Less than one in four Brits over the age of 50 put the money they usually spent each month on their mortgage towards their pension, research from Saga Investment Services reveals.

The survey, which asked homeowners who’d paid off their mortgage in full what they did with the additional money in the run up to retirement, found half put some of the extra income into a savings account, while 45% paid out for home improvements. Some 40% spent the money on holidays, while 27% bought a new car.

Only 23% diverted the ‘repayment pay rise’ to their pension and of those who did, an average of 40% of their additional income was put into their nest egg.

The average retirement age for those surveyed was 62, while mortgages were paid off at an average age of 55, meaning a seven-year period of mortgage-free income.

With the average monthly mortgage cost of £322 per month, if homeowners had diverted 100% of the monthly mortgage repayments into a pension until their retirement age, attracting basic-rate tax relief, they could save an additional £40,000 towards their retirement, based on 5% annual growth and net of charges, the report said.

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Nici Audhlam-Gardiner, managing director at Saga Investment Services, said: “Repaying a mortgage is one of life’s biggest financial achievements, and it’s understandable that people want to enjoy the income boost that they’re finally getting after decades of debt repayments.

“But this often comes when there’s limited time to build up as big a nest-egg as possible for retirement. Making the most of your finances in the run up to retirement is vital to ensure you have a comfortable life once work is over.”