Overpay tracker v AVC

[Marty39]

Looking for a bit of advice please.
Myself and wife are both civil servants for past 20 years, we are both job sharing to mind children since 2008 (not sure how this impacts pension).
We are both aged 40. Gross pay for each of us is in the region of 28k-29,500k.
We have 3 kids aged 2,6,10.
We have been saving 300 a month to Civil Service credit union for life expenses and kids college fund if needed.
We have 45k in Credit Union.
We have no significant other savings (3-5k in day to day account).
We have no credit cards or outstanding loans.
We have a tracker at 1.1% with 19 years left to pay. House value 350k and 175k left on mortgage. 35 year mortgage taken out in 2004.

Things are ticking along fine but recieved a letter from credit union informing us that they have capped savings balance at 50k so its a good time to look at how we are doing.
I had an AVC with New Ireland which i contributed to from 2000-2008 but stopped as I wanted to build up a savings fund for future and I wasn't getting 40% relief anymore.
What would be the best use of the 300 a month now that we will have to stop the credit union savings? I am concerned that paying into a pension will only provide 20% tax relief now but it's likely that when I retire I will be on the higher tax as we will both be likely back working full time.

Paying 300 extra a month will knock 5 years off the mortgage is that perferable to 300 into AVC's?
Many Thanks
Mart

 

[Brendan Burgess]

I wasn't getting 40% relief anymore.

it's likely that when I retire I will be on the higher tax as we will both be likely back working full time.

Hi Marty

These are the key points.

I don't see any point in contributing to a pension now when you are getting 20% relief.

Save up your money and contribute to a pension when you are getting 40% relief on it.



Brendan

 

[Brendan Burgess]

We have a tracker at 1.1% with 19 years left to pay. House value 350k and 175k left on mortgage

If you have no plans to trade up, then you should pay down the tracker.

As you are both public servants, you don't need a rainyday fund that high.

Is the Credit Union paying a dividend on your shares? If so, at what rate?

Even if you are not getting any dividend, it's not really costing you very much to borrow at 1.1% to put money on deposit at 0%.

€45k @1.1% a year is only €500 a year.

My own gut feel would still be to pay the lump sum or most of it off the mortgage.

Then overpay the mortgage.

When you are a bit closer to high education costs, you will have much lower mortgage repayments and you will be able to build up your savings pot again fairly quickly.

Brendan

 

[Marty39]

Thank you Brendan.
The Credit Union dividend is 0.20%.
So pay the money in the Credit Union off the mortgage balance. Do I just ring and tell them in the bank I want to increase my mortgage payments by 300 a month and pay a lump sum of 45k off the balance or does new contracts have to be drawn up? The mortgage overpayment calculator shows that I will be paid off 9 years quicker and 11k in interest savings which is significant.