Paying pension contributions with savings

TodayTomorrow24

There's been some talk about paying into pensions vs paying off a mortgage. While this is useful, these were from 2021. The economic situation has changed - my question is similar and different.

Self-employed, currently out of work in my late 50s.

Is it better to keep paying into my pension with savings?

I've taken a six-month pension holiday and have had to restart payments or the pension account will be closed for future payments.

Thanks.

MasterG83

A lot would depend on how long you have left on your mortgage or indeed how your current pension pot looks, I think given the current economic climate paying off your mortgage means greater peace of mind in terms of protecting yourself.

Marcon

Self-employed, currently out of work in my late 50s. 

Is it better to keep paying into my pension with savings? 

If you have no 'relevant earnings' in a tax year you are limited to paying £2,880 to a pension in that tax year, with the provider adding a 'tax top up' at basic rate (bringing you up to the maximum £3,600 allowed by legislation).

I've taken a six-month pension holiday and have had to restart payments or the pension account will be closed for future payments.

You could simply start a new personal pension - unless there are special terms for this pension which make it important to keep it going?

Otherwise it's hard to answer helpfully, given the paucity of information. You've said nothing about the terms of your mortgage, whether you have other savings, if you hope to work again, your attitude to paying off your mortgage (which is often a decision which involves more 'emotion' than other financial transactions).

Albermarle

https://forums.moneysavingexpert.com/discussion/6665434/paying-pension-contributions-with-savings

This is a very regular question on these forums, probably been hundreds since 2021.

Although the economic situation has some influence on the question, it is more about your own personal situation and personality.

QrizB

People think "once I pay off my mortgage I won't have to worry about making the payments".

What they don't necessarily think is "once I have enough savings and investments to clear my mortgage I won't have to worry about making the payments".

Full disclosure: I had this discussion with myself and paid off the mortgage.

What you're really looking at, though, is "savings vs. pension" and that's a slightly different case.

Self-employed, currently out of work in my late 50s.

If you're in your late 50s then you're old enough that you could get access to your pension pot if you needed it. So your pension is almost as easy to get at as your savings are.

For a basic rate taxpayer, if all other things are equal the tax treatment of pensions means you're likely to be 6.25% better off with your money in a pension than in savings.

If you've got £1000 in savings, paying them into a pension then taking them back out will leave you with £1062.50.