Pension and mortgage worries in my 50s

[awishes]

Does anyone have some sound advice for a late middle aged divorcée please!
I traded off my share of ex DH's pension for a bigger share of equity 6 years ago to allow our DC some stability at crucial stages of their education.
Of course I'm now regretting it as the years are flying past and my mortgage is relatively high.
Public sector type but not final salary pension, 7% ee contribution 17% employer.
Do I try to overpay my mortgage which has another 17 years to go or put more in to pension via AVCs? I did the calculator but it seemed to show little benefit from paying AVCs. Could it be because of my age?
I work 35 hours per week term time plus some so about 90% fte.
Does anyone have any knowledge, I'd be really grateful as it's keeping me wake at night.

There is a great page on Facebook (if you don't have a profile, perhaps set up one just for this so you can ask questions) called Meaningful Money Community. The members are a hive of knowledge. It would be worth asking your question on there as they seem capable of whipping out their calculator to help figure out what route is best to go down!

Thank you very much, I'll try there.

A good episode about pensions in general is

meaningfulmoney.tv/2020/11/25/the-ultimate-guide-to-platforms-pensions-isas/

Not sure why the calculator you used is not showing that an AVC is beneficial. It could be to do with age as you may only be a few years away from being able to access that money and the calculator may be assuming you will access it at the earliest opportunity.

AVC is an additional pot of money which runs alongside your defined benefit pension. The payment going in is taken directly from your wage which can make it a little better than using a SIPP (Self Invested Personal Pension) but the AVC may have fees which are higher than some SIPPs and you may not have investment options you desire.

You might be best getting professional financial advice as everyone's circumstances are different.

A career average public service pension is still a really good one compared to most of us on DC ones. How much of a short fall do you have between what it projects you will get versus your outgoings (allowing for inflation)? Do you want to retire early or not?

Putting more in pensions benefits from tax relief and potentially growth. But having high debts means more outgoings.

I have mostly DC pensions and want to retire early so it was important for me to clear the mortgage (still continuing to add to my pension). Now the mortgage is gone I am throwing everything I did at the mortgage now into savings and pensions as I want to retire early in my early/mid 50s which is in another 5 years.

Hello I put in standard retirement age which for me is 67 I think and 11 years away. I cannot imagine working at the pace I work for more than another 5. But happy to do something else for those last few years if I could.
I had a break of 10 years to raise the family and paid in to 2 company pensions
prior to that for about 11 years. All in all its looking very poor, not even £10k, for an income sadly. I could overpay mortgage for the next 5 years but that really is my question - which is better to do. Mortgage interest is around £150 per month and I have no other debt.
What my solicitor didn't factor in was ex's lump sum as i won't get one. With the benefit of hindsight I would approach it very differently.

In your circumstances you say you have 17 years left on the mortgage but only 11 years before retirement age. I know people say they will continue working but I have seen people simply unable to do that due to health. How are you planning to pay the mortgage in retirement?

Is that £10k including the state pension? If not then have you gone into the government site to see how much your predicted state pension will be and is there anything you can do to booster it such any paying any potential missing NI years that might be beneficial?

Are all your pensions DB ones? For DC you don't have to buy an annunity as there are options like drawdown. I know people on here say you don't necessarily need an IFA but they really helped me work through all the scenarios and options to see what shortfalls I might have hence saying you might want to look for professional advice.

Don't beat yourself up over it as you did what you did to give your kids a stable environment in which to flourish. Don't forget you should also be able to claim state pension at 67. I don't know if you have included this in the £10k you think you will have. I have a stakeholder which I continue to pay into monthly that run alongside my Teachers pension. With a stakeholder I pay in £400 a month but government tops it up to £500 being invested got me. Another option you have is to open a stocks and shares ISA and pick out company's that have slumped tongue to pandemic but will soar once we come out of it with vaccines. I also have one of these and follow investment advise of Motley Fool my shares have brought a much bigger yield than if I had put money in a standard ISA. There is an element of risk but I think the higher yields make risk worthwhile. I have held S&S ISA for 7 years and original investment money has more than trebled in that time. Whilst paying off mortgage early is always a good thing to do, I am doing that too and now only a little over 3 years to go, it may not be your best option given interest payments are very low right now. When you retire you would always have the option of selling and downsizing or letting out a room in your current house. My sister did that and not only does she get a monthly income that pays her council tax and utilities she has made a great friend in the lady who rents room from her and they both enjoy same TV so spend many evenings together in stead of my sister being alone every evening. They even go on some short holidays together. If you paid extra on your mortgage now would you have it repaid before you reach 67?

This looks an interesting read about paying off mortgage vs investing.
monevator.com/pay-off-mortgage-or-invest/

Don’t panic!

£19k income in retirement isn’t that bad if you have no mortgage to pay. (10k plus state pension). It’s more than I will have and I am confident I can do it, budgeting to run a modest car, have one holiday a year and keep a boiler fund.

Plus you could downsize once your children leave home / move somewhere cheaper once you stop work.

You lot are brilliant, thank you!
Do you know I had forgotten about the state pension! Feeling much better about things now, how stupid of me.
I will have enough NI by 67 as I worked since 16 but with the time out for kids, still ok!
So I just have to think now if it's worth paying more off the mortgage or adding to pension pot. I do have savings to could pay a chunk off mortgage. I don't really want to move but I agree it's an option. Thank you

I'd throw everything at the mortgage tbh. That will buy you freedom when it's done, and the amount you're paying to it will be extra available cash when it's done and you retire.

Can you buy APC’s (Additional Pension Contributions) through your public sector scheme. That’s what I’m doing and it’s adding 4K a year onto the amount I’ll already get at 67. Makes sense for me due to tax relief.

You say you have savings... so consider what that is really for and give it a name. It may well be your emergency fund, Gok fund, rainy day fund, what ever you want to call it. It might be money you are putting aside for children's education needs. Whatever those savings are for, give it a name and decide on the amount that needs to be in that pot. Then if you have money which has overflowed that pot, you can use that towards the mortgage.

Which public sector pension do you have OP?

Check your state pension entitlement online (Google how to if you don't know). You should have been credited years you were not working whilst bringing up children (aged under 12 I think) provided you were claiming child benefit.

I think a 24% salary pension contribution is high and a 17% employer contribution is rare in the private sector and a forecasted £10K income is also going to be above average. (Plus another £9K state pension).

If you take a 4% draw down, a £250K pot is required for £10K income.
In my opinion, a £250K pension pot is relatively good - may be not in the public sector but it certainly is in the private sector.

I would be paying down the mortgage because I think that your current pension provision is really good (compared to mine and I'm 49).

I know nothing about any pensions except private pensions: will your public sector pension allow you to draw down as needed? Or is it a steady income that you can't change?

When could you start drawing it?

If you were in receipt of Child Benefit you get NI credited until your child is 12, I think, so you should be fine with it. The problem is though that you can't get it until the state pension age.

Over the next few years keep some accessible savings, or else have a draw down pension that you can access before your state pension age, in case you feel like going part time or retiring earlier than state pension age.

If you kept the FMH do you now need all the space in it?. Could you downsize, clear the mortgage? You may even have some equity over that could you invest? The benefit of being mortgage free is that you can put even more into your pension.

@polkadotties LGPS

@bogforlife can't withdraw it's a steady income, don't think I can take it early. I have full state pension if I continue to contribute as I claimed child benefit. Thank you.

The cost of moving (stamp duty) does not leave enough really for me to buy somewhere and live comfortably. I'm a RightMove fanatic!

I vote mortgage. Clear that then you’ve got certainty.

you could ask your county council wages department what your options are, and if there is any addition cost

use the income tax calculator to work out how much less tax you'd pay on extra contributions - you will probably find for every extra £100 you pay into your pension that you actually only lose £70 in your pay check.

Also you can have the option of doing just one year at a time, so if your circumstances change then you can stop after the 12 months is up

Id pay into my pension first as that a ticking time bomb and the more you smoother it now the better - whilst your mortgage will just tick along nicely. Add to which you save more money on your tax on your wages, and your mortgage interest is on the low side so not worth getting worked up about

you could pay your saving you already have into the mortgage if you want to reduce monthly payments

if you overpay into your pension for 10 years at £100 per month it will cost you £70 - £3600 the government will effectively pay into your pension for you (as the rules stand and tax stands at the moment)
£12000 into your pension over 10 years will make a difference and it will cost you £8400

I work for an LGPS fund.
As you have said that you don’t have final salary then you must be in the post 2014 CARE scheme.
APCS are a good way of increasing your pension, however they are expensive and they get more expensive the older you are when you start the contract. On average you have to receive your pension for 14 years to ‘break even’ on paying the additional contributions.
There is advice on this thread which is not relevant to the LGPS

@Polkadotties
Yes joined 2008 I think and definitely CARE now