Cashing Out Defined Benefit pension?

Malthusian

atush wrote: »

A side note, concerning your teenagers. Once they finish college and get work, charge them rent.

Get them to move out, downsize again and pay off the credit cards is likely to give a better return. Otherwise he's trying to run a buy-to-let business on high interest credit card debt.

I realise he's already moved once and moving house is stressful and expensive, but downsizing by 2 bedrooms should release enough capital to pay off the credit cards.

Agreed that the debt free forum is worth visiting. The OP is right that he needs to start looking at other solutions now. Scraping by for seven years while watching £20,000 in credit card debt multiply and re-multiply is not a sensible course of action. OP - you said you were "making the payments" - are you actually paying the credit cards off or do you mean you are making the minimum payments?

Malthusian

LHW99 wrote: »

Would it be possible to transfer your existing current employers DC pot to somewhere where you could draw it down, and then rejoin the employer's scheme a week later to build up a new pot?
25% of that may clear the credit card debt, and if that's all you take, doesn't (I think) trigger a reduction in future contributions to DC schemes.

Correct, taking the 25% tax free cash doesn't trigger the Money Purchase Annual Allowance (which restricts your future contributions). Unlike taking taxable income, which does. In fact if the OP was 55 that would probably have been option number 1, not cashing in the DB pension. However, as he is just under 48, it's of little use right now.

atush

Malthusian wrote: »

Get them to move out, downsize again and pay off the credit cards is likely to give a better return. Otherwise he's trying to run a buy-to-let business on high interest credit card debt.

I realise he's already moved once and moving house is stressful and expensive, but downsizing by 2 bedrooms should release enough capital to pay off the credit cards.

Agreed that the debt free forum is worth visiting. The OP is right that he needs to start looking at other solutions now. Scraping by for seven years while watching £20,000 in credit card debt multiply and re-multiply is not a sensible course of action. OP - you said you were "making the payments" - are you actually paying the credit cards off or do you mean you are making the minimum payments?

Fine and fair enough, if they earn enough to move out. Mine do, but I have only a 5K mtg on a property worth nearly 1 mil.

They may not earn enough to move out.

p00hsticks

dunstonh wrote: »

So, this means that you would pay 40% on the taxable part of the pension.
You would also lose child benefit that year.
You would also lose your personal allowance (creating nearly £5000 in additional tax)
You would also have to reduce your pension contributions which would mean losing some of the employer contribution (free money).

So, you would lose around half that pension in tax and benefits as well as future lost free money.

I would start looking at the other options. IVAs you may not like but it is almost certainly the cheaper option.

And don't forget that the OP will have to find a couple of grand to pay for the financial advice required to transfer the pension in the first place...

LHW99

In fact if the OP was 55 that would probably have been option number 1, not cashing in the DB pension. However, as he is just under 48, it's of little use right now.

However even if the DB pension was the one transferred out, the same would surely apply - no access until 55.