Mass debt currently focusing on the now rather than later life

2022ismyyear

A bit of background about me - I am 30 years old currently in 15k debt, not a homeowner and very little in my pension fund.

My plan within the next 12-18 months to buy a place when I’m debt free.

My question is I am currently not paying into a pension pot, as I am channelling any spare income to my debt then onto buying a house so I can do these two things as soon as possible. Once this is done I will start paying into the pension.

My Dad thinks I am being silly not paying into my pension but I feel that I have more than enough time to make up for it if I am sensible.

I feel like currently my priorities are my debts then the house.

Does anyone have any thoughts on this?

DrEskimo

There probably is justification for not paying into it while clearing debt, but once you are debt free you should be looking to pay into a pension.

Once you are debt free, concentrate on building an emergency fund, then start saving for the house deposit.

sharpe106

If you can live, clear a 15k debt and save for a deposit in 12-18 months you must be a fairly high earner. So you will have plenty of time to make up the pension.

However it depends what kind of debts you have and what kind of interest they have. So without knowing some figures it is probably quite hard to suggest which would be best in the long run.

[Deleted User]

Are you not in your automatic work place pension? I know I'll probably not get a big pension packet from mine but at least it will help once I'm at retirement age. Plus with it coming off pay it doesn't feel like I'm paying out for it like a bill/debt.

2022ismyyear

@sharpe106  Thanks for your help.

In answer to your questions:

All my debts are interest free for 26 months. During lockdown I am making large payments of around £1200 due to saving on travel costs etc so expect this to last for maybe another 2 months. However after lockdown I will only be able to afford £600 per month.  

I also have a Help To Buy ISA which has £8000 currently accruing 2.5% interest. I am keen not to touch this to pay off my debts as the interest/the bonus I will receive when buying the house. 

In terms of my earnings it is around £32k per year.

2022ismyyear

@Deleted_User Thanks for your insight.

I work within a local authority it is optional to pay in either at full rate or 50% contribution or zero. The employers contribution is very good however missing £200 a month from my pay really does have an impact on my debt paying.

 

webnibbler

It can be difficult to know which to prioritise, but is it possible to do a bit of both? Some local authorities have relatively generous pension plans that are worth contributing to (relative to private sector that is). Your dad is right in that early contributions to pensions, when you are younger, have the biggest impact on the final value due to compounding over a longer period of time. Many people put off pension saving (me included) because there is always something more important requiring money, then they have to cram later to make up lost ground (me included).

sharpe106

If the pension is a government one you will be best investing in that long term. They are not gold plated like the papers make out unless you are really high up. But they are still a lot better then a private pension for a similar putting in figure. 
I would leave the ISA as it is then. As your debt is interest free I would look at putting the most into the pension you can and then put the rest of your money towards the debt. Might take a little longer but what you get put into your pension will more then make up it especially if you can move the debt interest free again if still there in 2 years.

onwards&upwards

Get yourself in the pension scheme.  Whenever the T&Cs change for public sector pensions they are always for the worse so the sooner you get in the better!  

ryanm8655

Is it an average salary pension? If so definitely don’t skip paying in. Employer pays about 20% effectively.

2022ismyyear

@webnibbler @ryanm8655 @onwards&upwards @sharpe106

You have all pretty much given the same advice so I am definitely going to start contributing again to the pension! I would be shooting myself in the foot really if I don’t.

Thanks for your help I appreciate it! I will just have to delay the debt free date and housing buying back a few extra months! ☺️