Use bonus against mortgage? or as AVC?

[MamaMia]

Hi,

I'm financially responsible for a spouse and child. We have an outstanding mortgage amount of about €290k on a tracker basis at 4.1%. I pay into a company pension at 7% of salary. I also spend 15% of gross salary on stocks through a company scheme.

I'll be getting a lump sum bonus of about €10k gross.

Should I pay the lump sum off the mortgage?
Or should I invest it as an AVC and benefit from the tax effect?

I've been trying to figure it out, but couldn't find anything similar when I searched, and I would really value your comments. I'm also not sure where to post this, so apologies if it's in the wrong place

MamaMia

 

[nelly]

how old are you and is your salary sizable? 7% of X is ?

I say for the few k that it is would you upgrade your car or holiday or something as you seem to have the mortgage payments nailed down and are covering all bases already?

If its a choice i say whack it off your mortgage if you are under 35ish as the pension is a long time away.

 

[Ravima]

I am a few years older than you, but when I had the oppertunity last year, I put the bonus into AVC. the reason being that some colleagues of mine are pumping all they can into AVC in their 50's, which is too late. If you put into AVC now, it has 25/30 years to grow and growth in some equity fund should be good over that period. teh entire €10K goes into AVC.

The alternative, is that if you want to put it into reducing mortgage, you must presumably pay income tax on it fist, which beings the sum available to about €5000, taking tax and PRSI into account. that would probably save you €25 per month, or €300, but would have the outstanding balance reduced by €5K.

I hope that this is helpful.

 

[MamaMia]

Hi there,

Thank you for the replies. I'm slightly the wrong side of 35, so I think you're both saying the same thing - go for the AVC option My salary isn't very sizeable - nowhere near six figures I'm afraid - we stay afloat, but can't afford the fancy car and holidays. Or maybe we could afford one of them, but I think we need to save it, or invest and hope for growth.

MamaMia