16 Jun 2016

Are you missing out on a £40,000 financial boost?

Are you missing out on a £40,000 financial boost?


Britain’s over 50s are splashing the extra income they receive once they’ve paid off their mortgages on holidays, home improvements and gifts for their children.

However, less less than one in four are using the money to top up their retirement savings, new research from Saga Investment Services has found.

Homeowners who have paid off their mortgage in full were surveyed to discover what they have subsequently done with the money in the run up to retirement.

Extra income

Those polled reported an average monthly income increase of £322.

Asked how they used the money once their mortgage had been repaid, half put some of the money into a savings account, while 45% paid out for home improvements.

Some 40% spent the money on holidays, while 27% bought a new car.

The survey also uncovered the gap between paying off a mortgage and retirement. The average retirement age for those surveyed was 62, and this group paid off their mortgage at an average age of 55 – a seven year period of mortgage-free income.

Pensions low on the priority list

Less than one in four (23%) diverted the mortgage repayment ‘pay rise’ into their pension.  Of those that did do it, an average of 40% of their additional income was put into their pension.

Pension contributions attract generous tax relief from the government, meaning their savings get supercharged as they head towards retirement.

Up to 25% of the fund can usually be taken as a tax free amount and any additional withdrawals from the pension are taxed at the savers marginal Income Tax rate.

Alternatively, the money can be invested in an ISA, which grows free of Income, Dividend and Capital Gains Tax and can be withdrawn tax-free. However, contributions to an ISA do not enjoy tax relief.

Calculations carried out by Saga show that if homeowners had diverted 100% of their monthly mortgage repayments into a pension until their retirement age, attracting basic-rate tax relief, a homeowner could have saved an additional £40,000 towards their retirement.

Independent financial advice

To make the right investment choices, you need to ask the right questions. And when it comes to answering those questions, Aberdein Consdine can help you find the best way forward.

If you would like to get a sound point of view about what may be right for your unique situation, please contact us. We’ll review and discuss your financial situation, help you set goals, suggest specific next steps, discuss potential solutions and provide ways to help you stay on track.

To speak to one of our advisers, call 0333 0044 333 or click here.

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