Pay down debt or maximise pension contributions

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Are there any calculators or ways to determine if one should pay down debt or maximise their pension contributions?

In our late 30’s and are in year 3 of a 10 year term @5.95% (variable) with ~€140k outstanding.

I’m in a position where I can maximise my AVCs or overpay the loan.

Is there anyway to determine which is the right thing to do?

Is there a general rule of thumb i.e pay into pension if debt is @<7%. Prioritise clearing debt if interest rate >7%

Thanks all
 
I think one way of looking at it is to compare the interest rate (5.95% in your case) to expected investmet returns in pension.

If interest rate is higher or similar to expected return then you should pay down debt. In your case with that rate I would prioritise paying off the debt.

My mortgage rate is 2.1% so i dont overpay that and instead max pension.
 
That is a very high rate of interest and it would limit your flexibility in terms of future borrowing, trading up, etc.

So paying down the debt is much more important than maxing your pension.

As you have 25 years to go to retirement, you have plenty of time to contribute to a pension.

By clearing the loan earlier, you will have more money later to put into a pension.

Brendan
 
In my opinion the original post/query probably really needs a Money Makeover analysis in order to offer useful/accurate feedback.
For all we know there could be other significant personal/financial criteria that might influence how the question is addressed?

Key Post - Basic information required for the "Money Makeover" forum

It can be difficult, but please try to use a meaningful title in your thread For example "27 year old with mortgage arrears". You will get a much better and much more coherent answer if you give as much information as possible in your first post. For example, if you give your mortgage rate, it...
www.askaboutmoney.com
 
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