Pension flexing prior to remortgaging

bainbridge

bainbridge

bainbridge

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Joined
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Bristol
Hi all

I'm currently paying 5.5% of my salary towards my pension and my employer is contributing 15%

I can flex my contribution at any time.

Our five year fixed rate mortgage ends in May 2025.

In my layman head it makes sense to flex my pension contribution down to nil to maximize my take home pay and therefore maximize my borrowing potential.

Then, once the mortgage is all done, flex it back up.

Is there any sense to this?

If so, when should I do it?

6 months before May 2025, or now?

Thanks :)
 
Pensions don’t apparently affect your borrowing as it’s not seen as a commitment like credit. Eg if you find yourself needing extra cash you can just stop the pension.

Essentially most lenders look at gross, not net income.

I had a chat with my mortgage broker today about this very thing funny enough.
 
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If you are on salary sacrifice and in the higher tax bands... personally I am... I would rather put it into my pension and get the tax and NI relief on it that pay off my mortage.

Just do the maths, for every pound you take from your salary over the 54k, you will get tax 40% and NI 10%, that's 50% aka 50p you can actually use to pay off you 3-6% mortage..

Even at the standard tax band, it's still 20% tax and 10% NI.. so you get to pay 70p from every pound you don't put into your pension.

If you're not on salary sacrifice, you can setup a SIPP and claim the tax but not NI back.

The kicker is, when it's time to take the money out of your pension at a lower tax rate than when you put it in.

Your pension should be your biggest asset pot imho, unless you have retal estate that you rent out, in which case it should pay for itself.
 
Thanks folks for your responses.

Admittedly 5.5% isn't that much difference but I figured every little helps.

The pension not counting regarding affordability does make sense actually because I ran through a mortgage questionnaire for a firm that my employers are affiliated with and they didn't ask about pension contributions so evidently aren't interested.
 
Most people’s pensions come out before it hits their accounts..

They will see what’s what when they ask for your bank statements and payslip.

During the affordability meeting they will query any large amount that are coming out to see if it’s a fixed/forced outcome like a loan or a flexible/optional outcome.

I have loads coming out of my payslip for company shares and pension, then I have loads coming out of my account, it just needs to be explained away.. I.e. if they see an amount going to vanguard they may as what sort of account it’s getting paid to, in case you need to access the funds because of job loss and can’t because it’s a SIPP.
 
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