How do I find out if worth contuniung to pay into pensiosn v reducing mortgage

edited 30 April 2009 at 9:36AM in Pensions, Annuities & Retirement Planning
2 replies 669 views
DeeforDeefor Forumite
8 Posts
I currently pay £132 into a Skandi pension and £112 into a Tesco pension and have done for about 10- 12 years. This represents about 9% of take home pay. but I don't really know how to check to see if these pensions are "worth it" / performing well, other than reading the paper work the companies in question send every so often.
I have a £111,100 mortage currently fixed for at 4.99 % for another two years, and there is part of me that thinks I should put the £240 ish per month into paying that off, rather than the pensions.

Any wise people know how this assessment could be made, or even if pension companies allow you to cease paying, with the possibility of starting payments again when finances improve a bit ?

thanks

Replies

  • dunstonhdunstonh Forumite
    107.2K Posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    ✭✭✭✭✭✭
    part of me that thinks I should put the £240 ish per month into paying that off, rather than the pensions.

    On what grounds? Do you intend to sell your house in retirement and live in rented accommodation?
    with the possibility of starting payments again when finances improve a bit ?

    Are you saying you have financial problems?
    I currently pay £132 into a Skandi pension and £112 into a Tesco pension and have done for about 10- 12 years.

    Skandia is a good provider with 300-1900 funds depending on which version of the pension you have. Tesco stakeholder pension is a cut down version of the Norwich Union stakeholder with a much smaller fund range. Not bad but not as good as other options available (as it very often the case with supermarket pensions). That is assuming you mean its a Tesco retail pension and not an employee pension.
    I don't really know how to check to see if these pensions are "worth it" / performing well,

    Investments zig zag. Always have, always will. We had a zag (down) last year but are in a zig (up) at the moment. When things go down your values drop but the units you buy each month are cheaper so you get more of them. When it goes back up, your values go up but the number of units you buy is less. So periods of volatility when the markets drop is actually a very good thing for pensions when you are not retiring in the near future. Although the inexperienced investor tends to look at values only and not realise that the drop is actually good news in the long run.

    You dont say how old you are or how much you have. 9% gross isnt a large pension contribution. Its about average. So, cutting it back doesnt seem like a good idea unless you have finanancial problems. You have to have an income in retirement and the basic state pension is only £4900 a year do unless you want to plan to be poor, then paying off the mortgage when interest rates are low instead of investing in a pension when investment prices are low doesnt seem logical.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • EdInvestorEdInvestor
    15.7K Posts
    ✭✭✭✭✭
    You may like to factor in your 2 state pensions.Get a forecast here as to the potential amounts: https://www.thepensionservice.gov.uk

    Some people get double the amount of the basic pension.

    Over investing in pensions vs stocks and shares ISAs or property can be a mistake for tax reasons, as can putting all pensions in one name and wasting a spouse's tax allowances.

    Each oldie gets a tax personal allowance of around 10k.This is clawed back when your income reaches around 22k until it falls to the normal personal allowance level. Pension (including state) income is taxed above the 10k level, whereas income from stocks and shares ISAs is not.

    |So if your state pensions are large you might be better to divdert some of that pension saving into a S&S ISA.The investment options are the same.
    Trying to keep it simple...;)
This discussion has been closed.
LATEST MSE NEWS AND GUIDES

Cut overdraft charges

10 tips to pay less for your overdraft + how to pay it off

MSE Guides

FREE tennis coaching

Find your nearest session and pre-book your place online

MSE Deals