The decade between your 50s and 60s is the most important for pension planning
More than half (58%) of people who paid off their mortgage did so in their 50s, saving an average £633 a month.
While it may be tempting to splash the cash, research shows that re-directing these contributions to your pension at age 50 could add £218,548 to your pot by the age of 65, according to Hargreaves Lansdown.
It said the decade between your 50s and 60s is the most important for pension planning as decisions made in this time can still have a big impact on your pension.
For those starting earlier, for example in their 20s or 30s, it can be difficult knowing you won’t see your money for a very long time. But with access to pensions currently available from the age of 55, those looking to store money away from the age of 50 have the ability to access their money in just a few years’ time.
Taking the average £633 a month saving, those nearing retirement are given a last chance to scoop up valuable tax relief:
However, it added that the amount can be even higher. If you are employed, upping your own contributions could attract additional pension contributions from your employer.
Further, higher rate and additional tax payers can benefit from additional tax relief through their tax return.
However, not everyone in their 50s will stop paying a mortgage with almost a third (31%) of those aged 55-65 still committed.
Hargreaves Lansdown also noted that people who are single or divorced are more likely to have paid off their mortgage, presumably because they have a need for smaller homes.
Nathan Long, senior pension analyst, said: “To spend or to squirrel, that is the question facing those on the cusp of repaying their mortgage. There are a million and one fun ways you could spend the amount you were paying on the mortgage when it is finally repaid. Re-directing the monthly payments to your pension may not seem fun but can supercharge your retirement by scooping up valuable tax relief.
“It is important that saving for retirement is made clear early enough to make a difference. Employers have a key part to play in flagging these issues nice and early in the workplace, as does the government which is rumoured to be supportive of plans for people to receive a mid-life financial MOT.”