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Balancing pensions and mortgages

Taking out a mortgage can be both exciting and daunting. For many of us, paying off a mortgage is the biggest financial commitment we’ll ever make – but one that can balance well with pension contributions.

Why should I balance a pension with my mortgage? 

  1. While a mortgage gives you somewhere to live that you own, a pension provides you with an income in later life. So you want to make sure you have enough funds in place to enjoy the retirement you want.
  2. By saving with a pension while managing your mortgage, you can enjoy the benefits of employer contributions, tax relief and the long term effect of having your returns reinvested each year. In other words, the longer you save into a pension, the longer the money has to grow and the more benefit you get from it.
  3. Pension savings outperform mortgage savings due to tax relief and inflation. To put this in context, every £1,000 invested into a pension has £250 basic tax relief added to it. Higher rate taxpayers can claim up to a further £250 back through their tax return. This is not paid into the pension scheme, but rather paid directly to the taxpayer. 

It doesn’t have to be either/or

Whatever you choose to do when it comes to pensions and mortgages, it’s your decision. Ultimately, it’s all about what works for you. But remember it doesn’t always need to be a question of either/or.

Whatever you decide when it comes to paying off your mortgage and saving for the future, there are plenty of resources to help you on your way, like the Money Advice Service’s budget planner and NEST’s guidance and advice page.

Login to your online account

You can see how much you’ve got in your retirement pot, change your retirement date, increase your contributions and more at any time by logging into your online account.