Pay into Executive pension or contribute to mortgage

F

Familyman77

Registered User
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Evening all, my employer has paid into an executive pension plan of my choice for me for the last 2 years ( 45k year 1 and 55k this year ) . The amount each year will be based on profit share so will change each time but should average around 25k. I've the option to pay tax ( higher band ) and take the money through payroll. I've 17 years left on the mortgage of 185000 ( 3.15% save) and I'm 42 so theres 25 years of paying into the pension. Was I right to pay into the pension or should i have " cashed out " and over paid the mortgage. It's something that keeps niggling at me
 
1) How much do you have in your pension fund at present?
2) Do you have any other savings outside the pension fund?
3) I am assuming you are single with no dependents.
4) What is the value of your home?
5) What is the likelihood that you will trade up and when might that happen?
6) How safe is your job?
7) What basic salary are you on?
8) Expected annual bonus: €25k
 
Brendan

Answers as follows

1, 95k . I have another minimum paid CWPS pension which comes out of wages. Will be worth 120k at retirement
2, 30k savings
3, married, 4 year old and 7 year old boys. ( 7 year old has autism so I also have his future in the back of my mind )
4, 350k
5, doubt we will look at trading up.
6, private sector construction, fairly safe and 15 years with employer
7, take home €1100 per week
8, expected 20 to 25k. Last 2 years were good years

Thanks
 
My view is that one should prioritise the mortgage if it's a big mortgage relative to your salary and relative to the value of your house. In other words, aim for a comfortable mortgage.

So your gross salary is about €100k per year. So the mortgage is about twice your salary.

You have a mortgage of €185k on a house worth €350k - again about 50% Loan to Value

This is at the inbetween level. The mortgage is not so high that paying it down is a priority. Yet, it's not so low that you should be prioritising your pension.

So it's a fairly close decision.

But with a pension fund of "only" €95k at age 42, I think you should be boosting your pension fund.

You are knocking €8k a year capital off your mortgage each year as it is.

The only thing you might consider is getting the LTV below 50% as this may well be the level at which the best mortgage rates are available.

Brendan
 
3.15% is a very high mortgage rate.

You should ask your lender to reduce the rate or consider switching to Ulster Bank or KBC to avail of the 2.2% rate.

This would save you about €1,800 year in interest.

Brendan
 
Thanks for the info Brendan. We are part of the cohort so would expect about €30k to come off the mortgage in due course . This will presumably push it more in favour of concentrating on the pension fund . Could we do with having more in readily available savings do you think. I can put AVCs into the CWPS so should I consider that over using savings to over pay mortgae
 
Further to my previous query following the AIB redress and a small overpayment my mortgage is now 150k . With the cheque for the interest still due of approx 9k should I again overpay or make an AVC and avail of the higher band tax relief
 
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