Pension vs Mortgage

Also depends on what your assets are in various place.

Im 38 have a 31 year mortgage but fixed for ten years at 2.59%i have 60/ltv and a decent amount in pensions so I'm prioritising isa savings now as I'm lacking in this area. Still contributing alot to pensions. I'm hrt payer but not above 100k. If i earned what you did I'd pay at least enough to get back below 100k if possible

Dazed_and_confused wrote: »

In all honesty that could have been written 20 years ago.

Not if you were using carry forward allowances like I did to make up for lost time.

Details are high tax earner, approx 120k with bonus.

You don't say what your existing pension arrangements are (total value and annual contributions), and this could be very important. It is interesting to note you put in far more detail about your mortgage, which could suggest an inadvertent over-emphasis on mortgage.

If you are not familiar with the pension tax Annual Allowance and the tapered Annual Allowance you should learn about them now. If you think your income will increase much in the coming years, then you are likely to start having issues with either or both of these things (assuming you don't already). That might suggest making pension contributions now, whilst you still can, but it might also suggest not doing so if you think you may need to use carry-forward of unused allowance to mitigate an Annual Allowance breach in a few years.

You should also consider the Lifetime Allowance, and whether that will be a future issue for you before deciding to put more into a pension.

Details are high tax earner, approx 120k with bonus.

If you are not familiar with the tapering of the income tax Personal Allowance, and how it imposes an effective income tax rate of 60%, you should learn about this. Using a pension can avoid the taper.

Current mortgage 200k over 21 years and think I can cut this down to 10years if I wanted to but at 2% now and remortgage next year hopefully at a similar rate for 5 years am I best to try and maximise my pension contributions as opposed to paying an extra £500-1,000 per month on the mortgage?

I would say the mortgage is pretty low priority given current interest rates and your capacity to service what is a small debt, relative to your income.

You need to consider and deal with multiple priorities to be most efficient. This will ensure you take full advantage of all incentives available, and don't make the mistake of focusing just on one objective at a time, leaving you unable to fully exploit the advantages of all investment types either now or at a future point. Factors such as whether you plan to more to a more or less expensive house at some point may influence your financial decisions now, for example. You should also be taking into account a partner in the planning, if you have one.

Personally my priority order for allocation of additional funds is pension > ISA > mortgage > 0% credit card. There could be an argument for using Venture Capital Trusts too (again, if you are not familiar with these you should research them - not right for everyone, but should be considered.) You could also consider exploiting 0% credit cards to reduce mortgage - I have a bit over £72,000 on 0% credit cards between myself and partner, which is effectively used to reduce mortgage, although both the mortgage plus credit card balance is more than covered by ISA investments (invested cautiously reflecting they are using primarily borrowed funds and that I expect to draw on them in about 4 years time).

I prefer ISAs over mortgage as in addition to higher expected returns I think they give more security than paying a mortgage - if you suffer a devasting income shock you have a greater buffer with a mortgage of £100,000 and an ISA of £50,000 to use to meet ongoing payments than you do with a mortgage of £50,000 and no ISA.