Up the AVCs or pay down mortgage

David_Dublin

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529
Age: 47
Spouse’s/Partner's age: 46

Annual gross income from employment or profession: 105k
Annual gross income of spouse: 21k

Monthly take-home pay: 7k (combined)

Type of employment: e.g. Civil Servant, self-employed: both private, me full time, her 20hrs a week

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

Rough estimate of value of home: 875k
Amount outstanding on your mortgage: 140k tracker (580 per month), 10k SVR AIB (100 per month)


Other borrowings – car loans/personal loans etc: None

Do you pay off your full credit card balance each month? Yes

Savings and investments:
We have 210k savings (some via inheritance), all readily accessible, deposit accounts

Do you have a pension scheme?

Yes, I contribute 4%, this is matched by employer. This is something I want to look at potentially increasing.
I also have a pension from previous employer, current value > 800k, buy out bond.

Do you own any investment or other property?
No

Ages of children: 10 and 13

Life insurance: yes, thru work and a separate mortgage one

What specific question do you have or what issues are of concern to you? Hope I can get some answers to the below.

Question 1: Now & Next - up the AVCs or save for project?
We have up to 2k excess per month. Should I pump as much of the 2k into pension as possible? Or should I save some towards refurb job we plan to do in the next year or two? Savings wont completely cover this, may need to borrow 100k on top of 210k savings, would intend doing by re-mortgage.

Question 2: At 50 - access 200k from Buy Out Bond, or keep in pension until I need it?
I can access up to 25% (max 200k) of buy out bound at age 50. Should I plan to access that in full at 50 and pay down SVR and Tracker? Then use the cash this frees up to pay as much as I can into AVCs into my 50s? What's the "right" thing to do? Should I leave as much of it in the pension as long as I can, maybe only try pay down the SVR element, and keep the cheap tracker?

Question 3: Longer Term
Longer term goal is we retire circa 60. This probably has overlap with Question 2.

What suggestions would people have to be in as good a position as I can. Presumably put as much into pension as possible. But should I pay down tracker with the buy out bond, or any excess savings?

We don't live oppulent lifestyle, but would like to be able to travel a bit, help the kids out with a car or education etc. We both have ageing parents, its reasonable, given their situations, that we could expect some amount of one off income from them in the coming years, up to 300k or more in total, after taxes. I hate adding this but it is the reality.
 

Sarenco

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6,264
I think you are over complicating things.

Just pay off your mortgage from your savings and make the maximum tax-relieved pension contributions for 2019 and then going forward.

Leave the Buy out Bond well alone!
 

David_Dublin

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529
What about the refurb job in the next 12 months, should I not keep the tracker for that, better have a tracker for most of the borrowing, than pay of cheap funds, only to borrow more expensively down the line.
 

Sarenco

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6,264
Sorry I somehow missed the part about the refurb job.

Could you not hold off on the refurb until you have enough saved up to complete the job?

I would be inclined to leave the BOB alone if at all possible.
 

David_Dublin

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529
OK, good to know keeping the BOB intact should be a prime consideration.

Can't really hold off on the refurb too much longer, its been 10 years already!

If the two choices are borrow or release from BOB, max 100k, what would you think?
 

Gordon Gekko

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4,399
So the refurb will cost €310k, you have €210k, you owe €150k (€140k tracker plus €10k SVR), and you can save €24k a year?

- I wouldn’t go near the Buy Out Bond
- I’d keep saving to add to my €210k and get it as close to €310k as possible
- I’d borrow the rest and then aggressively pay it back plus the SVR as quickly as possible
- Then I’d leave the tracker run its course and max out my AVCs
 

David_Dublin

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529
So the refurb will cost €310k, you have €210k, you owe €150k (€140k tracker plus €10k SVR), and you can save €24k a year?

- I wouldn’t go near the Buy Out Bond
- I’d keep saving to add to my €210k and get it as close to €310k as possible
- I’d borrow the rest and then aggressively pay it back plus the SVR as quickly as possible
- Then I’d leave the tracker run its course and max out my AVCs
I'd like to understand the third point, about paying the SVR and new borrowings back quickly, rather than increase AVCs.

The SVR is relatively cheap, why not max out AVCs, or increase AVCs significantly beyond my current 4% contribution?

Aren't the tax benefits of the pension pretty compelling, or compelling enough to let the SVR repayments tick over, while getting upping the pension contributions?

Just wondering if its a cut and dry thing? Or maybe a psychological thing re clearing debts before doubling down on pension?
 

Gordon Gekko

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4,399
Well, the extra debt you take on will probably be even more expensive, so it should be cleared. Plus you’ve €800k in a Buy Out Bond and you’re only 47 so with AVCs the Standard Fund Threshold (i.e. maximum pension fund) is very relevant. And an SVR isn’t that cheap.
 

David_Dublin

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Messages
529
Well, the extra debt you take on will probably be even more expensive, so it should be cleared. Plus you’ve €800k in a Buy Out Bond and you’re only 47 so with AVCs the Standard Fund Threshold (i.e. maximum pension fund) is very relevant. And an SVR isn’t that cheap.
OK, thanks for that, much appreciated, makes sense.
 
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