Am I balancing pension saving and plans to upsize sensibly?

[starstar84]

I’m really struggling to know if I’ve got this right and would love some objective views.
For context:

• 41, one baby (under 1)
• Live in London (zone 3/4-ish), currently in a 2-bed which feels tight long-term, my daughter is in a box room and I also want to move to a new area - probably in Kent
• Planning to move in the next 1–2 years to a 3–4 bed (~£550–600k budget ideally)
• Commute 2 days a week into London Bridge, when we move this will be from further in Kent but I’ll only go to office twice a week.

Income:

• Me: ~£95k
• Partner: ~£38–40k (training to be a teacher soon, so income will hopefully increase from 2027)

Assets / debts:

• House worth ~£465k, mortgage left ~£310k - I got on the property ladder 5 years ago
• ~£50k in Premium Bonds
• ~£210k pension (I contribute quite heavily – ~£1.7–2k/month salary sacrifice plus company cont of £700 so roughly £2.6k in total) - we are hoping to retire early so I am saving for the both of us whilst partner maxes take home pay
• Partner will have pension of about £20k at 67 before state pension with current job
• ~£8k credit card debt (0%)

Monthly:
Take home between the two of us roughly £6750

• Mortgage: ~£1,600
• Household bills including insurance and pets: ~£700
• Therapy - much needed at the Mo £300 - will likely end in a couple of months
• Food including eating out and groceries £1000
• Family and house stuff £300
• Holidays £300
• Hobbies / health £100
• Transport including commuting costs and car £400
• Miscellaneous £200 - including repairs, gifts etc
• Childcare £250
• £90 on credit card debt at 0%
• Savings for child £100
• Personal spends between us £400
• Any extra was being put in maternity leave fund but now it will go towards overpaying mortgage - roughly £1k a month

Future plan:

• Upsize house (this will increase mortgage + costs) - likely closer to £2700 mortgage and bills
• Long-term goal: retire ~57–58
• Maybe think about possibility of getting bigger house then downsizing in retirement? Or pay mortgage off with the big tax free lump sum available at 57?

What I’m unsure about:

• Am I over-prioritising pension vs present-day quality of life/ bigger mortgage payments so we can get a bigger house?
• Is it mad to upsize given current costs?
• Or am I actually under-saving for the future given age/income?

I think what I’m really asking is: does this look like a sensible balance?

Which is then negating the "tax free" benefit. Effectively it's a directors loan and you're then choosing to put this into premium bonds. You pay interest on a directors loan after a period of time.

There are only two reasons to hold premium bonds:

1. You have maxed out all of your other tax efficient ways of savings/investing
2. You love the thrill of the potential win (in which case just hold a few)

Even in a normal savings account £50k would be generating a guaranteed £190ish a month and that would then be compounding and earning you more and more. You really need to put it into an ISA. It's financial madness not to.

The effective average win rate on premium bonds is 3% but it could be far lower (or of course higher). DH has won nothing on his full holdings in the past year. Not a penny. I've won £875 but had one larger win. Thats less than one percent. We've clearly been unluckier than the average but it highlights it's just luck. If we'd had that money in the savings account then even paying top rate interest it would have earned us a few thousand guaranteed.

We have money in premium bonds as an experiment. I got sucked into the MN threads talking about wining and DH and I agreed we would put money in there for a year to see how they performed against putting it elsewhere and paying top rate tax on it.

I lost the bet (that we'd average out and be just as well off). We are not at a full year yet (9 months) but it's coming out this week when we see our financial advisor and work out where to put it since it's silly.

I didn’t know that re interest on directors loan - I will look into this as I don’t fully understand how it works. I think my accountant is sometimes not very good at explaining things or helping me make smart decisions….

But hear you on the compounding @User88765 and have been meaning to put some into an isa. About to do my taxes so will work out how much is mine personally (easy to put into isa) and how much the companies and what I can legally do with that as I don’t really understand this side of things!

I will admit I dream of winning a million far too regularly and do love a gamble (to a healthy degree) so being able to have 50k chances per month has been keeping me in them.

Not bad and certainly good for paying off any last mortgage

DH has won nothing on his full holdings in the past year. Not a penny.

If this is true then you should speak to them as this suggests some sort of issue- eg they have the wrong details for him or maybe he has given them an old account or something. The odds of not winning anything at all in a year on full holdings are infinitesimally small- less than one in a billion.

I’ve just been promoted with a super paltry pay rise, almost insultingly low; but my company is shedding ppl v quickly and doing badly so didn’t want to argue. Was also on mat leave. Also given how much I’m putting into my pension, I am very far away from that 100 K threshold.

On pension versus ISA savings for a house deposit, I guess that’s what I’m looking for opinions on what others would do in terms of balance. I started with around 70 K in my pension four years ago and have been increasing contributions significantly so that I can hopefully build a good amount of fund upfront and rely on compounding to do the work for me to some extent later on. However, I would love a bigger and nice house, and have no inheritance coming from my parents, so I’m very aware of the need to build a big pension. I also don’t want to rely on earning as much as I do until I am 55/60, I may want to go part-time at some point and I’m considering a four day week next week to spend more time with my child. I’m finding the balance between today and tomorrow quite tricky-and wondering if actually it’s better to buy a bigger house, not necessarily pay it off before retirement, and downsize if we need to at a later point. My partner may inherit some money from his parents when they passed away, but I don’t want to rely on this, the house is worth around six or 700 K, but it would be split between four siblings. And they may need care in the meantime.

I would agree with this. I have had full holdings now for three or four years, and I have always won most months this past year, there has been a few months of not earning anything, but before the average interest amount went down, I was definitely winning every month. Even if it was only 50 quid.

I know, coffee is such a Money drain, it’s only since I’ve gone on maternity leave that I have spent a lot on it. I’m getting less dependent now, but I definitely needed at least one flat white a day for the first few months! It was also just a way to get out of the house to be honest. Definitely will rein this in when I go back to work, plus there’s free coffee there!

How much do you think I should be putting away from my child? Thanks so much for the link, I will look into that – I often look at the fire movement on Reddit but I have to say there is so many people that are doing so much better than me it does sometimes feel a little bit depressing.

well to be fair its nine months this month (so he could win this month) but it just highlights how its a game of chance and at 3% (current mean average winnings) it isn't even keeping up with inflation.

That's still madly unlikely. Do get him to check.

Plug some numbers into a pension calculator. If you carry on with your current contributions you could have a pot of £1.7 million at 58, which could give you an income of £63k. If you reduced your contributions to £1k pcm (including employer contribution) you'd have a £1 million at 58, which could give you an income of £40k (in today's money - I assumed 10% growth and 3% inflation) Then you'd have your £20k from DHs teacher pension and each £11k state pension. So a household income of £82k if you reduced your contributions to £1k now. Or £105k if you carry on as you are.
Personally I'd reduce the pension contributions a bit and put the difference in a S+S ISA to give you more flexibility for the next 17 years.

Do you and your DH have joint finances and are you planning for the future together? You say you're paying into your pension so you can support both of you in retirement. Have you worked out what your annual income is going to be from your pension pot after taking the maximum tax free lump sum? Will it push you into paying higher rate tax? I know that you're getting employer contributions, but would it be worth working out if the benefit there is offset by higher rate tax in retirement? If so you could reduce your contributions, and open a SIPP for your DH where you pay in the difference. Make sure that between you, you're making full use of your tax allowances in retirement. And that each of you would still have a good income in the event of the death of the other.

I agree with other posters that getting some of your PB money in a S+S ISA would be a good idea.

How are you saving for your DC? I'd say that would be best in a S+S ISA too. If between you you're not maxing out both your isa allowances, I'd keep it in one of your names rather than use a junior isa. So you can keep control of it for uni or house deposit etc. If you can afford to up your monthly savings to £200 it would make a huge difference. I'd also consider opening a SIPP for your DC, with just a minimal amount per month, £50 pcm could make their retirement so much better because of the compounding. But you can put up to £2880 in a year for them.

I would agree that you don't actually want £1.7m in a pension with the tax free cap and the changes to IHT rules. Better would be a balance between pension and S&S ISA with no more into pension once you hit £1.2m (or £1.1m allowing for growth).

I've hit £1.2m so I'm now putting into other investments including the DC's pensions instead.

As someone with a household income much higher than yours, with a current mortgage of 2100 soon to be 2700, I wouldn’t recommend a mortgage of 2700. It’s not the affordability necessarily but the stress of largely relying on one income day to day is quite heavy. I would be considering significantly reducing your salary sacrifice to save more to increase your ‘if something goes wrong’ buffer for the house.

I guess I’ve been keen to make the most of tax efficiency while I’m earning a high amount because I’m just not sure this salary will be long term given how unstable things are in my industry / things are being cheapened by AI. Plus I may want to go part time at some point. And I wanted to do lots upfront and then dial down to let compounding to do the work in my late 40s / 50s. But actually that is interesting re 1k still being a decent take home. Dpndoesnt get pension until 67 so maybe I’d want more? But then maybe I’m tying myself up into higher tax later on! I need to do some calculations don’t i!

interesting re opening a sip for my partner. We are def planning finances together, I assumed my pension would go to him but maybe I need to check the rules….

And excellent advice re sip for child. We have a jisa. Will reconsider and up conts to £200

For the kind of house we want it would be more like £2100 a month. Thoughts on this amount?

At the moment, 30% of my individual take home is my current mortgage price ie 1600.

definitely factor potential uni costs into future savings as max loan on your salary would be 4k a year, and that won’t even cover rent, some students rent is 8k, plus living costs. Student loans are paid out based on parent’s salary now. Plus part time jobs at uni are much harder to come by with current climate. Moving out of London will help, as a young person trying to stay in London as family are there almost feels impossible now.