# Pension versus Mortgage Overpayments



## rmelly (20 May 2008)

On a number of posts I have seen people say that you should focus on mortgage rather than pension.

I am single, early 30's currently paying 12.5% into defined contribution pension (have been for 5 or so years incl. previous employer) and plan to start overpaying my 35 year mortgage by €200 per month.

I'm aware of the PAYE/PRSI relief for pension contributions and benefits of overpaying mortgage.

In general which should I focus on - the pension or the mortgage? I am 'happy' with my level of debt and ability to service it, and am probably more concerned with boosting pension fund (value of approx 75k currently after market hiccups).

On top of these I expect to be saving approx €700 - 800 per month after annualising/budgeting for all costs including annual contingency for house repairs etc etc.

Should I increase the 200 to 250 or even 300? Or increase pension further? Employer pays 5%, so current total is 17.5%.


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## ClubMan (20 May 2008)

rmelly said:


> On a number of posts I have seen people say that you should focus on mortgage rather than pension.


Most people qualify such comments somewhat. For example:


> [FONT=Verdana, Arial, Helvetica, sans-serif]*FOUR SITUATIONS          WHEN A PENSION FUND MIGHT NOT BE ADVISABLE
> 
> *[/FONT]       [FONT=Verdana, Arial, Helvetica, sans-serif]IF YOU AREN'T          CONTRIBUTING THE MAXIMUM TO YOUR SPECIAL SAVINGS ACCOUNT
> The Special Savings Account is more tax attractive than contributing to          a pension. Don't contribute to a pension if you are not putting in the          maximum €254 per month into your SSA.[/FONT]
> ...


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## rmelly (20 May 2008)

Thanks, I didn't mean to imply otherwise.

I'm more interested in the logic of this though. In what way is 'anything over twice your salary is uncomfortable'?

Yes, my repayments are approx 1/3 of my take home salary, but I had been saving almost twice that consistently for 2 plus years (living at home) without a massive drop in standard of living.

I also have sufficient savings to cover at least 6 months of no income.

Why should I feel uncomfortable?


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## ClubMan (20 May 2008)

rmelly said:


> I'm more interested in the logic of this though. In what way is 'anything over twice your salary is uncomfortable'?


That is just _Brendan's _personal rule of thumb. There is no specific science to this. I think the general thrust of his comments should be clear though.

It sounds to me like you can afford to both increase your pension contributions towards/to you age related tax relief limit *AND *make accelerated capital repayments on your mortgage. If so why not do both?


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## Darando (20 May 2008)

Have you calculated how much your mortgage repayments will be shorten by if you over pay by €200?


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## rmelly (25 May 2008)

A €250 will shorten by 10 years.


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