Increasing pension contributions

GazzaBloom

jamesd said:

GazzaBloom said:

One great way to increase your retirement wealth is to pay off all debt and any mortgage, a guaranteed immediate return in investment in the interest you save.

Once that's done ramp the pension contributions, especially if a higher rate tax payer and using salary sacrifice and let compound interest do it's thing on the snow ball as it gathers size.

It's great but for many a great way to make yourself poorer than you could be.

A more efficient way is to make pension contributions then use the tax free lump sum to do mortgage repaying. This gets you tax relief on your mortgage capital overpayments.

Since pensions can only be accessed from 55 rising to 57 and because the maximum pension tax free lump sum is a little over a quarter of a million this can limit who can usefully do it, with mortgage overpaying usually better at young ages.

But...only if your job is secure, I was made redundant for the 2nd time in my life a few weeks before my 50th birthday and it felt very uncomfortable having the salary requirement needed to feed the mortgage we had at the time. It worked out OK for me, but I then set about getting mortgage free so if it happened again I could take a lower paid job if I had to.

The security that having no mortgage and fully owning the roof over your head should not be undervalued in my opinion.  

Albermarle

GazzaBloom said:

jamesd said:

GazzaBloom said:

One great way to increase your retirement wealth is to pay off all debt and any mortgage, a guaranteed immediate return in investment in the interest you save.

Once that's done ramp the pension contributions, especially if a higher rate tax payer and using salary sacrifice and let compound interest do it's thing on the snow ball as it gathers size.

It's great but for many a great way to make yourself poorer than you could be.

A more efficient way is to make pension contributions then use the tax free lump sum to do mortgage repaying. This gets you tax relief on your mortgage capital overpayments.

Since pensions can only be accessed from 55 rising to 57 and because the maximum pension tax free lump sum is a little over a quarter of a million this can limit who can usefully do it, with mortgage overpaying usually better at young ages.

But...only if your job is secure, I was made redundant for the 2nd time in my life a few weeks before my 50th birthday and it felt very uncomfortable having the salary requirement needed to feed the mortgage we had at the time. It worked out OK for me, but I then set about getting mortgage free so if it happened again I could take a lower paid job if I had to.

The security that having no mortgage and fully owning the roof over your head should not be undervalued in my opinion.  

To me this is the key point in these numerous pension vs mortgage threads. A lot comes down to your perceived job security.