{"id":491889,"date":"2026-06-23T17:45:36","date_gmt":"2026-06-23T17:45:36","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/491889\/"},"modified":"2026-06-23T17:45:36","modified_gmt":"2026-06-23T17:45:36","slug":"at-31-am-i-wrong-to-prioritise-overpaying-my-mortgage-instead-of-pension-saving","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/491889\/","title":{"rendered":"At 31, am I wrong to prioritise overpaying my mortgage instead of pension saving?"},"content":{"rendered":"

In our\u00a0Pensions Crisis Coach\u00a0series,\u00a0we aim to help ease your\u00a0retirement worries<\/a>. Are you concerned you\u2019re not saving enough for your later years, do you want to know if you have enough to retire or don\u2019t know how to find your lost pensions? Email us at\u00a0money@theipaper.com<\/a>. We\u2019ll seek to get you on the right track with help from some of the best financial experts and advisers in the business.<\/p>\n

Jake writes: I\u2019ve been working as a freelancer for the past eight years and not paid into a pension \u2013 so I\u2019m at risk of not having enough saved for retirement. I also opted out when I was in full-time work. I\u2019m 31 and own my flat in London with a mortgage. <\/p>\n

I\u2019m due to pay it off in 30 years but I\u2019ve worked out that by overpaying I can cut this dramatically to as little as 15 years. My current plan is prioritise early repayment of my mortgage, and treat that as my eventual nest egg in retirement.\u00a0Is that the best strategy to take?<\/p>\n

Callum Mason,\u00a0The i Paper\u2019s deputy money editor, responds:\u00a0We had some back and forth on email to go into your situation in more depth.<\/p>\n

You opted out of your pension when you were working as an employee because your wage was low \u2013 under \u00a330,000 in London \u2013 and you felt you needed the money you would have contributed. You said that you do have some pension savings, but that the amount is \u201cnegligible\u201d at the moment.<\/p>\n

As you explain, you are now self-employed, and so you aren\u2019t automatically enrolled in a pension by your workplace with employer contributions, as employees are.<\/p>\n

Aside from with pensions however, you describe yourself as an \u201caggressive saver\u201d, at times working a second job. You were able to put a \u00a350,000 deposit down to buy your first flat in south London and you also have \u00a320,000 in emergency savings as well.<\/p>\n

You are well aware that savings into a pension comes with benefits \u2013 you can claim back income tax for example \u2013 and that saving early means your money can compound, but at the same time, you say your main goal is to repay your mortgage.<\/p>\n

Your mortgage is at a rate of 4.6 per cent at the moment and you\u2019re on a 30-year term. You hope to get it paid off in 14 years time \u2013 so when you\u2019re 45.<\/p>\n

I spoke to Greg Moss, a chartered financial planner at founder of Eleven.2 financial planning, to ask him about your approach.<\/p>\n

His first point, before we get into the mortgage overpayment versus pension saving debate, was that you shouldn\u2019t feel as if you\u2019ve \u201cmissed the boat\u201d on retirement saving.<\/p>\n

\u201cMathematically, the earlier the better, so the fund has as long as possible to compound tax free. But there\u2019s no such thing as too late and our clients start this process at different stages of life. <\/p>\n

\u201cPeople who fund pensions consistently from very early in their careers do exist, but they aren\u2019t as common as you might think. So don\u2019t let that put you off,\u201d he says.<\/p>\n

In terms of your strategy, he says it is \u201cperfectly valid\u201d to overpay debt before thinking about pensions, and that this applies even more if you expect to earn more later in your career.<\/p>\n

You get income tax relief on pension contributions at your marginal rate \u2013 20 per cent if you\u2019re a basic rate taxpayer and 40 per cent if you\u2019re a higher rate payer.<\/p>\n

If you expect to earn over the high rate threshold in the future \u2013 currently \u00a350,270 \u2013 then paying into your pension later can give you a greater tax relief than paying in now.<\/p>\n

\u201cThe easiest way to think about it is that overpaying a mortgage gets you a risk-free return of whatever your mortgage rate is \u2013 so, 4.6 per cent, which is a decent net return, comfortably above inflation \u2013 the same money in a pension would benefit from tax relief, and potentially higher growth if invested in the stock market. <\/p>\n

\u201cBut that extra return isn\u2019t guaranteed to be better and comes with risk,\u201d he explains.<\/p>\n

He does, however, sound caution about treating your property as a \u201cnest egg\u201d for retirement.<\/p>\n

Some people refer to their property as their pension because they intend to sell or release equity \u2013 pulling cash from your property \u2013 in retirement, and living off the money they make.<\/p>\n

\u201cIt\u2019s a risky strategy because you\u2019re then very dependent on the growth of one asset class \u2013 residential property \u2013 and you could end up having to work longer than you want if you can\u2019t sell your property quickly,\u201d he says.<\/p>\n

He says this plan \u201cwould be different from prioritising paying off a mortgage first, then funding pensions and investments later on\u201d.<\/p>\n

I hope this guidance is helpful, and does something to calm your worries about not having enough in your pension.<\/p>\n

Good luck with their mortgage overpayments and retirement saving, whenever you decide to prioritise it.<\/p>\n","protected":false},"excerpt":{"rendered":"In our\u00a0Pensions Crisis Coach\u00a0series,\u00a0we aim to help ease your\u00a0retirement worries. Are you concerned you\u2019re not saving enough for…\n","protected":false},"author":2,"featured_media":491890,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[138,246,111,139,69,12613,107584,244,245,294],"class_list":["post-491889","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-finance","tag-new-zealand","tag-newzealand","tag-nz","tag-pensions","tag-pensions-crisis-coach","tag-personal-finance","tag-personalfinance","tag-retirement"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/491889","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=491889"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/491889\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/491890"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=491889"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=491889"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=491889"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}