55 Conundrum

grocerjack

kidmugsy wrote: »

A valley girl speaks.

Lol, about as far from that as possible. London geezer.

grocerjack

HappyMJ wrote: »

It depends on what interest rates you are paying on your debts. If they're credit cards charging a lot of interest then do whatever you can to pay them off as no pension fund will ever return enough to exceed what you're paying in interest.

If you're paying less than what the SAYE scheme returns then there's no need to pay the debts off any sooner.

I personally have a lot of debt at 4% APR or less but I earn more in interest/returns from savings and investments so there's no need to pay any of them off.

Actually it's about half and half, 50% are high and 50% are very low. I'll try and use a spreadsheet to calculate what the overall % is versus the overall debt, but it's an interesting thought that hadn't occurred to me. Calculating returns on the shares is trickier but the BOGOF would need a catastrophic share tumble to lose money. The SAYE scheme return is variable as it depends on a 5 year performance improvement, but to date this has always been delivered and in most years I've doubled the investment over that period as a minimum. This won't always be the case but the company (a huge Telco) has multi-billion pound valuation so I'm not expecting any disasters soon. However should the share price be lower than the total set at the beginning of the 5 year scheme, the 3 month bonus is still paid so you don't lose unless it would hve earned more in another vehicle.

Thanks for that point though. All the replies much appreciated.

Blue_Parrot

On the basis of "All the replies much appreciated", just reading down this and trying to understand some of it:

.....to become debt free aside from the mortgage.

......Debts are around £17k....

So you are £17,000 in debt PLUS the mortgage? How much is the mortgage per month and when will it be paid off, I have to wonder.

Plus it gives me enough to upgrade a holiday mobile in France with a small amount per month for the shortfall in the total mobile cost (but way less than the debt servicing I manage now). It's not a Ferrari treat but it would secure our holidays each year for the next 10-12 years.......

Why are you considering upgrading holiday mobiles in France when you are £17,000 in debt plus the mortgage? (leaving aside why would anyone want to commit to spending their holiday in the same place each year for 10-12 years when there's a whole wide world out there.......)

.....and the inner devil is saying to hell with being uber cautious.

After what's happened to me in the last twelve months, I'm in the To Hell with being Über Cautious club, to some extent. No one knows what's round the corner - literally. Being completely disabled with upper and lower body injuries and in a wheelchair for four months after a RTA can do that to a person's perspective. However, our mortgage is long ago paid off and we owe not a penny to anyone: debts were cleared years ago. Now I'm in the Spend The Kids' Inheritance Club, we've earned it.

Returning to your posts:

.......but have been paying the minimum or a little above.

Blinks, slowly. This in regard to paying off the debts, I think. My gut instinct is :eek: crazy! You're talking about not paying off the debts and are talking about investing in a Holiday Home??????

...........as long as I remain employed with this company. I would wager the vast majority of people would love to be saving £375 per month with a final salary pension locked away.

You don't know how long you will remain employed, since you're not self-employed (and even that status can be hit by unforeseen events like road traffic accidents).

Personally, and feel free to disregard this, I think you are focussing too much on spending opportunities and nowhere enough on becoming debt-free as fast as possible. Look at it this way, perhaps. Would you want your spouse/family to inherit your £17,000 debt if life jumps up and smacks you in the face? And have to sell your French holiday home to pay that off? :question:

grocerjack

Blue_Parrot wrote: »

On the basis of "All the replies much appreciated", just reading down this and trying to understand some of it:

So you are £17,000 in debt PLUS the mortgage? How much is the mortgage per month and when will it be paid off, I have to wonder. The mortgage is around 1200pm and is paid when I'm 65, unless I pay a but more off each month which I'm considering as we're well into reducing the capital now

Why are you considering upgrading holiday mobiles in France when you are £17,000 in debt plus the mortgage? (leaving aside why would anyone want to commit to spending their holiday in the same place each year for 10-12 years when there's a whole wide world out there.......) because we can release some DC pension pot , clear the debt and still have enough to treat ourselves. We're francophiles with every intention of retiring to France. We both speak it pretty well and we would rent the home out during July freeing us to do a few cruises (although our wanderlust has been pretty well sated over the years)

After what's happened to me in the last twelve months, I'm in the To Hell with being Über Cautious club, to some extent. No one knows what's round the corner - literally. Being completely disabled with upper and lower body injuries and in a wheelchair for four months after a RTA can do that to a person's perspective. However, our mortgage is long ago paid off and we owe not a penny to anyone: debts were cleared years ago. Now I'm in the Spend The Kids' Inheritance Club, we've earned it. I'm so sorry to hear that. That's the kind of thing that makes me think spend some now and get debt free which a lot of commenters seem to have missed. The £17k would reduce to £1100 (Argos) my DC pension pot would reduce but if I stay with the company i could have 11 years employment left, plus my DB scheme and another smaller pension pot remain intact and growing at the rate of inflation each year

Returning to your posts: Blinks, slowly. This in regard to paying off the debts, I think. My gut instinct is :eek: crazy! You're talking about not paying off the debts and are talking about investing in a Holiday Home?????? Actually it is exactly that, paying off and clearing the majority of the £17k. And then with the money that's left from the planned £35k DC pot raid upgrading to a new mobile home. I wouldn't have any more credit cards aside from the Argos card as we've learned to live without the others for over 5 years now. We've used savings and dividends from shares to buy what we need. My biggest luxury is a season ticket

You don't know how long you will remain employed, since you're not self-employed (and even that status can be hit by unforeseen events like road traffic accidents). Agreed and that's what makes me think to hell with it. Life's too short. I'm reducing an overall pension of circa £40k (DB), £6k (DC if left untouched) £1.2k (reserved pension from mis-selling) and say £10k state pension ...so roughly £57.2k pa to around £53k pa, and that's not including my wife's pensions

Personally, and feel free to disregard this, I think you are focussing too much on spending opportunities and nowhere enough on becoming debt-free as fast as possible. Look at it this way, perhaps. Would you want your spouse/family to inherit your £17,000 debt if life jumps up and smacks you in the face? And have to sell your French holiday home to pay that off? :question:

I hope my answers cover your well made points! If life does do that, and I appreciate that more because I'm 54 and you can feel mortality's breath a little closer each year, then I have life insurance through work, share schemes, a final salary pension to take care of the family and around £350k equity in the house. My point is I'm wondering if a reduction in income when retired is balanced against being debt free now and using some of the money I've invested to treat us to something we love.

Thanks for the reply, and I really hope things look up for you soon. have you told the kids the inheritance is going

atush

Have you looked up snowballing yet? Basically pay all debts at the min, and put every spare penny against th highest interest rate debt- until it is cleared. Once that one is, hit the next highest and so on.

Forget about upgrading your mobile home. Consider it if you must once all debts are paid off. It isnt like you cant stay there now.

then I would condiser, at least until the debts over 8% are cleared, not paying more into the SAYE scheme- re entering once they have been. Or use the 25% TFLS to pay off the highest debts, then snowball the next highest.

And you really should do an SOA, and a spending diary. As you really should have a cash saving pot for emergencies at this point.

AlanP_2

Agree with suggestion re Cash Pot for emergencies - you never know when something will come along and derail the best laid plans.

As for upgrading the Mobile Home then why not? You are in a luxurious position of having a secure retirement almost guaranteed via your DB scheme.

To my mind what you need to plan for is what happens if redundancy or something strikes before your company will treat it as early retirement as that seems to be your riskiest period (worth checking what reduction in annual pension an early retirement would cause as well).

One option, as suggested above, that would minimise tax implications and not trigger an Annual Allowance reduction would be to take the 25% TFLS and make use of that.

You could, presumably, repeat that each year albeit only against the growth in the pot over the preceding 12 months.

How does the loan compare to the mortgage interest rate wise? Could you cut back on the mortgage payment for a period and boost the other side before attacking the mortgage again?

grocerjack

Hi, I'll try and deal with your points below as it makes it easier in my mind to reply....it's an age thing

AlanP wrote: »

Agree with suggestion re Cash Pot for emergencies - you never know when something will come along and derail the best laid plans.

As for upgrading the Mobile Home then why not? You are in a luxurious position of having a secure retirement almost guaranteed via your DB scheme. Thats my point really. The risk seems low here as the DB pension remains untouched. As does the top up one from Scottish Widows, although it's a very small amount in comparison.

To my mind what you need to plan for is what happens if redundancy or something strikes before your company will treat it as early retirement as that seems to be your riskiest period (worth checking what reduction in annual pension an early retirement would cause as well). Yes, that is a potential spanner in the works and the worry is that getting any job on my salary at 55 or over is hard as companies today seem to value experience less than youth...even if they accept that todays youth are unlikely to stick around in the company very long. A lot of our grads get the training, get a few years under their belt and then solicit themselves around until something better comes along. Fair play to them, but I think big companies like mine are being very short sighted in undervaluing experienced people like me when recruiting. The company makes very generous compromise payments on redundancy and always has done. On average someone my age, with 22 years service would get between 12-18 months salary depending on grade. All my BOGOF shares are paid up tax free, and the SAYE schemes are refunded with the bonus payment. Holiday is of course paid up as is the 90 day statutory period. On top of that any pro-rated bonus is also paid, so if you are made redundant 10 months into the year you'd get 10/12 months annual bonus - this is taxed. Is it enough to change my life? Probably not, but it would be 6 figures for sure...of course the hard working tax man would take his chunk from that...you know because he's earned it! I have a redundancy plan which covers what I could do and I like, what I can do but don't like and some ideas that are a bit 'out there'. Contracting might be an option as my knowledge of the industry I work in and the technologies used is substantial. But it would be a risky and tough period.

One option, as suggested above, that would minimise tax implications and not trigger an Annual Allowance reduction would be to take the 25% TFLS and make use of that. This is the bit I'm unclear about. I thought I could take 25% of the pot tax free and do as I wanted. But it seems you can take 25% of any cash withdrawal free but will pay tax (40% in my case) on the remainder. However to become debt free now, with just a mortgage and get the mobile upgrade is very tempting if only to tell the credit card companies where to go. I'd reduce the Argos card balance to half what it is now and keep that as it is very useful.

You could, presumably, repeat that each year albeit only against the growth in the pot over the preceding 12 months. That was the plan when I thought the new freedoms meant I could take 25% of the pot tax free but it doesn't seem that way now on re-reading it. If I'm wrong then that's what i would revert to.

How does the loan compare to the mortgage interest rate wise? Could you cut back on the mortgage payment for a period and boost the other side before attacking the mortgage again?

My mortgage is sitting at 4.2% interest as there was a floor on how low it could go when the deal ran out. we pay the amount they ask for, but clearing debt down might mean we could pay off say £200 per month more to reduce the capital even more quickly.

Thanks for the comment as well. it seems to me you might be the only one that understands my position, in that it's pretty good and I have some decent choices in front of me, and yes some risk relating to work....but then who's job is safe? The idea of having one store card and no credit cards is a compelling one as I would not use a credit card again, and indeed haven't for some time because of the share options and the dividends which fund holiday spending money and any other things that Argos don't do, like carpets or decorating etc.

Much appreciated :T

atush

4.2% is really high these days, geez?

grocerjack

atush wrote: »

4.2% is really high these days, geez?

Yep i agree, but when the time is right I will re-mortgage on a new deal. For the time being the capital is reducing. I won't get caught again when renewing.

AlanP_2

It seems to me that you can take 25% of your DC pot at Age 55 TAX FREE, and then if you don't withdraw any more you won't pay tax as their is no INCOME being paid out.

So say your current pot is £40k - Take £10k and the remaining £30k will stay invested as a crystalised pot and continue to grow (hopefully).

Make new payments into DC pot + some growth gives you say £12k 12 months hence.

Repeat above taking £3k tax free with the other £9k becoming a crystalised pot again.

I can't see the issue with that but I haven't got your stage yet in terms of needing to make a withdrawal.


As for CCs - Have you looked into opening a new 0% Balance Transfer Card to avoid any interest payments at all on the debt?

There are some that allow you to take it as cash effectively and then pay off a non-CC loan if that is the case.

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