Take 25% TFLS to pay off mortgage and continue SIPP contributions?

waveneygnome

Time has flown

(and thanks to excellent help/advice of these boards we find ourselves in good position)

My long suffering wife will hit 55 this year. 
We have a mortgage of £95k @ 4.99% for 14 more yrs (no penalty for early repayment)
She has NHS pension contributions 33 yrs & counting (no plans to retire)
I opened up a SIPP for her to give her flexibility/more options if she wanted to leave NHS early (she doesn't)

SIPP has grown to amazing £400k

Can we/should we take 25% TFLS to clear the mortgage?
Can I/she continue to contribute to SIPP at normal contribution rates (£60k minus NHS pension input amount)

(I'm much much younger at 52, have own SIPP/pension arrangements.......I think we have 'won' and are more concerned now with passing things onto adult children/lowering IHT issues)

The £1.2k monthly mortgage savings would be given to 3 children (18 to 22 yrs)/with strict instructions for them to save/invest.  i.e not pension recycling 

It would still leave her with a £300k pot/ options to go earlier, and if I/we can still contribute, the pot will increase more. 

penners324

You'd lose many years of investment performance increases, possibly meaning having to retire later.

Why not over pay the mortgage a bit to shorten that 14 year term?

Marcon

waveneygnome said:

Time has flown

(and thanks to excellent help/advice of these boards we find ourselves in good position)

My long suffering wife will hit 55 this year. 
We have a mortgage of £95k @ 4.99% for 14 more yrs (no penalty for early repayment)
She has NHS pension contributions 33 yrs & counting (no plans to retire)
I opened up a SIPP for her to give her flexibility/more options if she wanted to leave NHS early (she doesn't)

SIPP has grown to amazing £400k

Can we/should we take 25% TFLS to clear the mortgage?
Can I/she continue to contribute to SIPP at normal contribution rates (£60k minus NHS pension input amount)

(I'm much much younger at 52, have own SIPP/pension arrangements.......I think we have 'won' and are more concerned now with passing things onto adult children/lowering IHT issues)

The £1.2k monthly mortgage savings would be given to 3 children (18 to 22 yrs)/with strict instructions for them to save/invest.  i.e not pension recycling 

It would still leave her with a £300k pot/ options to go earlier, and if I/we can still contribute, the pot will increase more. 

You can, but whether you should is entirely up to you. Mortgage related decisions often have a strong emotional component (being mortgage free carries rewards all of its own!). 

Taking tax free cash won't impact on your wife's ability to contribute to her SIPP.

I think if you re-read your own post you might just have made the decision anyway and are perhaps looking for validation/encouragement to take the plunge...?

cfw1994

Just for balance: as you say, you have perhaps already “won”….congrats 🍻

I think your plan & thinking is very sound & would be exactly what we would do in your circumstances, & yes, if you ONLY touch the TFLS part, you can still continue to contribute - just be sure to NOT touch any of the rest 👍

Doing it now secures that amount to clear your home, which is always nice 😎  
We should also remember that last year had great growth in many areas (my chunk of a World Equity fund managed 26%😜) - it is perfectly reasonable to suspect the coming year might see those investments take a dip.  Not certain, of course 🫣  To be honest, we took a chunk out & used it towards a car trade up with that logic in mind 🤷‍♂️

Your mortgage rate is quite high, & clearing that rather than hoping for growth above & beyond that makes a lot of sense to me #NotAdviceOthersMayFeelDifferent

With the proposed government changes to pensions & inheritance, I also believe in passing on earlier rather than later makes sense.  

Maybe you can help guide the offspring with their investments - LISA if they don’t already own homes but might, ISAs for accessible cash, pensions for long tr, 👍

FWIW, I do think they could add to their pensions - the recycling rules would be more about you putting your lump sum into your own pensions, AFAIK.

Oh, & I would split the £1,200 four ways, & keep one quarter for you & your wife - maybe a monthly random night out, which could include taking the kids out for a meal or who, etc.  Live a little, share a little 😉🎉

Good luck 😀

kinger101

I think your plan is sound. There are no doubt options which make more sense financially but these are jam tomorrow.  And in any event, inflation will gradually erode tax free element the later it is taken.

You've built some flexibility by having the SIPP in addition to the DB, so if this is what works for your family, it makes perfect sense.

waveneygnome

penners324 said:

You'd lose many years of investment performance increases, possibly meaning having to retire later.

Why not over pay the mortgage a bit to shorten that 14 year term?

Thanks for pointing this out. 

However in our specific case, Long Suffering would still have good DB scheme intact, the current SIPP is the flexible bit/icing; I/we should still be able to contribute good chunks into the SIPP going forwards if things stay the way they are (£30-40k pa) - so in 3 years time the SIPP could be back up to the £400k mark (markets permitting).

waveneygnome

cfw1994 said:

We should also remember that last year had great growth in many areas (my chunk of a World Equity fund managed 26%😜) - it is perfectly reasonable to suspect the coming year might see those investments take a dip.  

........Oh, & I would split the £1,200 four ways, & keep one quarter for you & your wife - maybe a monthly random night out, which could include taking the kids out for a meal or who, etc.  Live a little, share a little 😉🎉

Thanks cfw1994.

Yes partly thinking of doing this to take 'some money off the table'.......between us we have over £1m on the roller coaster and whilst we're meant to be prepared for the big dipper......when it actually comes to the slide down I'm not sure how we will feel in reality.  Hopefully warm and cosey in a mortgage free home!

Treating ourselves.......hmmm......I upgraded to youtube premium to avoid the adverts last year and spent months feeling guilty about it.

waveneygnome

Marcon said:

I think if you re-read your own post you might just have made the decision anyway and are perhaps looking for validation/encouragement to take the plunge...?

Yes, taking the plunge.  For us big sums of money/don't want to make a silly mistake/seems a bit too simple/easy/we hadn't thought of this before/planned it this way.

Alexland

I guess you could shop around to try and find a better mortgage rate but at only £95k it's not going to be worth paying mortgage product fees to get the best rates. After several years of amazing investment returns then I'd be tempted to take some risk off the table and get it repaid to simplify your life. This is only a small proportion of your combined net worth anyway so its not going to make a lot of difference.

crv1963

waveneygnome- Your plan sounds good to me. In addition to the SIPP TFLS your longsuffering wife will have the majority of her NHS Pension in the 1995 scheme so will also get another decent lump sum when she retires so taking the SIPP TFLS to pay mortgage makes perfect sense.

I agree with cfw 1994 you should make an effort to use some of the money you were splitting 3 ways into a 4 way split to do this, Seeing your response to his suggestion I ask myself are you ready/ prepared to decumulate in a few years time?