Overpay Mortgage or chuck in to pension ?

[gazapc]

mike9009 said:

I agree, I was somewhat jesting and musing what the right answer is? Therefore, I have taken a stance of increasing my pension and paying the mortgagee off in a 50/50 split. (I also have six months pay in a crappy cash ISA).

Plenty of accounts paying much higher interest than a cash ISA! I had around 20k just before Christmas earning between 6-3% (now most of it is on a house deposit so killed the 3&4% paying accounts). Also from April you get a savings interest tax free allowance

[mike9009]

Tony Angelino said:

Sorry to butt in, but I have a question on similar lines. I am about to look at remortgaging as I have come to the end of my fixed term and have hopefully sneaked under the next LTV threshold to enable me to improve my rate and reduce my term rather than reduce my payments. I have a similar question about pensions and/or mortgage payments. Would I be better looking to reduce my term and hammer away at the mortgage, should I stuff a few extra quid into the pension and do I need a financial advisor (thought my amounts where too small to warrant the cost)?

Some background, just an 'average Joe' really:

Higher rate tax payer,but not by a massive amount.
Pay 4% to work pension matched by employer, maximum is 5% for employer matching. Been paying about 4 years only.
No plans to move.
10 year old child.
40 years old.
17 years left on mortgage.

Also, I don't do a self assessment, do I need to do one for any reason?

thanks lads.

Tony,

As demonstrated earlier in this thread, I am no expert.

If there is extra cash available from remortgaging, I would look at burying this in your pension. You have only been paying in for four years, which will already limit your final pot. The amount being paid in now is fairly meagre and being a higher rate tax payer (for the time being) gives you the most bang for your buck. Low stock market at the moment may also bring longer term gains.

Mike

[gazapc]

Tony Angelino said:

Pay 4% to work pension matched by employer, maximum is 5% for employer matching.

In my mind this is an obvious change to maximise returns. For a relatively small difference to the take home you can double your 'investment' due to the 'free' money from your employer (plus the tax advantage). Interested to hear any other opinions though.

[CaptainSlow]

gazapc said:

Tony Angelino said:

Pay 4% to work pension matched by employer, maximum is 5% for employer matching.

In my mind this is an obvious change to maximise returns. For a relatively small difference to the take home you can double your 'investment' due to the 'free' money from your employer (plus the tax advantage). Interested to hear any other opinions though.

Yes, I'd certainly be maxing out the Employer matching.

[Ozzie Osmond]

CaptainSlow said:

Yes, I'd certainly be maxing out the Employer matching.

^^ This. If it's affordable the employee should always try to draw the maximum available matching contribution from his/her employer.

[Tony Angelino]

Thanks, will look to action this increase as soon as I can. Anybody advise if I need to look to doing s tax return? Been looking online and i can't seem to find any clear advice.

Thanks

[CaptainSlow]

Tony Angelino said:

Thanks, will look to action this increase as soon as I can. Anybody advise if I need to look to doing s tax return? Been looking online and i can't seem to find any clear advice.

Thanks

If you increase your contributions via payroll then no. If you make additional contributions from your taxed take home salary you will need to do a return or write to HMRC to recover the higher rate relief. Keep in mind there is speculation the higher rate relief may be restricted, we'll find out more next month.

[anonymous-user]

I am in a similar situation, does it matter whether my pension scheme is a company one as to whether I make over payments or should I try and clear my mortgage.

I currently pay the minimum of 4% and my employer pay appx 12,5%; should I be paying the maximum I am allowed (I think it is 6 or 8%), I believe the matched rate cannot be higher only my contributions.

27 and I have been in the scheme since 2007, I want to ensure I am maximising the pot whilst I am young and with this employer.