Why I'm not saving into a pension

Michelle McGagh
retirement image of pension...
retirement image of pension...

Saving for retirement is a sensible thing to do; the government tells us so, our employers tell us so and even our parents nag us about it. But when is pension saving not a good idea?

I'm having a dilemma about it at the moment because despite what my dad thinks, I don't think my financial priorities lie in saving for retirement, and I'll tell you exactly why: I have a mortgage. A big mortgage that would make many break into a cold sweat.

Me and my husband live in London so it's no surprise we're mortgaged up to our eyeballs. While we're both financially savvy people who like to save a bob or two, neither of us are paying into pensions.

Instead we're overpaying the mortgage. We're working on the oft-quoted principle that you should pay down your credit cards before you save for a rainy day, just on a larger scale so instead of saving a giant sum of money for our dotage, we're paying off the rather large sum that is our mortgage.

Before you tell me what an idiot I am for doing this – and I'm well prepared for that – I've asked a couple of financial advisers what they think of this plan and surprisingly they're not adverse to it. In fact, one actively encouraged it as a sensible way to organise our finances.

The truth is we're probably both going to be working until we're 70 and thankfully we have desk jobs, not manual jobs, so theoretically we could stay strapped to our desks. At the rate we're going we could very well pay off the mortgage by the time we're in our mid-to-late 40s (I'm 31 and my husband is 34).

After that, as one adviser so eloquently put it, we'll start chucking money at our retirement pot. Of course we may have missed out on stockmarket growth and the benefits of compound interest in the meantime but the amount we'll be able to throw at our long-term savings will be considerably more than if we start paying it off now.

I can see the merits in both arguments and many will say split the extra cash between overpaying and saving but I have to admit I am seduced by the idea of being mortgage free in my 40s. We're in our dream family home and have no reason to move so we won't be taking on anymore debt but I pretty determined to pay off what we do have.

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