Andrew Ducker (andrewducker) wrote,
Andrew Ducker
andrewducker

What should I do with my money?

I have a pension* with my company that I don't contribute to, and that's great. I _also_ put money into a retirement account plan, which is basically a separate pension that I drop some money into to supplement things.

Last year I put £3,600 into the pension, and it ended up worth £2,970 more than it was at the start of the year, so they've lost £630!. Which is not, shall we say, the intended result. If I put money into my pension I'd like it to end up worth at least that much more, if not significantly higher.

Part of me thinks "Fuck that, I should pay off my mortgage instead." which is costing me just over 5% per year, if I remember correctly.

But the pension payments come out before tax, which is likely to go into the 40% bracket this year, if there are bonuses**.

As my pension is never going to be high enough that I'll be paying 40% tax on it, it looks to me like I'll be saving 40% _now_ and 20% overall by putting the money into the pension. And hopefully the plan will start making money at some point.

The question is, does that work out better off than paying off the mortgage faster? Which one works out better in the long run?

*Career Average Defined Benefits, for those that care about such things.
**Which there have been every year so far, so I'm assuming that will continue.




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