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AVC's or pay off interest free debt.

Hi all. I have a non-contributory final salary pension which I know is good but am not on an amazing salary. Ie not much spare cash. However if I did have spare cash would you advise paying off interest free credit card debt. Or pay into AVC's . I am 36 I know its better to pay into your pension earlier to give it time to grow, etc. That's why I'm thinking of holding off paying back the debt.otherwise it could be 5 -7 years before I pay off all my debt. (8k) and start contributing to Avcs. Thx for any advice.

Comments

  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Wellgood wrote: »
    Ie not much spare cash

    It's probably best to build up a good emergency reserve of cash e.g. six months' worth of outgoings. The best rates at the moment would be from either Regular Saver accounts, or from interest-bearing current accounts.
    Free the dunston one next time too.
  • Sorry - shd have mentioned I have some emergency cash already and some shares I could cash in if I needed to. Bearing this in mind what would you do with the int free debt vs AVC question
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    how long is the debt interest free? How were you thinking of paying it off when the term ends?

    I'd be saving the money to pay off the debt into an interest bearing acct (or even drip feeding it into S&S isas). Think of AVCs (or perhaps a personal pension) after you ahve enough saved to pay off that debt at the end of the term.

    Then AVC/pp which? Are your AVcs salary sacrifice or not? What is the scheme age? how can they be used (ie can they be used to fund your tax free lump sum so you can keep the max indexed pension from the main scheme).

    If you scheme age is say 60/65, and you want to retire earlier, a PP could be a good tool (along with S&S isas) as the PP can be taken from age 55.
  • opinions4u
    opinions4u Posts: 19,411 Forumite
    If you are confident you can clear the debt before it accrues interest pile in. If not, pay down debt.

    Assume they'll kill your final salary perk before the decade's out.
  • I guess my thinking is that I can just transfer debt to another int free card when int free period runs out. (Obviously pay a small balance transfer fee) so no rush to pay it down. My inital thoughts are similar to the replies- pay off debt.but I can't help thinking money in pension will work better the sooner I put it in. The plan is I would use AVC for 25% tfls so not to touch my main scheme. In summary- is there any arguments for basically funding avcs through interest free debt.? (As I will use monthly cash for avcs rather then debt repymts)
  • what if you lose your job, and new interest-free deals dry up at the same time? do you have enough cash savings to pay off the debt? if not, do you have enough by also selling off accessible investments?

    and after paying off the debt, how much cash savings and accessible investments would you have left over as your emergency fund?
  • opinions4u
    opinions4u Posts: 19,411 Forumite
    Wellgood wrote: »
    I guess my thinking is that I can just transfer debt to another int free card when int free period runs out. (Obviously pay a small balance transfer fee) so no rush to pay it down.
    Those fees are higher than returns in savings accounts. Circumstances can change and you can get lumbered with high rate debt. Bad plan. Pay off the debt.
  • As you have a final salary pension, I think your priority should be to clear your debts. You never know when 0% offers are just going to dry up!
  • Thx everyone.. message is clear
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