Savings, Pension or Mortgage

Cookiepops

If you had £200 disposable income every month, what would be the best thing to do with it? I'm in my late 40s, have no loans or credit card debt. I'm luckily on a low interest rate fixed mortgage until 2025.

Newbie_John

If you on 40% tax rate then definitely pension.
If you don't have emergency savings covering 6 months income - then build that - there are 5% easy access accounts.
If you have opened LISA before you were 40 - then LISA.
If you're on 20% tax have you maxed out your employer pension contribution?

Otherwise I'd open regular saver like First Direct bank 7% with £300 max a month.

ColdIron

Newbie_John said:

Otherwise I'd open regular saver like First bank 7% with £300 max a month.

First Direct?

Newbie_John

ColdIron said:

Newbie_John said:

Otherwise I'd open regular saver like First bank 7% with £300 max a month.

First Direct?

Hey, updated that, yes First direct, but there's more:
https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/

badmemory

Personally I would save at the best rates available which will be better than your mortgage rate.  If mortgage rates have come down again to match your current rate then put that money in your pension.  If not pay it off your mortgage especially if it will put you in a lower LTV.  Or if the figures are fairly even then split it.

Cookiepops

Newbie_John said:

If you on 40% tax rate then definitely pension.
If you don't have emergency savings covering 6 months income - then build that - there are 5% easy access accounts.
If you have opened LISA before you were 40 - then LISA.
If you're on 20% tax have you maxed out your employer pension contribution?

Otherwise I'd open regular saver like First Direct bank 7% with £300 max a month.

Yes I'm 40% taxpayer and I have maxed out my employers pension contributions, I pay in 5% and they pay in 10%. Husband reckons we should be throwing any spare money at the mortgage.

saucer

Cookiepops said:

Newbie_John said:

If you on 40% tax rate then definitely pension.
If you don't have emergency savings covering 6 months income - then build that - there are 5% easy access accounts.
If you have opened LISA before you were 40 - then LISA.
If you're on 20% tax have you maxed out your employer pension contribution?

Otherwise I'd open regular saver like First Direct bank 7% with £300 max a month.

Yes I'm 40% taxpayer and I have maxed out my employers pension contributions, I pay in 5% and they pay in 10%. Husband reckons we should be throwing any spare money at the mortgage.

If you are a higher rate tax payer pension should be your first thought. Can you afford to lock money away until 55-57 (depending on your age)? If so you are you could be benefiting from lots of tax relief and then potential pension growth. You can do this with a SIPP.

ColdIron

Cookiepops said:

Newbie_John said:

If you on 40% tax rate then definitely pension.
If you don't have emergency savings covering 6 months income - then build that - there are 5% easy access accounts.
If you have opened LISA before you were 40 - then LISA.
If you're on 20% tax have you maxed out your employer pension contribution?

Otherwise I'd open regular saver like First Direct bank 7% with £300 max a month.

Yes I'm 40% taxpayer and I have maxed out my employers pension contributions, I pay in 5% and they pay in 10%. Husband reckons we should be throwing any spare money at the mortgage.

If you pay higher rate tax then a pension is probably top of the list

You could turn that £200 into £333 every month, that's a pretty good deal

I'm luckily on a low interest rate fixed mortgage until 2025.

With a low rate fix you won't see much benefit by throwing money at it. I'd wait until 2025 and reconsider

Newbie_John

You said you're late 40s - let's say 47, and your tax is 40%.

So you have spare £200 a month - that's £2400 a year (after tax) which is £4000 before 40% tax.
Now, if you keep putting that in your pension for 10 years - that's about £40k saved + some interest acquired (if 4% then you'll save £50k).

If you started putting £200 a month towards mortgage for 10 years you will end up overpaying it by £24k + some interest - let's say 4% average - that would save you £30k.

Your mortgage is fixed till 2025, how much you got left (years, amount)?
If you have more than 10 years then you could always withdraw the tax-free £40-£50k when you're 57 and pay off the remaining mortgage 

A lot variables but if mortgage rate and pension rate are:
- 4% - then you'll be £20k better of putting money to pension
- 0% - then you'll be £16k better of putting money to pension
- mortgage 4% and pension 0% - then you'll be £10k better of putting money to pension