Your thoughts and advice on my financial situation

VNX

Good evening all,

I’d appreciate your thoughts if I may, as I am approaching a sort of cross roads, I enjoy this forum there are so many wise heads with good advice.

As much detail as I can as I appreciate it’s helpful. 

I recently turned 40, I have a modest income of circa £29k, am single with no kids. 

Currently pension pots of circa £105,000 with around £154,000 in cash (I know I know I know this is too heavily weighted towards cash!) but I am where I am, this is primarily tied up in fixed cash ISAs and some in fixed bonds all paying between 5 and 6%, I have around £20k in easy access as an emergency fund.

My mortgage is 1.78% fixed until Jan 25, the balance then will be around £47,000, I have made sure I have ISAs and bonds of over £50k maturing just before this date.

I haven’t overpaid the mortgage during the term as savings rates are much higher. 

Really what I am thinking is what to do in Jan 25, whether it makes sense to pay off the mortgage, I pay £700pm this can then be diverted into my pension to build a better pot as I know my current pot isn’t great, or whether to keep the mortgage, and divert money from savings to put straight into my pension as I can make a lump sum payment I believe or pay some off the mortgage rather than all, a kind of half way house.

I’ve thought about investing but I think pension would be a better option (I appreciate this is investing but a safer (?) way), but your thoughts on this and anything else would be greatly appreciated. 

My pension scheme isn’t great (well the pension is OK, it’s with Aviva and doing fine) it’s my employer where it isn’t great, I pay in 5% my employer just 3%, I can up my percentage or value to whatever I want, sadly my employer doesn’t go more than 3% but I appreciate it’s taken as source so has tax relief benefits. 

I know ultimately it’s my decision what path I take but as I say I enjoy the wise heads of this forum and your advice, I’ve read similar threads to this and found them to be very useful.

Thank you, if there is any information I’ve missed or would be useful just ask.

sheslookinhot

Pension every time.

ColdIron

VNX said:

I’ve thought about investing but I think pension would be a better option (I appreciate this is investing but a safer (?) way), but your thoughts on this and anything else would be greatly appreciated.

A pension isn't safer than investing as it can hold the same investments as a ISA but the tax relief gives it an advantage and you look to have enough cash to increase your contributions. You can't access it until 57 unlike an ISA which can help you bridge the gap if you want to retire early, though I don't think you're quite on track for that yet

gt94sss2

It depends on your attitude to risk and also what terms you are offered if you were to remortgage.

However, I would be tempted to consider paying off your mortgage and if you haven't, open a LISA + ISA and use the 20k annual allowance to invest in shares.

Investing in a pension is fine, but you can't access that money in an emergency. You may want to consider a SIPP rather than contributing more to your company pension as that will give you more control over where your money is invested. You're not currently a higher rate tax payer but when you are, you can get additional tax relief on your pension contributions.

thunderroad88

gt94sss2 said:

It depends on your attitude to risk and also what terms you are offered if you were to remortgage.

However, I would be tempted to consider paying off your mortgage and if you haven't, open a LISA + ISA and use the 20k annual allowance to invest in shares.

Investing in a pension is fine, but you can't access that money in an emergency. You may want to consider a SIPP rather than contributing more to your company pension as that will give you more control over where your money is invested. You're not currently a higher rate tax payer but when you are, you can get additional tax relief on your pension contributions.

The OP can’t open a LISA as they’re over 40. I’d certainly pay off the mortgage, best thing I ever did was doing that in my early 40s, one big worry gone. It’s not terrible that they’ve been in cash earning 6% but I’d be considering putting £20k of what remains after paying off the mortgage into a global index tracker ISA this tax year. 

VNX

Thank you all, I have a LISA I opened one last year with a pound just in case, will look into this option.

Hoenir

Clear the mortgage and up your pension contributions. Don't take unneccessary risk with your investments. Compounding ultimately takes care of the majority of heavy lifting. 

simonsmithsays

Paying off the mortgage at a similar time to you was the key thing for us.

Then we ramped up pension contributions and savings

Albermarle

VNX said:

Thank you all, I have a LISA I opened one last year with a pound just in case, will look into this option.

Make sure it is a Stocks and Shares Lisa, and not a cash ( as you have said you already are far too weighted towards cash savings.

You may want to consider a SIPP rather than contributing more to your company pension as that will give you more control over where your money is invested.

This would maybe be a good idea, for someone who understands what they are investing in . The OP's comment I’ve thought about investing but I think pension would be a better option (I appreciate this is investing but a safer (?) way) would indicate that is not the case, so they are probably better ( for now anyway) to stick with the workplace pension, until their knowledge improves.

poseidon1

Regarding your mortgage, rather than pay off completely reduce to say £5k to 10k but keep your original term. You may want additional borrowings in future  ( home improvements ? ) so keeping your current mortgage should mean less fuss bother and fees for additional borrowings ( subject to affordability criteria), depending on the flexibility of your current provider.

VNX

Thank you all for your advice