Using pension to pay off debt.

Enchilada_2

Hello,

Put this on wrong board so have moved across. Can anyone give me advice on this please??

****

I have debts and no savings (yeah life's great). Not tonnes of the stuff but enough to make life a general misery. Now you'll have to bear with me as I know NOTHING about money so it needs to be explained slowly IN BIG LETTERS.

I currently owe about £800 on a bank loan (this has taken years to get to this stage and will be paid off in November yippee), £1600 on an overdraft (absolute bane of my life, always going over the limit so get charged every month) and £2500 on a credit card (hate this stupid card, needed it for a genuine emergency and now can't pay it off). This is £4900 of general misery (I don't even count the student loan!!).

Now, I've been working in my job for just over 2 and a half years and I joined the pension when I started so have paid, conveniently, at my reckoning about £4900 of my salary into it. This may sound really, really stupid but can I just cancel the pension, withdraw it and pay off my debts with it? It's a public sector Essex County Council pension which I understood was a "good deal" but really I would rather just pay debt now and save the constant cost/charges and re-evaluate my money situation from a blank slate. It's not as simple as this I fear. Has anyone got any advice. (I'm also owed £1880 by my boyfriend but I'm not gonna see this anytime soon....).

Thanks for your time

Enchilada_2

Just read one of the stickies and think it answered my question anyway.

Bit confused as to why I should bother with a pension at all really though now!!!

CannySaver_2

Enchilada wrote: »

Bit confused as to why I should bother with a pension at all really though now!!!

I think you should re read whatever you just read and stay in the pension.

The local government scheme provides a guaranteed pension when you retire, to get it you need to take no investment risk, and each year it will rise in line with inflation.

Most people who have to use personal pensions or money purchase workplace schemes would sell their gran for a pension like you are thinking of leaving and many of your colleagues are thinking about striking to save it.

Join it / stay in it!

The Canny Saver

Rupert_Bear

Enchilada wrote: »

Hello,

Put this on wrong board so have moved across. Can anyone give me advice on this please??

****

I have debts and no savings (yeah life's great). Not tonnes of the stuff but enough to make life a general misery. Now you'll have to bear with me as I know NOTHING about money so it needs to be explained slowly IN BIG LETTERS.

I currently owe about £800 on a bank loan (this has taken years to get to this stage and will be paid off in November yippee), £1600 on an overdraft (absolute bane of my life, always going over the limit so get charged every month) and £2500 on a credit card (hate this stupid card, needed it for a genuine emergency and now can't pay it off). This is £4900 of general misery (I don't even count the student loan!!).

Now, I've been working in my job for just over 2 and a half years and I joined the pension when I started so have paid, conveniently, at my reckoning about £4900 of my salary into it. This may sound really, really stupid but can I just cancel the pension, withdraw it and pay off my debts with it? It's a public sector Essex County Council pension which I understood was a "good deal" but really I would rather just pay debt now and save the constant cost/charges and re-evaluate my money situation from a blank slate. It's not as simple as this I fear. Has anyone got any advice. (I'm also owed £1880 by my boyfriend but I'm not gonna see this anytime soon....).

Thanks for your time

By all accounts you have been very foolish in the past but please do not add to it. You are talking about your future financial security.

dunstonh

Bit confused as to why I should bother with a pension at all really though now!!!

Clue is in the name. It is called "pension". That is why you do it. Plus, you have a great pension scheme that most in the private sector would love to have.

CLAPTON

if, as you say you know nothing about money then it's pretty essential that you start to learn


firstly learn to budget
a reasonable place to start is here
http://www.makesenseofcards.com/soacalc.html
make sure you include ALL the yearly (holiday, car insurance, tax, xmas, birthdays) or quarterly costs (so annual costs just divide by 12 and put them down as monthly

secondly start a spending diary and write down everything you spend so you can account for every single penny

thirdly compare your spending diary and you budget and your bank account regularly (initally every week at least)

fourthly in BIG LETTERS STOP SPENDING

it you wish you can post up the budget and invite comments for ways of reducing spending ..or go over to the debt free wannabe board where people regularly do this.

and by the way stay in the pension scheme ; you'll never get a better deal

atush

You don't need the pensions forum. Yo have a great pension- you need to stay in your pension. If you paind in 4900, your employer will have paid in twice as much or more. Not to mention the tax you saved.

So, go to the Debt Free forum. This is where you will learn how to free yourself from your burden. tHey will help you trim your spending and give you tips on increasing what you earn. And to start, list your debts in order of the interest rate- and tackle them IN THAT ORDER. Each one, once gone means you hit the next that much harder.

thenudeone

Enchilada wrote: »

Bit confused as to why I should bother with a pension at all really though now!!!

Because you don't want to work until aged 70 then spend your retirement trying to work out how to live on a state pension that's only a quarter of the average working person's income?

JoeCrystal

CannySaver wrote: »

The local government scheme provides a guaranteed pension when you retire, to get it you need to take no investment risk, and each year it will rise in line with inflation.

Most people who have to use personal pensions or money purchase workplace schemes would sell their gran for a pension like you.

I agreed, these kind of pension schemes are like gold dust. I have to admit that joining that pension scheme is most likely your best financial decision you made ever , please do not leave your pension scheme!

Frankly, I would argue that your pension payments is one of the most important payments you need to make among all other payments. In doing so, you are ensuring a known good quality pension scheme that is effectively safeguarded. Unlike most people on private pension schemes, you have far better idea of what you will get when you retire. After all, the "private sector" cost of "2/3 of final salary pension" is roughly 25% of your salary for forty years. Add in death in service benefit and so on, it is far higher (I might give it a go to work out how much it would cost in private sector). A lump sum death grant, an ongoing survivor's pension or/and (?) children's pensions.

Therefore, to leave it would meant that you would make one of the worst if not, the worst financial decision you ever made.

Cheers

Joe