Pensions

Numpty_2

Hi
Hope you don't mind me leaping straight on, but have been trying to look at ways to clear my debt quicker without putting more on the credit cards every month. I've used the snowball calculator and think I have a sensible payment plan. However - I have a pension going straight off of my salary at £150 a month (I assume this is before PAYE). This is for a final salary pension scheme.

I'm only 25, would I be stupid thinking about pulling out of the pension scheme, getting the money I've paid back in (about £2400) and pay off my debts quicker first. I'm also only on a fixed term contract with work which ends in 8months, so chances are the next place won't have a final salary scheme anyway (does anyone know how meging pensions works anyway!).

Am I really stupid in considering this.

Oh BTW - this is my debt list (bar student loan) - eeek!

Graduate Loan £2410 - fixed payments of £267.80 a month (no overpayment)
HSBC Credit Card - £200 (20.9% APR I think)
Lloyds Credit Card - £1500 (17% APR)
BoS Card - 6500 (0% for another 6months)
HSBC OD - £1500 (£1000 at 9.9%)
Abbey OD - £500 (0% for another year)
Egg CC - £3000 (Husbands card I seem to be paying, dont know interest rates)

Thanks!

seraphina

My gut instinct is don't touch ANY money you have in a pension scheme, especially if it's in a final salary one!

Money you put into a pension whilst you're young is worth more than if you put it in when you're older, simply because it has more time to mature.

It's obviously up to you, but if you're coping okay with your debt repayments now, I would leave it where it is.

Emmzi

Generally you can't just take money out of a pension -once it's in, it's in til you retire. (I've tried!)

you need a specialist financial advisor to help when merging/ transferring pensions from scheme to scheme. (I tend to leave a trail of pensions behind me..! HAve 4 ready to pay out when I'm older, but I go for 'spread the risk..!')

I took 2 years of pension to fix debt. It may not have been the wisest financial decision but it was something I needed to do to feel free. For pure financial advice - you need someone qualified, and all your pension scheme and projection information.

Numpty_2

Seraphina (are you seraphina from the H site too?) - that was my gut instinct too. I'm managing by, just, on paying debts back - my only struggle is because I try and pay them all back too fast I've ended up struggling.

Emmzi - I thought I read (but you could well be right, in which case it's definitely not worth it) - that I could take the amount I'd invested out, but obviously my employers would keep their lovely (13% of my salary) invested. I suppose I just feel uncomfortable with that debt level now I've seen it written down, so looking at possible cut backs.

CLAPTON

just bare in mind they your payments to the pension are free of tax and NI so although you stop paying 150 the tax man will come along and take some of it so you get less than that to spend

seraphina

Numpty wrote:

Seraphina (are you seraphina from the H site too?) - that was my gut instinct too. I'm managing by, just, on paying debts back - my only struggle is because I try and pay them all back too fast I've ended up struggling.

Emmzi - I thought I read (but you could well be right, in which case it's definitely not worth it) - that I could take the amount I'd invested out, but obviously my employers would keep their lovely (13% of my salary) invested. I suppose I just feel uncomfortable with that debt level now I've seen it written down, so looking at possible cut backs.

:wave:
'Fraid so

I know what you mean - I sometimes get overzealous and pay off more than I can afford and wind up having no money for the last two weeks - I find it hard to accept that I might not clear my cards as soon as I want to. Have you tried phoning up the lenders and asking if they would apply any promotional interest rates to your current balance? I tried this with Barclaycard and got a 6.9% LoB.

Numpty_2

Yep - thats my problem. Plus I paid off one card with a 0% one, and ended up needing it for something - and whilst I havent overdone it (well for me!) the DD is still set up at £250 a month. I really should change that - although the snowball things says thats the first that needs paying off.

I take home £1563.95 a month and pay out £942.80 in debts and then £500 into a joint account for bills mortgage and food, which leaves me £120 ish for petrol, running the car and other things (normally weekends away/dinners/clothes shopping), I have to decide whether to reign in the amount of extras I need every month or pay slightly less. Far too many decisions for me!

msmicawber

Hi Numpty,

Final salary pension schemes are almost as rare as hens' teeth these days, so I wouldn't recommend coming out of one or stopping paying into it. They don't give you back your premiums in cash anyway, merely agree to transfer them to another scheme or freeze it for you (which is probably the best option). When you change jobs you may be able to continue paying into the scheme (you'll need to check the terms & conditions). IMHO, it's best not to consider any pension premiums as possible income to be diverted to pay debts or whatever else. Other things may come up later in your life that force you to have a pension payment holdiay - illness, unemployment, maternity leave ...

Although middle age seems a long time away now, before you can say knife you'll be in your 40s worrying about how to get enough money in your pension fund to avoid a retirement working in B&Q and eating cat food.

Your debts don't seem that huge - is your husband not earning at the moment? If he is, why are you paying his Egg card off?

Why have you not included your student loan - are you earning below the threshhold for repayment?

A good start would be to set out a full SOA. If your finances are inextricably linked with our husband's, then a joint SOA would be better. Then the DFW nerds can get to work advising how to reduce your debts without jeopardising your retirement provision.

Numpty_2

msmicawber - I seem to be paying it back, because I cant remember why, but I am!

Yes he's earning - he also won't show me how his debt payments are coming along so as much as I try and look at them as joint debts to see if we can clear them jointly together, I can't. I have a feeling his heads in the sand, so I'm trying to prompt him slowly - hopefully we'll be there soon!

I dont count my SL because it goes straight out of my salary, and being the student loans company, havent had a statement in eons.

Right
Income - £1563.94
Outgoings - £500 - mortgage, bills, food
Grad Loan - £267.80
HSBC Card - £50
LTSB Card - £250
BoS Card - £150
HSBC OD - nothing yet, this is my regular account
Abbey OD - £75
Egg CC - £150
Petrol - £100 a month
Evenings out/weekends away - average £100 a month

Any extra petrol I use, unexpected expenses go on the Lloyds TSB credit card.

seraphina

Your H sounds the same as mine - Mr S likes to keep everything ticking over nicely but isn't that fussed about extra payments or getting debt free sooner. To be fair, he has more financial committments than me - he pays for council tax, car+bike maintenance, almost all our petrol - but I have a new job starting soon which will mean I can start to pay my way.

In the meantime it's a lead by example thing - I try and translate things into real terms - eg less money on boring utilities = an extra takeaway/money towards something we both want.

The one thing I would be tempted to do is clear your HSBC cc asap, even if it makes meaning minimum payments on one or two of the other cards. It's a horrendous APR and it means that the next month you'll have a bit more money (even if it's only an extra £10/20) to throw at some other stuff.

Have you already looked at changing gas/electric suppliers?

Numpty_2

Changed gas and electricity about 3months ago, still the cheapest (and we get the 12month free which is nice). I'm going to pay that card all off next month and get rid of it I think, then start on the Lloyds one.

We're also selling our second card soon (hopefully), so that'll be another 2k to the pot.

The problem isnt the joint money as such, its his own spending - he went through a period of having nothing within a week of payday, now he always seems to have money, he hasn't had a pay rise so I dont know where its coming from. I'm worried he's putting more back on credit cards he's restructured recently!