Closed final salary scheme and debt

Yellow748

I was made redundant from my last job in 2015 i was in a final salary scheme that closed just before i left i am now 55 and have a job which doesn't pay particularly well , due to being rubbish with credit cards and i am struggling each month to pay these back and pay other bills as well to the point where i am going over my agreed overdraft limit each month.
i have more bills on the way and have no way to pay for them which is causing me stress and is making me ill .
I can withdraw some of my cash free lump sum to clear these not totally but make them not a problem and to a point where i can start to pay more to clear them , or pay them off totally and be debt free with the total tax free lump sum
As it's closed scheme this is a one hit thing a lump sum and monthly payment for the rest of my life , the current total value of my scheme £234,000 and a lump sum of just over £35,000 and £300 a month , although i would not need the £300 and it would be reinvested into some form of savings account .
I also asked for a quote for a lump sum of £5,000 which gave a monthly payment of £500 again this would go straight into a savings account , the £5,000 would make my life a lot easier as i would clear enough income to transfer the cards to interest free deals and pay them off fully.
I really really don't want to plunder my pension now but the only other option is to borrow more money to pay off the cards at a better interest rate and i don't really want to do that either
i'm in a bit of a pickle :(

Dox

The fact it's a closed scheme is neither here nor there, now that you have left the employer: you are simply a deferred pensioner.

Go and talk to the one of the reputable debt agencies before doing anything further. Far more info needed to give good advice other than that. See https://www.moneysavingexpert.com/loans/debt-help-plan/

Linton

Taking a defined benefit pension early can be extremely expensive. Given your figures I would guess that by taking the pension with the larger lump sum now you would perhaps be getting about half the income you would get if you waited until the pension's due date. Do you have the actual number?

The alternatives of £6K/year + £5K lump sum vs £3.6K/year +£35K lump sum seem a bit odd in that the lower lump sum is a very much better deal. That is a difference of £2.4K/year in exchange for £30K. There is no way that £30K would pay for a lifetiime inflation linked income of £2.4K. Are you sure the numbers are right?


If you did take your DB pension now would you have enough income in retirement to provide your desired standard of living?

What interest rate are you paying on your cards?
Do you own your own house? With a mortgage? If so could you increase it?


PS tear up the credit cards

Mnd

I agree, first of all get to grips with your spending and find another way of dealing with your debt.don't borrow from your future if there is any alternative

Clive_Woody

As mentioned, first point of call would be to talk with one of the free debt charities, such as Stepchange who could talk through your options around managing the debt without having to take the hit on your pensions.

They even have a free phone number to call them on, and there's not much they won't have seen before and can offer helpful advice on.

https://www.stepchange.org/

xylophone

Have you obtained a new state pension statement?

If you go ahead with taking the DB pension early, could you not regard the monthly pension as income to replace the larger contribution you could make to the pension scheme offered by your current employer?

Yellow748

Those are the numbers given in the quotation request i put in
the exact figures are
£7,437.04 pa with no lump sum
£4,988..36 pa with £33,255.00 lump sum (sorry not quite the 35k i wrote originally)
£7068.88 pa with £5,000.00 lump sum
at a rough guess my c cards amount to around £7,000

yes i own my property no mortgage but about £220 pm charges it's a park home

barnstar2077

I agree with the rest of the advice given. Contact an agency that helps people with debt, use the money saving expert forums to talk to other people who are in debt and are in a similar position. I would view the pension option as the last resort! And also, give yourself a bit of credit, I know that you have got yourself in a bit of a pickle but seven grand is perfectly manageable if you change your ways, and you have made a start just by posting a message on here. I don't know anyone who hasn't made some kind of financial blunder in their life, so chin up, today is the first day of a new attitude and the first step on the way to your financial freedom and peace of mind!

thickasabrick

You should be able to resolve this without "Borrowing from a poorer, future you".

Contact StepChange and they will advise what the best course of action will be.

Starts with a statement of affairs, so write down your monthly income, monthly bills etc. anything you can think of.

See the links on the Debt-free wannabee board .

A service such as StepChange can really help with the stress as they guide you through the options and creating a realistic plan to become debt free.

Good luck !

That quote came from an article on Monevator titled "The really obvious thing we all forget when borrowing money"

How much money are you taking from your future self when you spend his or her money today ?

Yellow748 wrote: »

...
have a job which doesn't pay particularly well , due to being rubbish with credit cards and i am struggling each month to pay these back and pay other bills as well to the point where i am going over my agreed overdraft limit each month.
i have more bills on the way and have no way to pay for them which is causing me stress and is making me ill .
...
I really really don't want to plunder my pension now but the only other option is to borrow more money to pay off the cards at a better interest rate and i don't really want to do that either
i'm in a bit of a pickle :(