Pension options to deal with debts / mortgage situation

jimi_man

Effectively you’re taking out a loan (borrowing from your future self by raiding your pension) to pay off another loan. 

Flugelhorn

still don't get how this is an I/O pension and you are looking to "overpay it" - how are you actually paying for the property?

lisyloo

JoeCrystal said:

Well, you can always get rid the pets! Unpopular suggestion that might be! Cancel Amazon and Sky. Review all subs and cancel everything that is wants rather than needs. Internet should be kept wonder it is actually a need rather a want but can check if you can get cheaper/slower packaging. If your water rated rather than metered, it might be worth checking if this can be changed over (only if it is cheaper though.) 

Make a record of every pennies spent through the month. Can use spreadsheet for that. Other than that, your budget look rather reasonable!

Pets are members of the family, so it will be unpopular yes. 
I'd get another job before getting rid of pets.
fewer subscriptions yes, look at everything very critically. Could either of you work from home more to save on petrol/tolls?

how are you planning to repay the mortgage?
Are both of you putting in to your pensions?

Could either of you get another job?
tough yes, but for a while to get debts down.

Marcon

zAndy1 said:

QrizB said:

zAndy1 said:

... is the consensus that I shouldn't use my pensions to get out of this debt situation and I should instead look to enter into a DMP or something to deal with the debt?

The consensus is (or seems to be) that you need to get a firm grip of your household finances. Only then will anyone (you, us, random folk on the Clapham omnibus) be able to say whether using the pension TFC to pay down your debts is a good idea, or not.

Really don't know what to do tbh, think I need to talk to a financial advisor as my brain hurts...

You don't need a financial advisor, you need to talk to Stepchange or similar.

Between you and your wife, you've got a £60k+ annual income (is that gross, or net of tax & NI?).

We're all struggling to understand how you can spend all that and still run up £55k of unsecured debt (much of it without knowing how), and concerned that you'll end up in the same situation in another 5-10 years but then without the pension TFC to get you out of the hole.

Have you got a household budget?

Fair comments, I earn £57k gross, wife earns £30k gross (recent Sept 2022 payrise from £21k previously). 
Rough figures...
Income £5200 net
Mortgage £820pm (£870 with life insurance)
Gas/Elec/Water £150pm
Council tax £200pm
Loans £430pm (£395 me , £34 wife)
Sky/Internet/amazon/other subscriptions £100pm
Mobiles £20pm
Credit cards £1000pm (I pay more than the min already)
Food shopping £400pm
Petrol / Bridge toll £300pm
Misc spending £300pm
Car and House ins £80pm
Car tax £40pm
Pet insurance £60pm

Left over £1200pm approx 

So yes I'm struggling to understand how we're in this situation but we are. But imagine if I pay the loan and credit cards off how much healthier the situation will be (it's already on the face of it pretty healthy). Sure I could chuck another £1000pm at credit cards but it's still gonna take 3 years to pay them off if I do that and not make any dent in the mortgage. Anyway this is getting OT for the pension forum but posted for info 
And appreciate the concern but there's no way I'm ending up in this situation again in 5 years time, not a chance

You keep returning to the fact you don't know how you got into this mess. If you can't identify what's gone wrong, you have much less chance of avoiding a repetition. You say you aren't going to get into this situation again, but presumably you made exactly the same resolutions once you were discharged from bankruptcy.

Be warned. If you access the tax free lump sum from your DC pension, there is a very strong probability that you will then see the remainder of your pot as a handy piggy bank, to be dipped into whenever you feel the situation demands. Once you do that, you'll trigger the Money Purchase Annual Allowance, which will limit you to a maximum DC pension contribution of £4K per annum (including any tax relief/employer contributions), which will make it difficult to rebuild your pension pot.

Everybody here is doing their level best to point you in the direction of getting some help with your behaviour, because that is at the root of your problems, rather than the much more usual absence of funds. The choice is yours...

zAndy1

Thanks for the replies everyone , I'm actually very depressed about the situation as you can probably imagine. I know I've been stupid, I don't need anyone else to tell me that but I'm determined to sort it out and sooner rather than later for my own mental health apart from anything else which is why to me being debt free by taking some of my pension now is far more appealing than having debt over my head for umpteen more years to come.
To answer some of the questions / suggestions that have been posed. I already work from home, petrol / toll costs are my wife's who is a teacher so can't work from home. Wife is in the teachers pension scheme and has been before and also the LGPS, I'm paying into my current pension about £450pm including the employer payment, I could take a pension holiday or reduce the contribution level but I think I'd regret that if I did as I'd be missing out on free money and it's done by salary sacrifice to reduce the amount of 40% tax I incur. I'm currently in the process of trying to sort out the MPAA triggering mess , hopefully I'll get that sorted soon. Can't reduce subscriptions and anyway they're a drop in the ocean in the grand scheme of things. As I've said I'm confident we'll be comfortable in retirement especially if I get the house paid off which isn't going to happen if I don't get my debts paid off.
How am I planning to pay the house off, either by remortgaging or overpaying a lot (which we'll be able to do once debts are cleared) , I've already checked and there's no limit to how much I can overpay by. Getting another job would be tough yes but I'll look into it...of course the cards will all come tumbling down if I lose my job but that's something I can't really do much about and will just have to pray that doesn't happen for the forseeable future..
I've got a meeting with the moneywise pension advice thing next week so let's see what they say as well...
Thanks everyone

Admiral_Barbarossa

Do not raid the pension.

Analyse your priority debts.
Go to National Debt Line. Try and get these frozen!

Set a budget. Live within it!

Admiral_Barbarossa

Link for debts letters!

Sample Letter - Write off the debt | Sample letter | National Debtline | National Debtline

Do not pay for an IVA!

Admiral_Barbarossa

Set your budget!
Your household budget | National Debtline

NannaH

If you are struggling with £40k CC debt plus a loan,  you must be living way beyond your means, which is quite some feat on a joint net income of £5k a month.   

A DMP can be self managed,  you stop paying until the debts default,  credit file is !!!!!! for 6 years but it will stop you getting more of the same - all interest stops on default then you can start to dig yourself out of the hole and hopefully settle your debts at a minimum 30% discount after a couple of years of token payments - you can throw lots of cash at your mortgage in the meantime, which is your most important debt

Please look at the Debt free board and a poster called sourcrates. 

lisyloo

Good on you for considering another job.
not sure who has run up the debts but I did mean both or either of you (depending on your working hours).

If you wife does lots of marking there are still options available (I can never find a dog sitter to come to my house).