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CalculatorsSIPP or overpay

2026/27 tax year · SIPP or overpay

Clear the mortgage by overpaying, or with a SIPP?

Two ways to use the same spare money. Overpay and the mortgage goes sooner. Or pay into a SIPP with tax relief, keep paying the mortgage as normal, and use the SIPP to clear what's left once you can reach it. This works out which leaves you better off.

Your numbers

Filled in with an example. Replace with your own.

Step 1Your spare money
£
£

Your income sets your tax relief: 20% on income up to £50,270, 40% above it, 60% between £100,000 and £125,140.

Step 2Your mortgage
£
%

Assumes a repayment mortgage and that the rate stays the same throughout.

Step 3How the SIPP grows

The last 10 years were unusually strong for US and global shares. Past returns don't predict future ones; many planners use 4–6% a year.

%
%

Inflation is used to keep tax bands realistic in future years, and to show results in today's money.

Step 4Your exit plan

On the SIPP route you keep paying the mortgage as normal until you can reach the SIPP. Then a quarter of the SIPP comes out tax-free and goes straight onto the mortgage. The rest is withdrawn year by year to pay off what's left, with interest still charged on the balance. Those withdrawals are taxed as income on top of anything else you earn; total income up to £50,270 is taxed at no more than 20%. Once the SIPP has enough to do this, the calculator stops paying in.

57 is the earliest (55 until April 2028), and it can differ from your other pensions. Clearing it after your current end date means asking your lender to extend.

In any year where your other income leaves part of your £12,570 personal allowance unused, it takes enough to use it all, because that comes out tax-free. The extra goes onto the mortgage, so it's paid off sooner. If later years would be tax-free anyway, even amounts can come out slightly ahead, because more stays invested; the tip below will say.

Your other income in those years decides how the withdrawals are taxed. All in today's money.

£
£

Put 0 if you don't have one. If you'll keep some other income after it starts, add that to this amount.

£

Overpay

Mortgage gone at
Interest paid
Freed-up money invested
You'd have

SIPP

Pay into SIPP until
Mortgage gone at
Interest paid
Tax on withdrawals
You'd have
£100 of take-home becomes£0
SIPP route wins if growth beats0%a year, before charges

The working

Your exit plan

† Topped up to use your full tax-free personal allowance. Mortgage and SIPP figures are in pounds at the time. *Other income is in today's money. Tax in red means part of that year's withdrawal is taxed at 40% or more.

    Mortgage balance, both routes

    Overpay: mortgageSIPP route: mortgageSIPP pot

    Once the SIPP has enough: SIPP or ISA?

    Keep paying into the SIPP

    In your ISA
    Left in the SIPP, after tax
    Total

    Put it in an ISA instead

    In your ISA
    Left in the SIPP, after tax
    Total

    General information, not financial advice. A simplified model using 2026/27 income tax and NI for England, Wales and Northern Ireland (Scottish income tax differs). Both routes cost you the same each month (your mortgage payment plus the spare amount) until your mortgage is due to end, which is when they're compared. Money not needed on a route (after its mortgage is gone, or once the SIPP has enough) is assumed to go into an ISA growing at the same rate as the SIPP, and both are compared at that point in today's money. It assumes a repayment mortgage at a fixed rate throughout, tax bands that rise with inflation, and that any SIPP left over is drawn later at your State Pension-age income. Investments can fall as well as rise. Speak to a regulated financial adviser before acting.

    Example returns, annualised over 10 years to 30 September 2026 in pounds: S&P 500 15.07% (HSBC American Index factsheet); MSCI World 13.11% and 9.99% since 1987 (MSCI factsheet); FTSE All-Share 8.12% (Vanguard factsheet); 60% and 20% shares: Vanguard LifeStrategy 60% 6.57% and 20% 2.12%, after fund charges (60%, 20%). Index figures are before any charges.

    The worked example

    Overpay the mortgage, or let your pension clear it?

    Overpaying feels like the sensible choice. For a higher-rate taxpayer, putting the same money into a SIPP and using it to clear the mortgage at 57 can leave you thousands better off. Here's the working, including when it doesn't.

    Read the worked example