Starting a pension when on a DMP?

lemoncheesecake

Hi all,

I'm due to start a new job next week and part of the package is an option to join the pension scheme. As far as these schemes go I'm advised its one of the best (a local government one). Job is a big pay rise so will be coming out with about the same as I am now if I pay into the pension scheme so am sure we can continue as we are budet wise.

But.....we still owe 6.5K in debts that are being paid back via payplan and we also have a large mortgage that we are only paying back interest on at the moment so not sure what to do for the best.

We are mid thirties with kids, no savings, no other pension plans and finally starting to grow up financially so want to make sure we make the right decision here - can anybody offer any advice here?

immoral_angeluk

In my experience it varies from creditor to creditor. Some see it as an acceptable household expense, whereas some will question it and deem it nonessential, in which case they would be unlikely to agree. Way they see it would be if you could afford to pay money into a pension you could afford to pay them more. Practice varies. I would discuss it with Payplan and see what their policy is on it.

pepe2008

If you are getting a pay rise, there will be no problems as you will ( I assume) not be reducing the amount you are paying to your dmp.
You should go into the Pension Scheme, particularly if your Employers are making Contributions. Your own contributions will be taken from your pay so you will not me making them as an extra item on your Monthly Expenses.

Re-set your DMP once you have started your new job and know how much you will be bringing home.

Be careful about cancelling any Life Cover you currently have ( because there will be cover as part of your Company Pension Scheme) because you may have a change of circumstance in the future that would make Life Cover harder/ more espensive to get at a later date.

I wouldnt involve Payplan, they are not able to advise on Pensions etc.

JasX

Is there anything stopping you joining it and then only quoting your net income when setting up DMP calculations.

Very sensible thing to join, do they expect you to be living off credit into your 80's ??

jh2009

If you can, join the Local Government Pension Scheme. You will bitterly regret it in later life if you don't.

Im sure if you are maintaining any agreement to pay off your debts, this isnt an issue.

lemoncheesecake

thanks - I wasn't going to contact payplan about this and was going to continue to pay the same amount towards the debt that had been agreed. New salary minus pension contribution is almost same as current salary.

I was really wondering whether it would make more sense financially to pay what the pension contribution woulod be towards the debst instead and then perhaps towards the capital on themortgage

be interested to hear your views

immoral_angeluk

jh2009 wrote: »

If you can, join the Local Government Pension Scheme. You will bitterly regret it if you don't.

Im sure if you are maintaining any agreement to pay off your debts, this isnt an issue.

It is if it comes to light that the client has 'uneccesary' expenditure which could've been money paid to creditors. As I said, practice varies but it's something he'd need to clarify with Payplan as if it comes to light and you haven't told Payplan or the creditors about a change of circumstances then the agreement is likely to be cancelled.

pepe2008

Definitely join it. Payplan cant offer Pension advice...and it certainly wouldnt be in your best interest NOT to join.
You will still be fulfilling your responsibilities to then Creditors. Bit of a repeat of my post above I know.

immoral_angeluk

pepe2008 wrote: »

Definitely join it. Payplan cant offer Pension advice...and it certainly wouldnt be in your best interest NOT to join.
You will still be fulfilling your responsibilities to then Creditors. Bit of a repeat of my post above I know.

They can't offer Pension advice but any changes to your income/expenditure need to be mentioned and I'm fairly sure Payplan wouldn't be too happy about being kept in the dark about something that may or may not effect payments to creditors.
Honesty is definitely the best policy. Tell Payplan and let them tell you how they would do it, balls in their court then. The op made an agreement with them and that would include keeping them up to date about change of circumstances.

They may well turn round and say it makes no difference, but better to have it from the horses mouth that to live with ifs buts and maybes.

pepe2008

lemoncheesecake wrote: »

thanks - I wasn't going to contact payplan about this and was going to continue to pay the same amount towards the debt that had been agreed. New salary minus pension contribution is almost same as current salary.

I was really wondering whether it would make more sense financially to pay what the pension contribution woulod be towards the debst instead and then perhaps towards the capital on themortgage

be interested to hear your views

No, pension Contributions ( and dont forget the Employers Contributions, tax advantages and Life Cover) will grow and youhave another 25+ years for this to happen. The debt is short-term.
You may find that you have a 'one-off' opportunity to take up the offer of the Company Pension.

JasX

lemoncheesecake wrote: »

I was really wondering whether it would make more sense financially to pay what the pension contribution woulod be towards the debst instead and then perhaps towards the capital on themortgage

I suppose you'd need to look carefully at the specifics of the pension scheme but my gut feeling is pension is still the sensible option, your contributions will be 'topped up' by not having tax deducted and quite likely further contributed to by your employer, then will appreciate over the next 30 years and should deliver a very decent pension (public sector ones are usually very very good -I also work in a sector renouned for generous defined benefit pensions and after only 3 years looked up some annuity charts and worked out I'd need several 10s of thousands in a cash pension pot to give similar income at retirement).

Not sure of the size of your debts but unless you're really being clobbered with high interest rates pension is probably the sensible move... although I have no idea what happens to a pension in the event of bankruptcy so if thats potentially looming would be wise to find out and take advice

I wouldn;t recommend passing up the pension for mortgage overpayments, in a generous government scheme tax benefits + employer contributions + years of appreciation will almost certainly offer better value than the mortgage interest you'd avoid