Mortgage or Pension

[Mercenary Keyboard Warrior]

its not though is it, its been consistently shown that value for money does not come in the form of pensions and if anything its going to get worse throughout the future (people living longer, expenses increasing , less to save etc) even last year from june to december payout rates dropped by 10%, a trend that is continuing throughout this year whilst the BofE happily churn out more money.

Spread your risks, always.

A short term focus on your mortgage is not necessarily a bad thing, if 60% LTV will get you a better rate/better deal (its not JUST about the rate) then stopping conts for a while isn't too bad.

Assuming your a basic rate tax payer then you can bump the conts back up in a few years and be probably hardly any different financially then if you carried on now. If your a higher rate tax payer then pensions are even more tax efficient as you can reclaim the 40% (limited to the tax you actually pay at 40%). So you may want to keep paying to be able to reclaim that 40% tax now, again not an issue if you earn a fortune and pay loads and loads of 40% tax each year.

 

[booyaka]

its not though is it, its been consistently shown that value for money does not come in the form of pensions and if anything its going to get worse throughout the future (people living longer, expenses increasing , less to save etc) even last year from june to december payout rates dropped by 10%, a trend that is continuing throughout this year whilst the BofE happily churn out more money.

Pay out rates?? What is that terminology from?

Also judging a pension return over 6 months is a pointless exercise. You invest in a pension for 30/40 years - why pick 6 months in that 40 years and base your assumption that pensions are rubbish on the back of such a short time-scale as that?

Name another investment that gives you 20% or 40% tax relief on every premium you pay?

People who slate pensions are generally mis-informed by someone who has told them "my pension was crap", or generally don't have a clue about pension.

Pensions produce decent returns over the long term if well looked after, invested sensibly and are invested in up to date pension contracts.

 

[Mercenary Keyboard Warrior]

its easy - mortgage.

Pensions are worth absolutely nothing.
My gfs family lost most of their pension in the crash, their house is pretty much their backup option and its turned out to be a decent investment that will get them through the rest of their lives comfortably.

They probably found it was forced to be revalued due to much lower expectations on returns, just the same as the endowment bubble burst when people allowed themselves to be convinced double didgit growth could happen every year into perpetuity.
When they found it didnt they found they were not going to get enough at the end of their term to pay off the mortgage. Most people I know who took out endowments were often given spin about having money for a car etc as well. They never asked why in that case could they just not pay less in, it was pure sales thats all.

 

[Mercenary Keyboard Warrior]

Pay out rates?? What is that terminology from?

Also judging a pension return over 6 months is a pointless exercise. You invest in a pension for 30/40 years - why pick 6 months in that 40 years and base your assumption that pensions are rubbish on the back of such a short time-scale as that?

Name another investment that gives you 20% or 40% tax relief on every premium you pay?

People who slate pensions are generally mis-informed by someone who has told them "my pension was crap", or generally don't have a clue about pension.

Pensions produce decent returns over the long term if well looked after, invested sensibly and are invested in up to date pension contracts.

Quite.

 

[Mercenary Keyboard Warrior]

No, its not possible.

Well it is. I believe if you have paid in for less than 2 years you can withdraw from some schemes.

I don't know anyone stupid enough to do it though so haven't actually seen it happen.

 

[booyaka]

Well it is. I believe if you have paid in for less than 2 years you can withdraw from some schemes.

I don't know anyone stupid enough to do it though so haven't actually seen it happen.

2 year rule only applies to company pension schemes that you paid into and it's a refund of your own contributions less tax and NI. The employer contributions (if any) are lost if you withdraw.

Otherwise the earliest you can access your pension is 55 under the current rules. 25% max lump sum and the rest as an income.

 

[Mercenary Keyboard Warrior]

2 year rule only applies to company pension schemes that you paid into and it's a refund of your own contributions less tax and NI. The employer contributions (if any) are lost if you withdraw.

Otherwise the earliest you can access your pension is 55 under the current rules. 25% max lump sum and the rest as an income.

I thought I was company schemes but wasn't sure hence my vague reply as I didn't want to misinform, thanks.

 

[Mercenary Keyboard Warrior]

My personal view is people have silly expectations on pensions and then they are disappointed when reality strikes. Its easier to hit out at the pension than admit they had completely unrealistic expectations.

Eg pay in £30 a month for 30 years and expect a £1000 a month pension at the end of it.

 

[D.P.]

My pension has returned 12% in under 8 months, if I then throw in the company match then the rate of return is ridiculous (company matches 35% atm, 50% next year, then to 75%).
And My companies pension is not even that great. My GF gets matched at 150%. She is throwing in about $500 a month, her employer $750. her pension also appreciated well over 10% in the last 2 quarters.

Let me know when you find any interest rate, be it savings or mortgage, that hit 75-150%!

 

[Aloreth]

THis comes with the standard caveat of seek financial advice etc.....

Pension schemes are very tax efficient when you are a higher rate tax payer, a good rule of thumb is to mitigate your higher rate tax liability completely if you only earn slightly into the higher rate band (say up to £60k).

Pension schemes are also very efficient if your employer is making contributions to the scheme for you, look at the minimum contribution that you can put into a pension scheme that results in the more that your employer will put in.

It is likely that lending rates are going to rise so it would make sense to make overpayments to your mortgage (so long as there isnt a penalty to do so) whilst your rate is fixed. I can give some worked examples re tax relief on pension schemes if it would be of interest

 

[Duff-Man]

It depends on the pension.

For mine, I pay 6.5% of my salary, and my employer adds "13%" (double my contributions). Given that pension contributions are tax free, I'd struggle to justify stopping payment s in order to repay a few thousand extra on a mortgage.

Of course, if I croak before 65 those pension contributions are worthless!

 

[platypus]

I'm tempted for one of us to cancel our pensions and plough that into the mortgage but equally mindful of the future, all this planning makes me feel old.

Might just halve pension payments and put that into the mortgage.

It is likely that lending rates are going to rise so it would make sense to make overpayments to your mortgage (so long as there isnt a penalty to do so) whilst your rate is fixed. I can give some worked examples re tax relief on pension schemes if it would be of interest

Please do.

 

[OpenToSuggestions]

I do not own a home, but am a starting a job next week with a big UK manufacturer.
They have a pension scheme and match what I pay in up to 6% - I genuinely have no idea if it is worth it or not. I am 24 and when I retire I will be about 75 years old and the pension probably won't be worth much.
I starting to save towards a house. Am I better ploughing the pension money into a house deposit?
Unless I hear a convincing arguement then I will be paying into a pension.

 

[taB]

I do not own a home, but am a starting a job next week with a big UK manufacturer.
They have a pension scheme and match what I pay in up to 6% - I genuinely have no idea if it is worth it or not. I am 24 and when I retire I will be about 75 years old and the pension probably won't be worth much.
I starting to save towards a house. Am I better ploughing the pension money into a house deposit?
Unless I hear a convincing arguement then I will be paying into a pension.

Personally, if they match to 6% I would take the 6% but no more than that at 24.

 

[grumpysculler]

I do not own a home, but am a starting a job next week with a big UK manufacturer.
They have a pension scheme and match what I pay in up to 6% - I genuinely have no idea if it is worth it or not. I am 24 and when I retire I will be about 75 years old and the pension probably won't be worth much.
I starting to save towards a house. Am I better ploughing the pension money into a house deposit?
Unless I hear a convincing arguement then I will be paying into a pension.

Pay into the pension (6%). Nothing beats free money.

The best way to ensure that your pension is worth nothing come retirement is failing to put enough into it. The earlier you start, the more the gains compound.

 

[Mercenary Keyboard Warrior]

I do not own a home, but am a starting a job next week with a big UK manufacturer.
They have a pension scheme and match what I pay in up to 6% - I genuinely have no idea if it is worth it or not. I am 24 and when I retire I will be about 75 years old and the pension probably won't be worth much.
I starting to save towards a house. Am I better ploughing the pension money into a house deposit?
Unless I hear a convincing arguement then I will be paying into a pension.

Those levels of conribution would set you up for a pension of approx 50% of your wage you earn. This is the goal for a lot of people as its a realistic amount to sustain a similar level of living to what you have been used to whilst at work.

Nothing beats some proper financial planning advice however as mentioned elsewhere.

To be honest if the 6% makes the difference on being able to, or not able to affort a house your really cutting it fine anyway.