Using pension as investment vehicle for paying off interest-free mortgage

NorfolkBoy2

Hi there, 

I probably plan to take this question to a financial advisor, but just in case I've missed something really daft I thought I would ask on here.  If someone can give me a really good reason not to do it I'll save the money on the advisor!

So, I am a higher rate taxpayer, and have to fill in a tax return so am able to claim 40% tax relief on my pension contributions.  I also have an interest-only mortgage.  I am now in my early 50s, and have some investments towards the mortgage (endowment + ISA) and some pension provision (though not enough).  In the next 12 months I am likely to have more money to be able to save (unless energy prices get worse than we think!).

I was thinking of putting more money into the investment ISA and more into my pension.  But I suddenly thought that if I were to pay off the mortgage and retire at about the same time I could put more money into the pension and take the lump sum to pay off my mortgage.  Would that not be more tax efficient?  (I'm not going to get anywhere near the lifetime pension contribution limit).

Thanks for reading, and would welcome all comments.