Company pension or pay off debts?

Jenny2008

My husband has just become eligible to join his company pension scheme. When he first started this job we agreed that he wouldn't join because we thought it more sensible to clear debts before we started making any savings.

But, husband had a meeting with the pension advisor at work as standard and he's agreed to £50 a month to come out of his salary. I wasn't too chuffed because he didn't discuss it with me first, but that's another story!

My first reaction was to get him to cancel it (our debts are £40k, so £50 is a big chunk out of paying them off), but the thing is, along with his £50 contribution, the government's and his company's, the monthly contribution then shoots up to £125. So for a £50 investment we're getting £75 'free'. Hmmm. The other thing is, our house is up for sale and the proceeds from the house sale will pretty much clear our debts. If it sells that is.

So, what to do? Is it worth keeping the pension while having debts?

MurrayMint

Hi Jenny,

I would say pay into the pension, and maximise on the company contribution and the tax relief.

I have paid my pension for the last 10 years on this basis, but have now (very reluctantly) put this on hold in order to put the money towards debt. But, my situation is different because I recently started a debt management plan, which will take 23 years to pay, but will drop by 10 years with this extra money. Plus, I do not plan on selling my house, so there are no other chances of clearing this debt.

I think a 125% top up on his contribution is too good not to take up - you won't get that return anywhere else. Just as long as you're not in dire-straights!

HTH
MM

Jenny2008

MurrayMint wrote: »

Hi Jenny,

I would say pay into the pension, and maximise on the company contribution and the tax relief.

I have paid my pension for the last 10 years on this basis, but have now (very reluctantly) put this on hold in order to put the money towards debt. But, my situation is different because I recently started a debt management plan, which will take 23 years to pay, but will drop by 10 years with this extra money. Plus, I do not plan on selling my house, so there are no other chances of clearing this debt.

I think a 125% top up on his contribution is too good not to take up - you won't get that return anywhere else. Just as long as you're not in dire-straights!

HTH
MM

Thank you Murray Mint. It doesn't really leave us in dire straights, but like a lot of people we have very little room for maneouver with our finances and every little spare penny is going to paying off debts. I heard £50 and I thought 'eek!' (:eek:)

We can still make our debt repayments, with a tiny bit left over to throw more than minimum payments at them, so I guess you're right - the return is too good to pass up!

Thanks again.

LiamJ

Yes, I'm with MurrayMint on this, that pension deal sounds too good to miss out on. Specially as you hope to be pretty much debt free if and when the house sells. Good luck.