Suspend PRSA contributions to increase savings

G

GetMoving

Registered User
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Age: 34
Spouse’s/Partner's age: 27

Annual gross income from employment or profession: €53k
Annual gross income of spouse: €50

Type of employment: e.g. Civil Servant, self-employed: private sector marketing

Other income: rent-a-room income €350-700 per month, depending on whether 1 or 2 rooms are rented. Generally €700 each month.

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

Rough estimate of value of home: €200k
Amount outstanding on your mortgage: €250k
What interest rate are you paying? NIB LTV Tracker - ECB + .8%

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?

Savings and investments: €2k Rabo Regular Investor, €1.5k Halifax, €1k Ulster Bank, €600 Credit Union, NIB €1.5k.

Do you have a pension scheme? TriBond with Zurich worth ca. €25k from previous job. Currently a PRSA with Irish Life worth ca. €20k, contributing €850 gross each month.

Do you own any investment or other property? no

Ages of children: none

Life insurance: Mortgage Protection

Monthly income:
After tax salary: €2,650
Rent-a-room: €350-700

Monthly outgoings:
Mortgage €1,150
Household bills, petrol and food €500
Car & house insurance, mortgage protection, car tax, holidays €600
discretionary spending €500
Before tax PRSA contribution €850
Savings €200-500

What specific question do you have or what issues are of concern to you? I haven't built up any savings, aside from an emergency fund of around €7k. Should I stop contributing to my PRSA for a year or so, with a view to getting savings together for medium term events like a wedding, deposit on a house etc.
 
It depends. At the moment you are in negative equity. I assume these figures don't include your partners savings? If your partner were to contribute and help lower the mortgage then I don't see any need to stop PRSA contributions. In fact there is no reason now why you should suspend them as you are able to pay your mortgage and can put away some money also each month.
 
Yes, you should stop contributing to a PRSA.

While the negative equity is not very relevant to you at the moment, if you do decide you want to move house at some later stage, an untouchable pension fund will be of little use to you.

I would set an interim objective of building up an accessible savings pool equivalent to the negative equity on your mortgage - at the moment that is €50,000.

You should build up this savings in a deposit account. You should not pay off your mortgage as the interest you are being charged is less than what you would get on deposit.

It will take you some years to achieve this interim objective. You can review your options when that is achieved.

Brendan
 
Agreed there is no point in having pension benefits in the future which prevent you from doing thing now you wish to do like move house. you should shut the gap between savings and negative equity amount.
 
I agree with stopping your pension contributions.

The civil servant part of your couple has a really great pension scheme anyway - almost 'free' compared with the private sector. So you're sorted.

The real issue is that you have no short term cash saving for an emergency.
The general rule is that should have enough cash to survive a several months (some say 3 month, some say 6 months).

In your case, however, I agree with the other replies that you need to have your negative equity in cash on hand in case you want to sell and move instead of renting and moving.
 
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