.

That’s a great way to think of it but I wouldn’t ‘see’ that 1.64% in my pocket until the mortgage is paid, ie: in a shorter period of time. And if I put it into the mortgage I don’t have access to it if I need it.

I'm not making the case for paying off your mortgage.  I'm making the case for not paying off the mortgage.  

boomboomboom

MEM62 said:

boomboomboom said:

MEM62 said:

Overpay your mortgage and the £500 per month saves you 1.64%.  Invest that in equities and a moderate-risk portfolio should return you 5% in the long term.  Even if the investment under-performs it is still likely to earn you more than you save by paying off your mortgage.

That’s a great way to think of it but I wouldn’t ‘see’ that 1.64% in my pocket until the mortgage is paid, ie: in a shorter period of time. And if I put it into the mortgage I don’t have access to it if I need it.

I'm not making the case for paying off your mortgage.  I'm making the case for not paying off the mortgage.  

Ah ok, the phrase “invest *that*” I read *that* to mean the 1.66% saving.