Published On: Mon, Sep 9th, 2019

Mortgage free or pension: Financial planner gives verdict on how to maximise funds


Paying off a mortgage will be a financial priority for many people. From switching to a competitive interest rate to making attempts to reduce the length of the term, there’s a lot to consider. Some homeowners may hope to lower the amount of monthly outgoings they have, by becoming mortgage free. With the freedom of accessing one’s pension savings from the age of 55, it may be the case that some wonder whether they should withdraw lump sums and instead pay off the mortgage.

The option was put to pensions expert and financial planner Warren Shute, during an exclusive interview with Express.co.uk.

However, for Mr Shute, keeping the savings in the designated fund could see a person maximise their wealth, as opposed to becoming mortgage free.

The chartered wealth manager explained: “The longer you can defer until you access your pension, the better, because it’s constantly growing.

“The longer we defer it, the better it will be.

“Now, to give some kind of sort of rough estimation on that, it should almost double every 10 years.

“So, if we can defer it from say 55 to 65, we’re looking at almost twice as much pension income.”

The financial planner explained that, in general, savers are seeing the pension as a bank account, and “something to tide them over”.

And, despite attempts to educate his clients to see it as a long-term investment for later life, some still ponder whether some of their pension wealth could be used for a holiday, or a 60th birthday celebration ahead of retirement.

So, what does Mr Shute say when he’s asked by clients whether the funds should be used in this way?

“I’ll say, ‘You can’t, no, because it’s not for that holiday. It’s for funding that 30 years when you’re going to want holidays every year, and actually when you’re going to start feeling very vulnerable’.”

However, Mr Shute acknowledged that there may be some instances where pension savings don’t always need to be reserved for later in life.

“There can be circumstances where, with advice, with someone helping them, then yes these things can work,” he said.

“But as a general rule of thumb, trying to avoid accessing your pension for as long as possible, is going to help you because you’ve got to go back to remembering, you’re funding roughly 30 years of income.”

So, what would he recommend doing if the aim is simply to become mortgage free purely for peace of mind?

Mr Shute insisted: “If you just wanted to pay off your mortgage early, then definitely don’t access your pension. It’s not there for that reason.”

Instead, “make sure you’re on the lowest interest rate, start overpaying on it, make a conscious effort to start chipping away at your mortgage,” he added.

“But don’t access your pension to pay off your mortgage.

“There’s a number of logical reasons behind it. You should be paying roughly two per cent on your mortgage interest.

“You should be getting roughly five or six per cent in your pension. But also, you’re going to need that money when you retire to carry you through.”



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