Yikes! I'm making the call tomorrow

bugslet

I'd listen to Ermines advice. When does the 0% finish, and could you get another 0% deal when it finishes?

Have you done a budget? Could you look at your spending* and/or see if you could sell something, cut some of your spending for a year and clear the debt that way? If you could, you'd benefit from more pension later.

*honestly not being judgmental, it's amazing to keep a spending diary and see how money leaks!

dunroving

I think you should read about the classic Stanford marshmallow experiment, and leave your pension where it is.

There's also a TED talk about it: https://ed.ted.com/featured/nvJHP79R

Spreadsheetman

Good advice from Ermine (as always).

The big picture is that you need to work backwards from what it would cost you to live in retirement - and be realistic about one-off costs (there is always something that comes up). Then see how you can change your financial situation over the time up to retirement to make whatever income you end up with work.

You've got to do all the groundwork first.

Anonymous101

Spreadsheetman wrote: »

Good advice from Ermine (as always).

The big picture is that you need to work backwards from what it would cost you to live in retirement - and be realistic about one-off costs (there is always something that comes up). Then see how you can change your financial situation over the time up to retirement to make whatever income you end up with work.

You've got to do all the groundwork first.

Best piece of advice you'll get... far too many people have their heads in the sand about the cost of their lifestyles and how much they'll need in retirement.

They save far too little and think they spend far less than they do. Then they don't understand how much income their pots will give them.
Also some people have far more than they need but continue to work flat out because they don't know how much they need.

luvpenguins

Thank you all for your great advice, I am having second thoughts now. I received my details from the other pension this morning. I can take a maximum lump sum of £24,000. If I leave it all there until retirement it would provide me with an income of about £9,000 pa. Add this to the other pension, I could take about £7500, or if I leave it I would get an income of about £3,000 pa so far.

I have taken on board the comments about changing my spending habits, and I fully agree I could be better. My eldest son has been struggling financially for a while, he moved in with his gf 18 months or so ago, and a lot of my disposable income has gone on helping them set up in their rented house, plus he is always in his overdraft and never has any money. I would love to be able to help them with a deposit for a house as I begrudge that they are paying off someone else's mortgage.

My tax has gone up tremendously over the last few months due to my petrol company car, that will go down in March, so I will have more in my pay packet than I do at the moment.

I know what my problem is. I have never had any money of my own. I have never been able to have savings. When I first started work at 16 my dad left so I had to help my mum keep the roof over our heads. I lost contact with my father (although he stayed in contact with my older brother). He died three years ago, and I found out recently that he had left £250,000 in his will, a lot of which went to my brother. I got nothing.

Since my ex husband left when my youngest was 3 months old I have worked all hours to support us, and I have worked my way up to have a decent job with a decent salary, but it's been hard. I've never gone into another relationship as I was too busy working and bringing up my kids, so I've never had any help with anything.

I would love to have no debt, either credit cards or mortgage, and to have something in an Isa or whatever sounds so attractive to me, and to be able to have a proper savings account instead of paying off debt.

I know I have to think really hard about this, and I appreciate that you are taking the time to advise me. Thank you.

atush

My eldest son has been struggling financially for a while, he moved in with his gf 18 months or so ago, and a lot of my disposable income has gone on helping them set up in their rented house, plus he is always in his overdraft and never has any money. I would love to be able to help them with a deposit for a house as I begrudge that they are paying off someone else's mortgage.

Your son isnt ready for a house, if he doenst have good finances now while renting. And he will never be ready if he doesnt stand on his own two feet.

ermine

There are good and noble reasons there, but remember what they say in the aircraft cabin if pressure is lost - put on your own oxygen mask before helping others. Your son has the benefit of of a working life of human capital ahead, and you have less of that being close to retirement. You are in a reasonable position financially with a manageable amount of mortgage and CC debt which is at a low interest.

a lot of my disposable income has gone on helping them set up in their rented house

I'm sorry, but this sounds like consumerism by proxy to me, and that's absolutely fine if you or he can afford it, but you going £15k into CC debt implies that at least you are pushing the envelope a bit. It is a long time ago when I started in a rental place, but I bought stuff secondhand and over time, rather than a splurge on getting 'set up'. But in the end how you got to here doesn't matter, it's where you go from where you are that does.

I would love to have no debt, either credit cards or mortgage, and to have something in an Isa or whatever sounds so attractive to me, and to be able to have a proper savings account instead of paying off debt.

Your future self will not thank you for damaging your retirement savings for the notion of being debt free. These debts are cheap. Fight the nearest fire first. Focus on discharging the CC debts first from your income. This isn't because the CC debts are dear - at 0% plus arrangement fee they aren't, but because they are dangerous. You only need screw up once with the repayment strategy and you are then plonked on some disastrous high interest rate. Also focus on not spending any more on CCs, spend only what you earn and get 'em down to 0.

Once you've done that it is perfectly reasonable for you to consider having savings as well as the mortgage, but because of your age and your 40% tax bracket you would be far, far better off using a SIPP to save/invest until you stop being in the 40% tax bracket. An ISA makes no sense for you IMO until you have got rid of those CC debts and until you are no longer a 40% taxpayer. Paying 40% tax and saving into an ISA is nuts compared to not paying the 40% tax and using a SIPP - you can mostly put the same kinds of assets into a SIPP as you can into an ISA.

The mortgage can be strategically planned for using the TFLS from your retirement savings but at a later date. You are paying £1800 a year on that mortgage.All you have to do to beat that is save £1800 a year of 40% tax to break even - the taxman will pay your interest by saving into your pension for you. That is achieved by tossing an extra £4500 into your pension, which will cost you £2700 in net income foregone. It is true that you will probably pay 20% tax on that coming out, but that's still a saving of ~20%. At your age and with the modest mortgage you shouldn't even be thinking of paying 40% tax - that's what a SIPP is for, to soak up any pay > the higher rate threshold.

You haven't said anything about if and when you do want to stop working. So far it sounds like if you don't take any lump sums you have a total pension income of £12,000. At SPA you will get another ~£8k. You will pay tax on an aggregate income of £20k, so you will have a net income of £18k, about £2k short on your current spending. If one is a DB pension you must qualify what effect taking £24,000 TFLS would have on that pension, because that could very seriously hurt your retirement income. You haven't quite got enough to match your current spending ,so you can't take much risk there unless you can realistically get your spending down.

Alexland

Also try not to think about yourself being 'in debt' - you have assets in the majority of the property you own and in your pensions. You are in a net asset position. It's good to have a bit of leverage in your working life to maximise your position in retirement.

I agree focus on paying back the credit card first (as it is dangerous) and then the house with your £500ish a month. You can afford to get these cleared without damaging your retirement income.

Alex

dunroving

Like a lot of financial questions, the underlying issues are quite different from the original question. At risk of sounding like a broken record, the whole "delayed gratification" message is pertinent here, except it seems to be compounded by facilitating your son's similar situation. It seems like at least some of your £15k CC debt is actually your son's debt, by proxy. He needs to learn to stand on his own two feet.

We all have to live within our means. Pulling from future income (pension) to remove your current CC debt is little different than continuing to splurge on credit cards. Forcing yourself to pay it off the "normal" (painful) way will be a constant reminder that CC debt is bad, bad, bad. Using future pension to make it miraculously disappear in one big "puff" simply compounds the underlying issues.