Credit card repayment

Avenger2

Hi hope this is the right place to post this?
We have approx £18'000 on credit cards, we are all update with all of our payments, I have around £20'000 in a flexi drawdown account with a Pension. I understand that if I draw this out it will be added to my overall salary for the year, however would the additional amount of tax I have to pay be less than the interest I'm currently paying on these cards (£642 a month)? My current salary is £55K. 
Thanks

molerat

With a £55K salary you are likely a 40% tax payer.  Taking £20K from the pension could have a £6K tax liability (or more depending on the crystallisation status) leaving you with £14K.  Plus withdrawing any taxable amount from a pension will limit you to what you can pay into a money purchase pension in future.

Marcon

Avenger2 said:

Hi hope this is the right place to post this?
We have approx £18'000 on credit cards, we are all update with all of our payments, I have around £20'000 in a flexi drawdown account with a Pension. I understand that if I draw this out it will be added to my overall salary for the year, however would the additional amount of tax I have to pay be less than the interest I'm currently paying on these cards (£642 a month)? My current salary is £55K. 
Thanks

Have you already taken the full amount of tax free cash from your pension, or do you get 25% of each withdrawal tax free?

MallyGirl

Are you 55 or older?

MX5huggy

What interest rate are you paying on the Credit Card? 

Avenger2

molerat said:

With a £55K salary you are likely a 40% tax payer.  Taking £20K from the pension could have a £6K tax liability (or more depending on the crystallisation status) leaving you with £14K.  Plus withdrawing any taxable amount from a pension will limit you to what you can pay into a money purchase pension in future.

Hi molerat
I'm 60 this year so took 25% when I was 55, thats how it ended up in a flexi drawdown, so not sure about the Crystallisation status? 

Avenger2

Marcon said:

Avenger2 said:

Hi hope this is the right place to post this?
We have approx £18'000 on credit cards, we are all update with all of our payments, I have around £20'000 in a flexi drawdown account with a Pension. I understand that if I draw this out it will be added to my overall salary for the year, however would the additional amount of tax I have to pay be less than the interest I'm currently paying on these cards (£642 a month)? My current salary is £55K. 
Thanks

Have you already taken the full amount of tax free cash from your pension, or do you get 25% of each withdrawal tax free?

Hi, I took 25% when I was 55, so not sure about the "25% of each withdrawal" you are referring to?

Avenger2

MallyGirl said:

Are you 55 or older?

Hi yea I'm 60 this year, as per my previous posts I took 25% when I was 55, I'm on here because I've tried to get professional advice on my pension/s but because its such a small amount (less than £40K) no one is interested, and I just get told to pay more into it!!!

molerat

If the 25% you took was the tax free lump sum then everything else you take will be hit with 40% tax, £20k out, £8K tax, £12K in your pocket.  Plus you will be limited to putting £4K per year into a money purchase pension.

Brie

I assume there is more than one card.  Are you managing to pay more than the minimum on any of them?  Are you prioritising the one with the highest interest?  I'd be reluctant to lose 40% of even a relatively small pension pot if there was a way to avoid it.  Maybe you could take a smaller amount to just get rid of the chunkiest debt?

QrizB

Avenger2 said:

Hi hope this is the right place to post this?

You might be better asking in Debt Free Wannabe:

https://forums.moneysavingexpert.com/categories/debt-free-wannabe