37 year old - Pension or Mortgage

faketales

Registered User
Messages
106
Personal details

Age: 37
Spouse’s/Partner's age: 38

Number and age of children: 0


Income and expenditure
Annual gross income from employment or profession: €63k
Annual gross income of spouse: €70k

Monthly take-home pay €3,000

Type of employment: e.g. Civil Servant, self-employed Semi State

In general are you: b
(a) spending more than you earn, or
(b) saving?


Summary of Assets and Liabilities
Family home worth €450k with a €260k mortgage
Cash of €40k
Defined Contribution pension fund: €60k


Family home mortgage information
KBC
2.4%
5 Year Fixed. 4.5 years left


Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?



Other savings and investments:

Do you have a pension scheme? Yes

Do you own any investment or other property? No


What specific question do you have or what issues are of concern to you?

I have a bit of spare cash (around 40k) and maybe about €350 a month that I currently save (and don't need for any future bills etc) that I want to start doing something with. We bought a house and got married in the last year so lots of changes...

I think I want to keep about €20k as an emergency fund so really €20k to play with. Options are either pay off some of my mortgage, we can pay €26k within the next 5 years without a penalty or make a lump sum contribution to my pension and up my contribution from 8% to closer to 20%. My work also contribute 12%.

Pension current value of around 60k, future of around 540k but I feel that might be a bit lo if I want to retire early. Currently our mortgage runs to age 61 and I would like to get that don at some stage.

I also have some interest in investing but don't seems like mortgage and pension should be priority.

My thought is the money would be best used in my pension given the relatively low interest rate I'm on and being in the higher tax bracket. That I should try and get as close as I can to the 20%. I have the potential for some extra money and if that happens I could put it to mortgage. Although its tempting to put it on the mortgage as the outcome is guaranteed savings / time.

Am I missing anything?

If I do go down the pension rout are AVC always the way to go? I don't know much about the fees in my work pension. Its with AON.
 
You should probably use spare funds to contribute to pension as you can adjust that downwards easily if kids come (kids are expensive).

Your mortgage is pretty affordable for your age and income level. You should maximise tax-relieved contributions while you can.
 
Pension current value of around 60k, future of around 540k but I feel that might be a bit lo if I want to retire early.
Bear in mind that this 540k figure is most likely a pension provider's estimated future value based on some assumed annual return and is largely meaningless.

Also consider that if you have €350 p.m. spare to contribute to your pension then, after tax relief, this can actually be worth up to c. €580 into the pension pot.
 
Bear in mind that this 540k figure is most likely a pension provider's estimated future value based on some assumed annual return and is largely meaningless.

Also consider that if you have €350 p.m. spare to contribute to your pension then, after tax relief, this can actually be worth up to c. €580 into the pension pot.

Ya I understand it's just a prediction but you got to use something for planning right? Not sure what rate they use. Is there a rate I should use to calculate?

I'm a bit of a sucker for needing to see the numbers in front of me in excel. Would like to compare against mortgage savings by overpaying. I have a calc for overpaying mortgage.

For pension I would need to use the 580 as opposed to 350 ya. Then set it to grow at x rate. Hopefully better than the 2.4% I pay for mortgage.
 
Last edited:
Not sure what rate they use.
It should be stated in your pension statement.
For pension I would need to use the 580 as opposed to 350 ya. Then set it to grow at x rate. Hopefully better than the 2.4% I pay for mortgage.
Well, even ignoring pension investment tax free growth, you're getting a 40% "return" on the pension contribution in the form of tax relief (assuming you're a high rate taxpayer) so you're already well ahead of any "return" on accelerating the mortgage repayments.
 
Option​
Mortgage​
Pension​
Amount overpaid / invested p.a.
€4,200​
€7,000​
Rate p.a.
2.4%​
5%​
Return p.a.
€100.80​
€350​
Comment
Guaranteed​
Not guaranteed​
 
Option​
Mortgage​
Pension​
Amount overpaid / invested p.a.
€4,200​
€7,000​
Rate p.a.
2.4%​
5%​
Return p.a.
€100.80​
€350​
Comment
Guaranteed​
Not guaranteed​
Thank you.

That was pretty simple actually. Makes pension a no brainer really as all it needs to do is beat 1.5% to be the better option.
 
Thank you.

That was pretty simple actually. Makes pension a no brainer really as all it needs to do is beat 1.5% to be the better option.
Where do you get the 1.5% from?
Edit: oh, €7k x 1.5% = €105 I guess?

The pension option already far outstrips the mortgage option by virtue of the 40% (for a high rate taxpayer) tax rebate that boosts the original contribution.
 
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