Pension payment or mortgage?

F

Familyman77

Registered User
Messages
157
Age: 43
Spouse’s/Partner's age: 37

Annual gross income from employment or profession: 65k
Annual gross income of spouse: n/a homemaker

Monthly take-home pay €4750 ( this figure includes ICTC tax credit €3300 per annum, €5000 net per annum bonus paid weekly )

Type of employment: e.g. Civil Servant, self-employed
Private Sector construction industry

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

Keeping savings steady at 20k, 8k in daily spending account ( which include holidays etc ) and then overpaying approx €500 a month on mortgage

Rough estimate of value of home
€350000
Amount outstanding on your mortgage:
€130000 17 years left at €815 per month ( plus €81.50 PPI )
What interest rate are you paying?
2.75% <50% LTV

Other borrowings – car loans/personal loans etc

No other debt

Do you pay off your full credit card balance each month?
N/A
If not, what is the balance on your credit card?

Savings and investments: €20k in CU

Do you have a pension scheme?

Work one is minimum industry requires I pay €20 and work pays €40 per week. Employer wont contribute higher to this.
Separate one is executive pension plan started 2019. Has 110k value and would expect employer to contribute average of 20k per year to this

Do you own any investment or other property?

No

Ages of children: 4 and 8

Life insurance: with mortgage, also have PPI and have Death in service cover with small industry pension


What specific question do you have or what issues are of concern to you?

I have received my annual performance related bonus which this year is €75000. I have the option to pay this full amount into the executive pension or take it now through payroll with the obvious deductions ( approx €35000 net )

I assume I should pay the full €75k into the pension and not take the reduced amount to then overpay the mortgage

just looking to check I'm right on this . Thank you
 
They 81.50 is monthly. It's a payment protection policy which covers 12 months mortgage if I get injured or even if I'm made redundant
 
PPI:
I never had this, as both of us working, but my attitude would definitely change if only one income earner in the family, as is your situation. This is a very compeditive area, i’d shop around to see if a cheaper alternative is available, which matches your requirements.

Mortgage:
I’d shop around to switch, you have <50 % LTV, and Avant Money currently offering 1.95 %, check and see if you qualify, as they are selective.
The 0.80 % rate difference (2.75% v 1.95 %)is over a grand a year, and even after legal fees, you’l be nett saving, from year 3 at the latest.

Pension:
Yes, personally, i’d put as much as you can, of the 75 k bonus into pension, your age related limit is 20 % of total gross pay, (salary +bonus+any other gross payments)so you will only get 40% relief up to this limit. Employer & industry schemes seem when combined, contributing at a high rates.

When you hit 45, the % max increases to 25 % of gross pay.

EII (Employment Investment Incentive)
You could consider an investment into this, there is risk attached, but 40 % tax relief is available.

State Savings - kids fund/additional retirement fund:
16 % guaranteed over 10 years, risk free, no fees or charges, and the option of withdrawing at any stage. Eg if you decided to move house, this could be withdrawn quickly.

Big Ticket Items:
Put some away for the big ticket items like car changes/ holidays/ home improvments. You have a savings cushion already in place, but these items can cause Financial shocks !
 
Last edited:
Yes. You should get your employer to contribute the full amount to your pension.

Your mortgage is comfortable as a percentage of the house value and as a multiple of your salary.

The only reason for not contributing to a pension is if you think you might need it in the next few years e.g. to trade up.

Brendan
 
Familyman77 said:
€130000 17 years left at €815 per month ( plus €81.50 PPI )
What interest rate are you paying?
2.75% <50% LTV
Click to expand...

This rate seems very high for <50% LTV. You should look at switching to a cheaper lender such as Avant at 1.95% .

The PPI seems like very bad value unless you are at a high risk of injury or redundancy.

How long have you been paying it?

You are paying €1,000 a year for a potential claim of €10k.

Generally, when you go to claim, you find that your particular injury is not covered. Or you get back to work quickly and no longer claim it. Or that you have paid off your mortgage.

If you lose your job, you will get more than €10k in redundancy.

Brendan
 

Thanks for the input. It definately looks like I should steer away from the PPI and will look to do so asap. I've been paying 10% of repayment value since 2009
 
Thanks for the input. Confirms I will pay into pension fund as I've no intention of moving or trading up anyway

Will certainly look at switching lender aswell

Thanks again
 
Quick one aswell though this may be a very open ended question. What size pension pot should we be looking to build up , I know many people say when the mortgage is gone etc you dont need as much etc
 
Familyman77 said:
What size pension pot should we be looking to build up ,
Click to expand...

It's not a question which can be answered in any way meaningfully.

Don't let it go over €2m.

It's less tax effective when it hits €800k

But you are a long way away from these, so don't worry about it. Put in any money you don't need.

Brendan
 
Familyman77 said:
They 81.50 is monthly. It's a payment protection policy which covers 12 months mortgage if I get injured or even if I'm made redundant
Click to expand...

Brendan Burgess said:
So you have paid in excess of one year's mortgage payments!
Click to expand...
What the OP didn't tell us in this thread, but mentioned previously, is that they've previously made a claim on the policy.

But, it's probably more expensive than separate life insurance and income protection policies.
 
As red onion says above a claim was successfully used on this policy and that claim was when repayments were a lot higher at €1400 per month. However this policy has moved to Axa as underwriters so may not be as fruitful if required again, plus my financial situation is better now so I think I will look into this more. Just to note I also pay €40 per month as life insurance for the duration of the mortgage. Aib suggested these 2 policies at drawdown
 
You need to review and shop around for alternatives on both the PPI and mortage life insurance.

Off the top my head, i changed mortage life insurance every time i switched mortages, which was 4 times, and, in addition, i also switched mortage life insurance, between those switches, every single time i reviewed it, i got it cheaper.

Finally, never takeout a mortgage life insurance policy with the bank you have the mortgage with, in my experience, there is always better value elsewhere, and zero obligation to take it from them. Each time my mortgage bank “suggested” i take it out with them i said no thanks.

Even saving €10 a month, is 2 grand saved over the remaining 17 years left, but i believe you may save even more than that. You can also get “decreasing” mortgage life insurance which is available, even cheaper still. Decreasing the years on the mortgage (by increasing monthly payments)also impacts the monthly premium.

But these are relatively small savings, when compared to the much bigger savings possible, by switching the mortgage.
 
Brendan Burgess said:
I have heard of the concept, but I had never heard of it being enforced. Does Revenue worry about things like this?

Brendan
Click to expand...

They do if they review your payroll taxes. It's a hot topic. There are ways around it but needs to be structured properly. I'm not a tax expert but I know for example if you've a €20k annual bonus built into your contract you cannot transfer this in as an employer payment.
 
Thanks for the advice. My employer paid into the executive pension. That pension now sits at €180000 and I have another construction pension sitting at €45000. ( €50 pe week goes into this as compulsory between me and employer ). I'm going to talk to banks aswell about switch and removing th PPI. Just wondering what's the opinions in how it's looking at the moment an going forward . To note I would expect an average of €20000 pe annum being available to add to the executive pension a longas I stay with my current employer
 
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