Should I prioritise pension saving or overpaying my mortgage?

[lycheesalltheway]

I've just turned 39 and feel I really need to start taking control of my life and would like to put myself in a good position financially.

Just to say, I'm not married and no family so will never inherit anything. I am also a freelancer and my income is not particularly high although I'm working on that, I'm not sure how the next few years will pan out. I may end up having to pivot.

I'd like advice on what is best to do in my situation. I have a LISA with £32k in it and I own my flat that I live in and have £145,000 on the mortgage. At my current salary, it will take me 30 years to pay off probably.

Should I prioritise saving into a pension or pay off my mortgage?

I know no one can answer this but what is a good pension to have to be able to live comfortably? I grew up pretty poor but I'm more worried about the fact that I really will have to rely on myself when I'm older and whether I will be ok.

But psychologically, money off the mortgage means paying it off sooner and for me the piece of mind is worth more than a large pension 30 years in the future

until you are in the future
then you look back and realise actually - id have more coming in each month or retire a few years earlier if I had prioritised the pension over the mortgage and the mortgage would have been paid of anyway

What's your health like? When I was your age, I paid off the mortgage and went for ISA savings as I knew I could have ready access to the ISA money (if desperate) but wouldn't (until 55 plus) if I put the money into a private pension.

The government may change the age you can take money out of a private pension or may change the 25% rule - but equally they could change ISA rules!

If you are freelance, it is a very good idea to keep a big 12 month plus reserve fund and have critical health insurance if you can get it

For me it would be mortgage. Once you are mortgage free you will always have a roof over your head and be that every month better off

There will be a limit on how much you can over pay on your mortgage. Do that much for sure.

Do you have any savings except for your lisa? If you dont,. prioritise building savings over overpaying on your mortgage, or pension for now. You need a buffer.

Good luck. Well done for achieving buying a place.

We have been trying to be more sensible with money over the last two years as well .

im similar age to you .

I pay an extra £280 off the mortgage per month, as thats a months payment without interest.

we have a few months savings in a help to save account , and put £50 each a month into a Lisa and £50 into a sand s isa .

in theory between our work pension forecast and our state pension, we will be absolutely fine (better off then now) but obviously that could well change.

also to consider is your job if the state pension moves back further- for example I’m a teaching assistant, no way could I be chasing after kids who are kicking and hitting me at 70 years old! And husband is a bus driver- will he be fit enough to be driving then ?

our Lisa aim is to allow us to go p/t at 60 until state pension kicks in.

I do want us to have a better balance though, I am putting more money into savings- but I don’t want to do it at the expense of giving up any travel and experiences in my 40s !

It’s a very difficult one because nobody knows the ins and outs of your current situation or your aimed end-goal. As such everyone’s well meaning advice I would take with a pinch of salt. If you can it will be worth speaking to an IFA because they’ll be able to guide you probably on considerations to make.

I am your age and a couple of years ago had the same “better sort my finances out” moment. My IFA has been fantastic and I’m feeling a lot more confident having sorted out multiple things (critical illness to cover mortgage, ISA, wider investments as well as my child’s investments I want to manage. Consolidating pensions and whether that was worthwhile doing considering the management fees. My IFA now manages my pension and the rate of return has been worth paying him the fee I am!). He also sat down and did projected retirement planning. Asking what age I want to retire and we worked back from there so I can factor in ISA monthly payments, private pensions payments then government (honestly I’m considering this as non existent the way public finances are going and I don’t think we will have one!).

Compound interest is something the majority of people don’t truly understand so properly worth researching and understanding that too.

You can also use apps like Sprive to round up your card payments on everyday spending so it chips away in small amounts on mortgage over payments and you don’t notice.

Also use chatGTP like an IFA for forecasting pension for compound interest and to try and ascertain how much to save each month. It’s actually really good.

Put money into your pension. The younger you start the better. You can overpay your mortgage by £50-100 per month to pay it off quicker. I know working freelance is great but unless you’re going to make good money I’d seriously consider moving to employed. An employer paying into a pension for you is worth its weight in gold.