Continue with pension or not?

bkclive

I would really appreciate some help/advice with this. Basically the situation is; I am 51 years old. No savings, no assets, in debt. Currently in teaching and paying into the teachers pension fund for last four years. Only other pension is a deferred armed forces pension which will be 9/22 of full pension.

If I stay in teaching until I am 65, then I will have the basic state pension plus a small teachers pension, plus an even smaller forces pension. I'm concerned that this will put me in "the pension trap", where I will not be able to claim any benefits, but will have to pay full price for things like council tax, etc. Would it be better for me to opt out of the teachers pension and use the money each month (around £150) to pay off debts/acquire some form of asset? Or is there a third option, like an ISA that would be more suitable?
Thanks in advance.

dunstonh

I'm concerned that this will put me in "the pension trap", where I will not be able to claim any benefits

Too late for that probably. A single person only gets pension credit if their income is over £6190. So, with your state pensions, army pension and the teaching pension paid to date, you are probably through that already.

Would it be better for me to opt out of the teachers pension and use the money each month (around £150) to pay off debts/acquire some form of asset? Or is there a third option, like an ISA that would be more suitable?

Rather than aim to be poor in retirement, why not stay in the teachers pension and get your 18/80ths plus tax free lump sum? If you are on £25k a year thats over £5k a year.

£150pm into an ISA would come nowhere near near the benefits that the pension would. Plus, even if you did qualify for pension credit based on income, the capital you would build up with the ISA would do more damage than the pension. Capital is penalised heavier than income.

EdInvestor

bkclive wrote: »

If I stay in teaching until I am 65, then I will have the basic state pension plus a small teachers pension, plus an even smaller forces pension.[ I'm concerned that this will put me in "the pension trap", where I will not be able to claim any benefits, but will have to pay full price for things like council tax, etc.

Highly unlikely.Step one is for you to get forecasts of how much your actual pensions will be at retirement.It's pretty likely you will be quite comfortable, way above the benefits level.

jamesd

Continuing with the pension is likely to be the best deal long term. It's one of the best pensions that there is.

Short term, I suggest that you post a statement of affairs in the Debt-Free Wannabe message board to get help sorting out your debts. It's possible that for a year or two it might be better to pay off debts but this is only likely to be true if you're right on the edge of being unable to cope with the debts and can only make progress by adding all possible money and cutting back expenses to the bone. If you're still eating out regularly, going to the pub and such, reducing those things comes first.

Debt repayment comes before the non-pension savings.

CLAPTON

absolutely no brainer .. stay in the teachers scheme .. what do you expect to be earning when you retire (in todays terms) : 18/80's of that plus tax free lump sum of 3x 18/80 of your final salary is pretty good and well worth having.
presumably you don't teach maths?