The most common £500-a-month question in UK personal finance, worked through both ways for one fictional couple at illustrative rates. The purpose of this page is to show the mechanics, including the tax relief most comparisons skip.
A fictional household, chosen so the numbers are realistic without being anyone's actual numbers. Priya is a higher-rate taxpayer; Dan is basic-rate. They have £500 a month spare after everything else.
Information and guidance only. Not personal advice. Priya and Dan are fictional. The right answer for a real household depends on facts not shown here. Verify decisions with a qualified FCA-authorised adviser before acting.
Overpaying turns £1,414 a month into £1,914. The balance falls faster, so less interest accrues each month, which compounds in their favour.
| Measure | Without overpaying | With £500 / month extra |
|---|---|---|
| Time to mortgage-free | 15 years | 9 years 11 months |
| Total interest paid | £74,533 | £47,577 |
| Interest saved | £26,956 |
The result is a guaranteed, tax-free saving of roughly £27,000, plus being mortgage-free five years early. Guaranteed is the key word: the mortgage rate is known, so the return on overpayment is known.
This is where the tax relief mechanics matter, and where most casual comparisons go wrong by ignoring them.
Every £80 paid into a relief-at-source pension becomes £100 in the pot: the provider adds basic-rate relief automatically. So Priya's £500 a month becomes £625 a month invested. Because she pays 40% tax, she can also claim a further £125 a month back through self-assessment, so the true out-of-pocket cost of that £625 is £375. On this page the £125 refund is treated as cash back in her pocket, not reinvested, to keep the comparison honest at £500 a month leaving the household budget.
| Measure | 15 years at 5% nominal (illustrative) |
|---|---|
| Invested (gross, £625 / month) | £112,500 |
| Growth | £55,252 |
| Pot at year 15 | £167,752 |
| Higher-rate refunds received along the way | £22,500 (£125 × 180 months) |
| Of the pot, tax-free on the way out (25%) | £41,938 |
| Remainder, taxed as income when drawn | £125,814 at her rate in retirement |
If Priya draws the taxed portion at basic rate in retirement, the pot's after-tax value is roughly £142,600 in nominal terms, plus the £22,500 of refunds received. The pension route wins on raw numbers in this illustration for one main reason: the taxman co-funds the contribution now, and (in this scenario) taxes it more lightly on the way out.
The bars are not the whole story. Route A frees £1,414 a month from year ten, which could then be invested for the remaining five years. Route A's return is guaranteed; Route B's assumes 5% every year, which no market delivers smoothly.
Run at a lower growth assumption the gap narrows sharply; the engine's ±2 point sensitivity band puts the pension pot anywhere from roughly £141,000 (3% nominal) to £199,000 (7% nominal) before tax. The comparison also changes completely if the mortgage rate rises at the next fix, if Priya's income falls below the higher-rate threshold (£50,270 in 2026/27), or if the money might be needed before pension access age, since pension money is locked until at least 55, rising to 57 from 2028.
Six factors decide this for a real household, and none of them appear in the chart.
40% relief now, basic rate later is the engine of the pension case. Basic rate both ways weakens it.
A guaranteed 4.9% saving beats an uncertain 5%. At a 2% fix the mortgage case fades; at 6% it strengthens.
Pension money is locked until 55 (57 from 2028). Overpayments come back only by borrowing or selling.
A paid-down mortgage lowers the household's fixed costs; a pension pot does not help with next month's payment.
Any unclaimed employer match beats both routes. That is checked before this comparison even starts.
Debt-free by 59 versus a bigger pot at 64 is a values question. Arithmetic informs it; it does not settle it.
Methodology. Mortgage amortisation computed monthly at 4.9% on £180,000 over 180 months (payment £1,414.07); overpayment case adds £500 a month until the balance clears. Pension case compounds £625 monthly at 5% a year nominal (monthly compounding) for 15 years. Tax relief per UK-2026.1.1 (2026/27): relief at source at 20%, higher-rate claim via self-assessment, higher-rate threshold £50,270, annual allowance £60,000, tax-free cash 25% within the Lump Sum Allowance. All arithmetic machine-checked before publication. Published 7 August 2026 · figures last verified 7 August 2026.
Sonuswealth is pre-launch. The app runs this comparison on your actual mortgage, your actual tax band, and your actual pension, side by side.