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Original poster

Thinking about pausing pension payments to overpay mortgage

36 replies

Mainframetimechange · 29/10/2022 15:17

Does this sound crazy? I'm thinking about pausing paying into my LGPS or going 50/50 so that I can save the money to overpay our mortgage while we have a good interest rate. I'm in my mid 30s have 9 years in the scheme and I figure once the mortgage is paid off (8 years left) I can rejoin and make additional payments to compensate for the years lost. I've recently found out about the 50/50 option, which feels a safer option to overpay and still build up my pension but as I don't pay a huge amount into my pension I wonder if it's better to just leave the scheme for a bit?

Does anyone have any thoughts on why this might be a bad idea please or things that I should consider before making a decision?

OP posts:
Suteki · 29/10/2022 21:01

RoseLemon · 29/10/2022 15:49

No. And no again. For all the reasons above 👆

You would be mad to do this especially when you only have 8 years left on your mortgage.

If you still can't get your head round the comments above then you need to see an FA or spend an evening looking at pensions and how they compound over the years.

You will regret this if you do it.

In genera this is good advice, but LGPS pensions don’t compound.

Suteki · 29/10/2022 21:03

LolaSmiles · 29/10/2022 15:44

You'd be losing employer contributions for the sake of what must be a small gain on the short term you have left.

Keep the pension unless you're in a dire situation

Again, this would usually be an important factor, but for a defined benefit scheme such as the LGPS, employer contributions are irrelevant.

Original poster
Mainframetimechange · 29/10/2022 21:20

Thanks everyone, some helpful points to consider. I have got life insurance. I won't make a decision to opt out without getting some financial advice.

OP posts:
WokingOrNot · 29/10/2022 21:34

Adding to everything that has been said, even if you have spare cash from other sources, do not overpay now while you're on, I'm assuming low, fixed rate. It only makes sense to overpay mortgage if the interest rate is higher than interest you can earn in a saving account. So anything you can save put into savings and overpay later once it makes financial sense.

RoseLemon · 29/10/2022 22:14

@Suteki fair enough, apologies for that, my reply was quick and I didn't check that LGPS is still solely DB. I've never worked for government and haven't kept up with all the changes I know are ongoing (I'm aware there's moves to CARE etc) but I stand by my message that doing a bit of online research would help the OP understand what she would be giving up. I still think she'd be foolish to reduce pension and overpay mortgage. Even more so with a DB government scheme as from what I've seen they are impressive!

Suteki · 29/10/2022 23:02

RoseLemon · 29/10/2022 22:14

@Suteki fair enough, apologies for that, my reply was quick and I didn't check that LGPS is still solely DB. I've never worked for government and haven't kept up with all the changes I know are ongoing (I'm aware there's moves to CARE etc) but I stand by my message that doing a bit of online research would help the OP understand what she would be giving up. I still think she'd be foolish to reduce pension and overpay mortgage. Even more so with a DB government scheme as from what I've seen they are impressive!

Oh, absolutely agree! 😊

Luredbyapomegranate · 29/10/2022 23:04

Ask an FA but I think it’s crazy

LondonQueen · 29/10/2022 23:18

Crazy, LGPS is a brilliant scheme and you'd be insane not to put as much as possible into it.

ivykaty44 · 30/10/2022 05:40

Hopefully by now you’ll have changed your mind on this, yes it’s shear madness what you were suggesting

Original poster
Mainframetimechange · 30/10/2022 15:46

@ivykaty44 yes, thanks for everyone's advice. I won't be doing this!! I watched some Meaningful Money videos last night, wish they taught financial things at school! Really think I need to educate myself a bit better about money beyond the importance of budgeting and trying to avoid being in debt after poor money management in my early 20s.

OP posts:
messybutfun · 30/10/2022 21:30

@MissyB1
you Said your husband would have to retire 7 years early or you would be forced to sell your house to pay pension tax and that is nonsense.
So, once you retire, you no longer have death in service benefits. Same as leaving the pension scheme. No?
Your tax will never be more than the extra benefit - you will still be better off just not that much. So if you really don’t want to breach the allowance, you don’t contribute any more and invest your savings elsewhere, maybe some life cover?
You are also forgetting that most schemes have survivor’s benefits.

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