-
How are you earning at the moment? If you're through a limited, pension contributions have the additional benefit of reducing corporation tax and NI contributions.
Other than that, it's all about what realistic but unknown returns you can make on a pension fund (less costs), versus how much you can reduce a (known-ish) mortgage, and your relative risk appetite.
Any reason why you can't do both to some extent?
NotThamesWater-
Any reason why you can't do both to some extent?
This is what I'm doing. I increase how much I pay into the pension every year by 1% and anything left over at the end of each month goes into paying off the mortgage. The hope is that the mortgage will be paid off by the time I retire, but if it isn't, I can use the tax free lump sum to pay off what's left.
-
How are you earning at the moment? If you're through a limited, pension contributions have the additional benefit of reducing corporation tax and NI contributions.
PAYE. I have done the contracting dance.
Other than that, it's all about what realistic but unknown returns you can make on a pension fund (less costs), versus how much you can reduce a (known-ish) mortgage, and your relative risk appetite.
I'd imagined the tax free nature of pension contributions as part of salary sacrifice and the 25% tax free nature of pension withdrawal somewhat negates the 'will it return more than mortgage debt will cost you' equation. Perhaps I'm wrong, I haven't done the math, just an assumption.
Any reason why you can't do both to some extent?
No, but I don't have a whole lot left over at the end of the month, so it would be spread thinly.
andyp
Howard
Opinions please, qualified or otherwise.
I probably have about fifteen years of paid work left in me
We owe a good chunk on the house that probably won't get paid off before I/we retire
We have children
I could overpay more in to the mortgage, or I could crank up my pension contributions. Or do something else.
In the past I have not focussed on Pension, as the benefit felt a long way off and because the rules can change for the worst. I feel less certain of that now.
With that in mind, it feels like it would be more sensible to crank up pension contributions for the tax benefit and that sweet tax free lump sum with which you then pay off the mortgage, rather than paying down the mortgage gradually with money that's been taxed.
What say you?