Additional Mortgage Payment Or Pension?

[ilovemarkb]

Hi there. I have seventeen years left on my mortgage. would it be better to pay £200 a month into my pension (nhs (the new one) or better to pay an additional £50 per wk off my mortgage. I only have about 3 yrs of nhs pension. Thanks

[ToraToraTora]

better to pay it into your pension as it will be tax deductable.

[fiction-factory]

Unless you have a very low interest mortgage I'd overpay the mortgage for now

[fiction-factory]

Yes, the pension contributions are tax deductible but the eventual income benefits will be taxable (apart from any tax free lum sum element). Ideally I'd do both, even if it means cutting back on other things. It also depends though on how long it will be before you stop working/paying into your pension

[Peter Pedant]

there must be someone at work who can advise
( since I used to do this )

I think it is tax deductible but there may be employer cont

maximising your NHS pension is always a good idea -well done - I cdnt get many people to do that ( for some reason )

[Ryzen]

Pay the mortgage off early.

[Peter Pedant]

hold it
we all had mortgages and maximised our pensions.....

so yes as ever go for the pension....

[fiction-factory]

I assumed, maybe wrongly, that the extra pension contribution is like AVCs and won't attract a matching element. It's probably a DB based one linked to the stock market rather than one linked to salary. If the employer matches it then I'd do as much as possible- and try to pay off some mortgage.
But it all depends on the detail- like your mortgage rate, tax rate (if on 40% put in pension), employer's contribution if any.

[fiction-factory]

we all had mortgages and maximised our pensions.....
I paid off mortgage as quickly as possible (10% overpayments max allowed each year I think) whilst paying in as per pension scheme rules and adding into pension AVCS anything left over. Once interest only mortgage was paid off 10 years or so early i had lots free to pay into AVCs.
Every case is different though

[Peter Pedant]

my memory tells me there were two recent changes,
2008 and 2015
and it is a career average ( db ) pension
but still very good
find out from work if they are going to change it again
( perhaps yes) in which case it makes sense to maximise it

[fiction-factory]

Yes, sorry, PP I meant DC (not DB) of course linked to stock market. - but if it is DB then go for that.
Good question ilovemarkB- difficult to answer. I'd actually hedge my bets if unsure and do some of both

[ilovemarkb]

Thankyou very much for reply's. Nhs will match my contribution. £200 is the minimum I can pay. Cant afford to pay towards both. Hoping to retire in 16 years (when I am 67)

[ToraToraTora]

yep if they are matching, go with the pension.

[Hymie]

If the NHS will match your pension contribution in to a DB scheme – you should pay in up to the allowable limit that the NHS will match.

Paying off the mortgage instead will not match this return, unless you are paying some extortionate interest rate.

Ignoring any changes in value due to investment gains, come your retirement you will have a pension pot of twice the value compared with had only you been paying in. You can then take 25% tax free, which will in effect be 50% of your contributions.

[fiction-factory]

Okay- so pension rather than additional pension. Yes, if matched, definitely go for that. The amount salary related DB pots can grow to after 20-40 years is mind boggling. My last quote for my pension pot said it was worth quite a bit more than I'd earned in the 35 years I'd worked there. But once you are paying in the minimum (and remember the £200pm will only seem like £150pm net pay) add more whenever you can if they match it. Once they stop matching it then paying off some of the mortgage earlier is worth doing if you have more spare at some stage

[ilovemarkb]

Thankyou all so much!! pension it is then xx

[CrapAtCryptics]

Can you do a bit of overtime and do both.

[Peter Pedant]

oh if there is employer matching ( please check !)
then go for the pension
no contest so good that I ...... dont want to tell you how good in public

EVEN if there isnt ( matching ) then it is still good ( but clearly not as good )
erm .... you DO contribute already dont you?

[Peter Pedant]

// Yes, sorry, PP I meant DC (not DB) of course linked to stock market.//

yes no dont be sorry - the gt secret of the NHS pension pot is that....there is no NHS pension pot ( Aneurin Bevan 1948)

it is pay as you go, and the conts from the punters are spent as tax in the financial year in which they are contributed

at present the conts outweight the pension paid to people like MEEEEE ! by around £2bn a year - and always has done since 1948 that is 70y

the cross over point ( conts need topping up for the pension) was to be around 2026. You will recollect TTT squawking like a girlie over this prospect - blimey politics of envy blah blah blah - o god like a Brexit thread but more foul mouthed. Mother of God. Think screamer Fielding in one of those Haunted programmes

and so it was changed 2015 to a career average scheme
and the three old-old ( -2008) old ( 2008-15 ) and new post 2015 were all run in trandem ( tandem only three ) - govt computers could manage it

ANS SOOOOOO - it is not stock market based cuz there is no pot

My superior knowledge got me advising the other employees on their choices over the changes ( union kiss kiss not opposition)