Pay extra on mortgage or into a pension

ali_bear

I have also put all of my bonus into pension on occasion. But I think the best pension investment strategy is to make regular (monthly) investment in a high volatility (growth, risk) fund over the long term. Once you start making bigger lump sum investments like your bonus you have to start thinking about timing the market. 

Cobbler_tone

ali_bear said:

I have also put all of my bonus into pension on occasion. But I think the best pension investment strategy is to make regular (monthly) investment in a high volatility (growth, risk) fund over the long term. Once you start making bigger lump sum investments like your bonus you have to start thinking about timing the market. 

In my instance that 'timing' would include at least 3-4 weeks notice to change contribution levels. I wouldn't consider doing it outside of SS. Mine isn't long term, so certainly nothing high risk in my three portfolio split. I'm sure it could grow more but I like sleeping.

dunstonh

ali_bear said:

Cobbler_tone said:

... we get a very volatile (and impossible to calculate!) annual bonus paid a week before the end of the tax year. It can be £0 - £10k and you are second guessing in the run up to avoid 40%. 2024/25 was the first year I targeted this and you can see I didn't do a bad job.

The trouble with putting a bonus into your pension is the big amount being invested in one go. I think you're better off only making regular contributions from monthly salary to properly smooth out the ups and downs in the underlying investment. And treat the bonus as unexpected but welcome additional income. 

Statistically, investing in one go beats phasing around 75% of the time.   The actual ratio will vary on studies, some into the 80% range but rarely lower than 75% depending on the timescale of the phasing in the studies.

If you accept that investment values go up in a zig-zag manner, then regular contributions will be the worst option most of the time. Most people make regular contributions because they pay out of their income that is paid regularly.

ali_bear

Is that based on making those one-off investments at times chosen to be better than others? 

Hoenir

ali_bear said:

Is that based on making those one-off investments at times chosen to be better than others? 

This is on the basis that the underlying investments themselves will be paying out income that then is continually reinvested. Missing out on the best trading trading days of the year can impact returns by condsiderable %'s. 

Of course the investments choosen need to be considered with care. Putting 100% into something which is considered overvalued is going to come at a cost in the medium term. Therein lies the difference between saving and investing.  Saving is about minimising risk while investing is understanding the risks one is exposed to. 

poseidon1

Gentlemen, as often seems to be the case this thread as wandered offtrack somewhat from the OP's original question.

 Given she seems to be  currently pensionless at age 45, it would be insightful to know from the OP if any of the contibutions here  has helped her to decide if it's about time to jump on the personal pension 'train' given her straitened circumstances.

I am cognizant that in her position as a struggling single parent divorcee her scope to divert funds to pensions maybe limited but would hope there might be some consensus here that her continuing to do absolutely nothing in this regard is less than wise.

PropertyGuru_Wannabe

Depends what her ultimate goal is for example retiring early or climbing up the property ladder etc.  Everyone is different and no one way is the right way.  However if I was her I would focus on paying into the pension monthly, but then she is not me.