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Mortgage overpayment vs maximise Pension AVCs

  • 26-10-2020 10:24am
    #1
    Naos
    Registered Users, Registered Users 2 Posts: 4,738 ✭✭✭


    October, the time of the year where I can put a lump sum in as an AVC to my pension. I'm currently overpaying my mortgage by approx 30% at the moment.

    Is it better to max out my Pension AVCs or overpay more on the mortgage?


Comments

  • #2
    woodman78
    Registered Users, Registered Users 2 Posts: 10 ✭woodman78


    Naos wrote: »
    October, the time of the year where I can put a lump sum in as an AVC to my pension. I'm currently overpaying my mortgage by approx 30% at the moment.

    Is it better to max out my Pension AVCs or overpay more on the mortgage?

    Can I ask who your mortgage is with and how you are overpaying? My experience is that UB only accept one payment per month and so if I want to split it then the second one has to be a manual payment.


  • #3
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,852 Mod ✭✭✭✭Henry Ford III


    Assuming that the mortgage saving will be less than 5% and the tax relief on the avc c.40% I think the answer is fairly simple.


  • #4
    KingCong
    Registered Users, Registered Users 2 Posts: 234 ✭✭KingCong


    Depends on your overall financial position, need more info. Normally putting it into the pension would make more sense but if your mortgage is high relative to your income then it may make more sense to focus on overpaying the mortgage until its down to a more comfortable level, while of course always contributing whatever minimum is required to the pension to get the employer's contribution (if there is one).


  • #5
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭pwurple


    You'd need to run the calculations for your situation.

    Depends on where you are in your mortgage, what your rate is. What your tax band is and how much the AVC payment is (tax saving on AVC)

    There are mortgage overpayment calculators available, these will tell you what the lifetime saving on the mortgage is, if you input the figures.

    Also depends on your level of risk acceptance. You stand to lose your pension investment, paying down debt faster is less risky.


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