I have been working in Australia for several years, with a temporary residence visa. I expect to soon be returning to my home country (UK). At this point, my superannuation account will be closed, taxed, and the balance returned to me as a lump sum. I have no choice about this.
What is the most effective way to make use of this money, given that it represents a significant fraction of my current retirement fund? The two main options appear to be:
- Immediately deposit it into a UK pension fund or other investment vehicle earmarked as retirement savings; or
- Use the lump sum to reduce my mortgage, and then increase my regular pension contributions to reflect the reduction in monthly mortgage payments.
I think (2) is the most cost-effective strategy, as it significantly reduces the total interest I pay on the mortgage. Am I missing anything?