Add to pension pot or reduce my debt?

SAJACKSON

I have received a letter from my previous employer stating that because I contributed to my pension (Civil Service, Alpha) for less than 2 years I can either have my contributions reimbursed, or I can of course transfer both mine and my employer's contributions to another pension pot. Obviously the transfer amount is much higher, and that would probably be the sensible option. But, I do have a rather large overdraft and a couple of credit cards, and I would quite like to have a lump sum to pay at least one of those off.
So, which do we think is better, transfer to another pension, or reduce my current debt? I can't decide.
Thanks!

MallyGirl

your future self will thank you for choosing the transfer.

Albermarle

Your future self would regret having thrown away the two years free money from your employer, and then usung your own money you have contributed, to sort out a short term problem .
Usually a better way forward is to have a period of significantly reducing spending , alhough of course we do not know your exact personal curcumstances.

SAJACKSON

Thanks! It's actually only 15 months contributions from my employer, less than 2 years; and yes, I am aware that if I spend less each month I will have some leftover to slowly pay off an overdraft. I never seem to have much left though - there's always something that ends up using the unspent money, like a punctured car tire or a fence panel blowing down and needing to be replaced.

Rounded up/down it's effectively £1000 in cash after paying tax, or £4800 into a pension pot. We're moving house in a couple of months, so I'm tempted to take the cash.

Sea_Shell

It's only £1000. Not worth sacrificing £4800 for, surely!!!

Malthusian

SAJACKSON wrote: »

Thanks! It's actually only 15 months contributions from my employer, less than 2 years; and yes, I am aware that if I spend less each month I will have some leftover to slowly pay off an overdraft. I never seem to have much left though - there's always something that ends up using the unspent money, like a punctured car tire or a fence panel blowing down and needing to be replaced.

Then you aren't spending less enough. It may not be fun to cut expenditure but it is what it is. As you say there is always something. Most people save part of their income so that they have 3-6 months' worth of spending in their bank account and can cover those one-off "always something" costs. You on the other hand have the same "always something" costs plus you have an overdraft and credit cards to pay off, so you need to save more than they do.

I highly recommend the Debt-Free Wannabe board as you will find a lot more helpful advice there than on this forum (which tends to be full of people who've never been in that position).

Throwing £3,800 down the drain is mad and will make your debt problem worse, not better.

MEM62

SAJACKSON wrote: »

Rounded up/down it's effectively £1000 in cash after paying tax, or £4800 into a pension pot.

So every £1 of that money you put in your pocket and spend will cost you £4.80. Buy a pint in a pub using that money and you have effectively paid £18.24 for it. A Big Mac will cost you £22.51.

Are you really that desperate for the money?

atush

Sounds to me like you need to do a full MSE, and a spending diary.

If you rob your pension to pay this debt, you will probably rack up more debt.

So, transfer and get your spending down pronto