Credit card repayment

af1963

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.

Putting the other argument:  if the pension money is really the *only*available way to pay off most of the credit card debt - then it's a choice between taking a one-off £8K tax bill, or continuing to pay £7500 per year in interest charges every year.  ( Although after paying £12K of the £18K you'd still need to pay about £2500 in interest if the rate remained the same.)

But I'd be looking for other ways to reduce the credit card debt, and/or move it to somewhere cheaper, before thinking about touching the pension money and incurring the tax bill. Waiting till you're no longer earning would let you take the money while paying less  tax.

EDIT - fixed the figures above to reflect likely 40% tax rate

Also:  hopefully you have other savings and/or pension arrangements in place as well as this drawdown pot ?  ( If not, going from a £55K salary when working, to a £10K state pension afterwards, will be ... interesting ! )

MallyGirl

QrizB said:

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

DFW - linked above - would certainly be a good place to ask about ways you might pay down the cards without robbing your pension. The card interest is not likely to be more than the 40% tax hit you would take on pension withdrawal (aside from the MPAA aspect of limiting future pension contributions mentioned).

Albermarle

Also:  hopefully you have other savings and/or pension arrangements in place as well as this drawdown pot ?  ( If not, going from a £55K salary when working, to a £10K state pension afterwards, will be ... interesting ! )

Maybe depressing, rather than interesting...........

JoeCrystal

Debts on the whole (excluding mortgages) totally suck, especially if it spirals out of control. I should know! All I can suggest is that if you still got an income, do the best you can. It is certainly worth practising living on your expected retirement income and whatever that is suffices enough.  If push comes to a shove, you can always apply for casual work on the weekend and there are always seasonal works you can do like during the summer and the winter for example. I do wish you all the luck!

ian16527

Can you take a loan out to clear the cards, and cut them up. 
I did this years ago to get out of the same situation, although it was not as much as you have