Dean Butler, Managing Director for Retail Direct at Standard Life, comments on the benefits of paying off a mortgage early and the impact it could have on future pension contributions.

Sharp interest rate rises over the last year have led to many homeowners seeking longer mortgage terms in an attempt to boost monthly budgets, however new analysis from Standard Life, part of Phoenix Group highlights the potential retirement benefit of paying your mortgage off as early as your circumstances allow. Not only will paying off your mortgage a few years clear of retirement mean you won’t need to factor housing costs into your retirement planning, but money that used to go towards your mortgage could instead be used to increase your pension contributions and boost your retirement pot.

Furthermore, increasing your pension saving towards the end of your career has the potential to significantly boost the value of your eventual pot, as your salary is likely to be higher and you have the biggest chance of benefiting from any potential compound investment growth.

Dean Butler, Managing Director for Retail Direct at Standard Life said:

Interest rates have rocketed since the middle of last year and so it’s understandable that people are looking for longer mortgage terms to ease the monthly strain. It won’t be possible, or even sensible, for everyone to stick to a shorter mortgage term, however it’s worth considering the potential retirement impact of any decision. There are obvious benefits to being mortgage free in retirement itself, but additionally having the option to swap mortgage payments for pension contributions in those valuable years leading up to retirement can have a significantly positive impact on your pot, and as a result on your standard of living in retirement.

Full release: Boosting pension contributions after paying off your mortgage could mean £52,000 more in retirement

Media contact: James Merrick, Standard Life, 07974 063067 / James_Merrick@standardlife.com