what would you do ?

bearspaws

we're going to get some independent advice but what would you do..?
Continue to pay £200 a month into a private pensions fund with a poor forecast ( about 11K pa) or would you overpay your mortgage by same amount (20 years remaining on 68K currently at SVR) or use put the £200 into an isa each month - Im very new to this and suspect I havent given enough detail........pse dont get too complicated in your responses as I couldnt do them justice with the tiny knowlege I have at the mo! many thanks.

EdInvestor

OK, starting with the pension, is it supplied by your company and are you getting a company contribution to match or exceed the money you pay in? Are you a higher rate taxpayer?

On the mortgage, now is not an especially good time, but presumably you have a lot of equity in your property, have you looked into remortgaging to a better deal at a lower rate than the SVR ?

Re ISAs, have you already got ISAs, or any other investments/cash savings elsewhere?

bearspaws

partner is self employed max earnings 28k - have got equity but times are hard and just fininished fixed rate and will go interest only for a few months....no other savings!

EdInvestor

How much equity?

dunstonh

Continue to pay £200 a month into a private pensions fund with a poor forecast ( about 11K pa) or would you overpay your mortgage by same amount (20 years remaining on 68K currently at SVR) or use put the £200 into an isa each month

If you put £200pm into a pension and £200pm into an ISA and use the same investment funds then you will get back exactly the same apart from the tax relief.

Over the long term you would expect investment returns on most risk portfolios to be beat the mortgage.

Lets say you repay the mortgage early and dont do any retirement planning. The basic state pension is £4500 a year. Is that going to be enough for you? Not likely so at that point your choice would be to sell the house you have paid for and either downsize (if possible) or equity release. Equity release is effectively having to borrow against the property again because you didnt put enough aside for your retirement.

You dont decide if you should pay the electric bill and not the gas. You pay both. Retirement planning is much the same. You dont pay all into the mortgage and you dont pay everything into a pension and you dont pay everything into a stocks and shares ISA. You do a bit of everything.

partner is self employed max earnings 28k

Self employed dont get the full state pensions. just the basic. So you need to be taking your retirement planning seriously. £200pm is not a bad start but its not really enough for a self employed individual. The Govt expects the self employed to take more care of themselves.

jamesd

Why does the pension fund have a poor forecast? Is it using a fixed growth rate of say 7% without accounting for the actual performance of the investments? Does it have a good range of investments available, that you're using?

You may also find the ISA v Pensions discussion useful.