Pension options to deal with debts / mortgage situation

zAndy1

Admiral_Barbarossa said:

Link for debts letters!

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

Do not pay for an IVA!

Slight problem with that letter especially this comment 'As you can see, my outgoings are more than my income and I am experiencing extreme financial hardship.'. That's clearly not the case which is why I think I'm going to struggle to get sympathy from credit card companies when it comes to writing debt off etc. 
I need this debt off my mind and I have an opportunity to do just that by this time next year at the latest if I dip into some of my pension. When I turn 60 my DB pension will start paying (unless I defer it) and I can continue to contribute to my current company pension (and at a good level) for the next 5 years all being well which should result in that being worth getting on for £150k by the time I'm 60. With my wife's pensions we'll be comfortable in retirement irrespective of whether I take my tax free lump sums now so I fail to see really why it's not sensible to do that and get rid of this debt asap , trust me it will be a huge weight off my shoulders if nothing else.

Admiral_Barbarossa

zAndy1 said:

Admiral_Barbarossa said:

Link for debts letters!

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

Do not pay for an IVA!

Slight problem with that letter especially this comment 'As you can see, my outgoings are more than my income and I am experiencing extreme financial hardship.'. That's clearly not the case which is why I think I'm going to struggle to get sympathy from credit card companies when it comes to writing debt off etc. 
I need this debt off my mind and I have an opportunity to do just that by this time next year at the latest if I dip into some of my pension. When I turn 60 my DB pension will start paying (unless I defer it) and I can continue to contribute to my current company pension (and at a good level) for the next 5 years all being well which should result in that being worth getting on for £150k by the time I'm 60. With my wife's pensions we'll be comfortable in retirement irrespective of whether I take my tax free lump sums now so I fail to see really why it's not sensible to do that and get rid of this debt asap , trust me it will be a huge weight off my shoulders if nothing else.

You are limited by MPAA rules to £4,000 a year to your pension if you raid it. Better paying off the loans over the years until you are 60.

MallyGirl

zAndy1 said:

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 

With my 'Debt-Free Wannabe' hat on I would say that a £300 pcm bucket of unclassified spending needs breaking down.
With you not knowing how you got into this pickle it would be good to sit down with your wife and decide on a detailed budget - then stick to it.
You don't mention children - is that £400 on food just for 2 plus pets?
I would look to pay just enough into your work pension to get the max out of your employer.

zAndy1

Admiral_Barbarossa said:

zAndy1 said:

Admiral_Barbarossa said:

Link for debts letters!

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

Do not pay for an IVA!

Slight problem with that letter especially this comment 'As you can see, my outgoings are more than my income and I am experiencing extreme financial hardship.'. That's clearly not the case which is why I think I'm going to struggle to get sympathy from credit card companies when it comes to writing debt off etc. 
I need this debt off my mind and I have an opportunity to do just that by this time next year at the latest if I dip into some of my pension. When I turn 60 my DB pension will start paying (unless I defer it) and I can continue to contribute to my current company pension (and at a good level) for the next 5 years all being well which should result in that being worth getting on for £150k by the time I'm 60. With my wife's pensions we'll be comfortable in retirement irrespective of whether I take my tax free lump sums now so I fail to see really why it's not sensible to do that and get rid of this debt asap , trust me it will be a huge weight off my shoulders if nothing else.

You are limited by MPAA rules to £4,000 a year to your pension if you raid it. Better paying off the loans over the years until you are 60.

Not if you only take the tax free lump sum

Pat38493

My comment would be that if you are a person / couple / family who has in the past been tempted by shiny things to run up large credit card bills on the basis that you can pay later, taking money out of your pension to pay off the bills would simply re-introduce the same temptation.

As such, I would rather advise to only do this or consider doing it when you are actually retiring and you need to reduce your outgoings.  Even then it would be better to make sure the debts are all paid off (apart from maybe mortgage) before retirement.

By taking money out of your pension, you are effectively reducing your available spending during your future retirement.

jimi_man

zAndy1 said:

Admiral_Barbarossa said:

Link for debts letters!

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

Do not pay for an IVA!

Slight problem with that letter especially this comment 'As you can see, my outgoings are more than my income and I am experiencing extreme financial hardship.'. That's clearly not the case which is why I think I'm going to struggle to get sympathy from credit card companies when it comes to writing debt off etc. 
I need this debt off my mind and I have an opportunity to do just that by this time next year at the latest if I dip into some of my pension. When I turn 60 my DB pension will start paying (unless I defer it) and I can continue to contribute to my current company pension (and at a good level) for the next 5 years all being well which should result in that being worth getting on for £150k by the time I'm 60. With my wife's pensions we'll be comfortable in retirement irrespective of whether I take my tax free lump sums now so I fail to see really why it's not sensible to do that and get rid of this debt asap , trust me it will be a huge weight off my shoulders if nothing else.

But it isn’t a sensible course of action. The harsh reality is that you appear to be papering over the cracks and glossing over the cause of how you got into the situation in the first place. Until you’ve addressed that first, then taken steps to address the shortfall by paying down the debts using your surplus monthly income, you will always be in a bad position. Taking money from your pension, as I’ve explained, is essentially borrowing money from yourself in the future. 

As far as I can see in terms of debts, you have £164k that you aren’t paying off and £55k that you are. With your history you need to avoid having access to large sums of money and start a strategy to pay this off bit by bit. This will mean addressing the root causes of your money management. 

I’m sorry if this sounds blunt but you seem fixated on one course of action that virtually everyone on here has advised you not to do. If you’re going to go ahead and do it then I fail to see the point of coming on here and asking for advice. 

Admiral_Barbarossa

zAndy1 said:

Admiral_Barbarossa said:

zAndy1 said:

Admiral_Barbarossa said:

Link for debts letters!

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

Do not pay for an IVA!

Slight problem with that letter especially this comment 'As you can see, my outgoings are more than my income and I am experiencing extreme financial hardship.'. That's clearly not the case which is why I think I'm going to struggle to get sympathy from credit card companies when it comes to writing debt off etc. 
I need this debt off my mind and I have an opportunity to do just that by this time next year at the latest if I dip into some of my pension. When I turn 60 my DB pension will start paying (unless I defer it) and I can continue to contribute to my current company pension (and at a good level) for the next 5 years all being well which should result in that being worth getting on for £150k by the time I'm 60. With my wife's pensions we'll be comfortable in retirement irrespective of whether I take my tax free lump sums now so I fail to see really why it's not sensible to do that and get rid of this debt asap , trust me it will be a huge weight off my shoulders if nothing else.

You are limited by MPAA rules to £4,000 a year to your pension if you raid it. Better paying off the loans over the years until you are 60.

Not if you only take the tax free lump sum

The problem here is you will use the pot to supplement further spending.

To access your pot, you will have to take Financial Advice. This may cost money and reduce future income. If your pot is below a set limit, of around £50,000, you may not be able to take it tax free as a lump sum, but have income and tax free. You need professional advice on this. No FA I know will allow you to use your pot to pay off debt.

Look at the debt helpline and there budget calculator and letters and do it that way!

Grumpy_chap

zAndy1 said:

I'm 55, wife is 50 , combined net income approx £5200 pm

Outstanding mortgage £164k, interest only, 10 years left , rate approx 6% (£820pm interest)

Personal Loan with monthly payments of £395 , 40 payments remaining, interest rate 2.3%, settlement amount approx £14k

Credit card debt of approx £41k (I know and I have no idea how tbh), all apart from about £4000 of that at 0% interest until mid-late 2023, min payments approx £700pm

I'm 55 in December, dc pension funds worth £130k approx (low due to market conditions right now) so a £32500 tax free lump sum available and DB pension that will pay approx £6k pa (estimate) at age 60 or £4.8k at age 55 with no tax free lump sum or £3.8kpa at age 55 with a £25k tax free lump sum 

zAndy1 said:

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 

zAndy1 said:

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 would not draw down the pension in any form at this stage.
Nor would I cut back the ongoing pension contributions, certainly not as a first step.
As a couple, your current income £87k per year gross or £62k nett.
Your pension income will be two state pensions £9.5k each, so £19k total.
Your DB pension £6k per year.
Your DC pension £130k fund, so maybe £6.5k per year drawdown realisable.
That's £31.5k plus your wife's DB pensions which I don't think you have said what they will yield, but it won't be the £55k you'd need to get to your current gross income between you.

Is the personal loan for a car?
Personal Loan with monthly payments of £395 , 40 payments remaining, interest rate 2.3%, settlement amount approx £14k
Could you sell the car, thus reducing the outgoings, reducing your overall debt liability and possibly providing a cash sum (the value of the car today) from which you can buy a cheap runabout and use the remainder to pay off some of the CC debt?

Did you ever have a plan to pay the mortgage at the end of the term?
Is there an endowment policy somewhere to clear this?
Will you down-size?  (You stated the remaining mortgage balance £164k but not the size or value of the house.)
Could you down-size now and clear the mortgage but still have suitable living accommodation?  You'd then be mortgage-free for when you go into your retirement years and have great comfort of security.

The partial budget shared is a good start, but I really do recommend preparing a full SoA (statement of affairs).  That may reveal items you can make savings on.  If that is not enough, then share the SoA in the DfW (Debt free wannabee) area of the forum for support.
Looking at what you have given so far:
1. £50 per month life insurance - have you reviewed the rate recently and cover levels?
2. £34 wife's loan - what is that for?  when does it end?
3. Sky / internet / amazon - scrap all the subscriptions and save £100.  Get an absolute minimum landline broadband service if really required - can you hotspot from the mobile within the current tariff?
4.  Is the £400 for food shopping for two people?  Seems quite high.  More value less finest perhaps?
5.  £300 misc is unclear
6.  Pet insurance might have to go and deal with the pet getting ill if that happens.    Or let the pet go - could a family member adopt the pet so you can still visit?

I know there are some unwelcome suggestions in there, but it does look as though the £1,200 left over each month could become £1,500 each month.  Use that to pay down the CC debts and £41k will be gone in under 2 1/2 years.

If you cleared the loan (car?) and the mortgage (down-size?) as well, then you could be on a good, secure footing to face your future in a relatively short timeframe.

Goodluck OP

zAndy1

Admiral_Barbarossa said:

zAndy1 said:

Admiral_Barbarossa said:

zAndy1 said:

Admiral_Barbarossa said:

Link for debts letters!

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

Do not pay for an IVA!

Slight problem with that letter especially this comment 'As you can see, my outgoings are more than my income and I am experiencing extreme financial hardship.'. That's clearly not the case which is why I think I'm going to struggle to get sympathy from credit card companies when it comes to writing debt off etc. 
I need this debt off my mind and I have an opportunity to do just that by this time next year at the latest if I dip into some of my pension. When I turn 60 my DB pension will start paying (unless I defer it) and I can continue to contribute to my current company pension (and at a good level) for the next 5 years all being well which should result in that being worth getting on for £150k by the time I'm 60. With my wife's pensions we'll be comfortable in retirement irrespective of whether I take my tax free lump sums now so I fail to see really why it's not sensible to do that and get rid of this debt asap , trust me it will be a huge weight off my shoulders if nothing else.

You are limited by MPAA rules to £4,000 a year to your pension if you raid it. Better paying off the loans over the years until you are 60.

Not if you only take the tax free lump sum

The problem here is you will use the pot to supplement further spending.

To access your pot, you will have to take Financial Advice. This may cost money and reduce future income. If your pot is below a set limit, of around £50,000, you may not be able to take it tax free as a lump sum, but have income and tax free. You need professional advice on this. No FA I know will allow you to use your pot to pay off debt.

Look at the debt helpline and there budget calculator and letters and do it that way!

Aviva will let me take the tax free cash after getting advice from pensionwise which I'm doing next week and that's free. I don't have to take income from either DC pension I have , one worth £100k and one worth £30k , Pensionbee will also let me take the tax free lump sum without incurring cost. I don't really get the comment 'No FA I know will allow you to use your pot to pay off debt'? Various advice I've seen suggests paying off debt is one of the few legitimate reasons for taking the tax free lump sum and it's up to me what I do with my tax free lump sum at the end of the day and no FA can stop me taking it either as far as I'm aware, it's a right everyone has at the end of the day.

And to address other comments made. It's all very well saying use the surplus income to pay the credit cards off but next year all of the credit card debt will start incurring interest at the standard rate, at that point I probably won't be able to afford the minimum payments or even if I can they'll just pay the interest and make no dent in the debt. Saying paying £1500pm off credit cards will have them paid off in 2.5 years, yes sure at 0% interest but as I said interest will start being applied next year unless I can move the balances to other 0% promotional rates which seems unlikely. Surely it makes sense before that happens to try and get the credit card debt paid off because frankly having say £35k on credit cards at 20% interest is not a sustainable situation. 

House value is approx £250k so we have £90k equity in the house so yes I guess we could consider downsizing but it's definitely a last resort option , is that a better option than taking my pension tfls, perhaps and I'll definitely look into it but moving would be a major pain in the !!!!!! and we love our house and the neighbourhood but at the end of the day it's a 4 bed detached house and there are now only me and my wife living in it so downsizing is certainly an option I guess.
£34 wife's loan is for a DFS sofa, there's about £900 left , will probably look to pay that off in the next few months 
Yeah I've thought about the pet insurance as it has got expensive, tempted to just put £50 a month away instead 
£300 misc is to cover things like clothes, haircuts, nails, car servicing / MOTs , odd meal out (birthdays / anniversarys) things like that really
DC pension fund value £130k, that's current value and it's down a lot this year for obvious reasons (so yes not an ideal time to be taking cash out I get that). By retirement, let's say when I'm 65 for the sake of argument I would hope the DC funds would be worth at least £200k , with £5k going into my current one each year and a potential increase purely from the inevitable rebound in the next few years I don't think £200k is unreasonable as a DC fund value for myself. I would hope that would give me £8k a year. Think my wife's DB pensions are forecast to be about £15k, would have to double check that. 

Kim1965

Out of interest, what have you bought on the cards?
Have you had periods of un employment, gambling? 
 Give us a clue. If i was in your position I would be confident on your také home i could sort it out. A period of austerity would be the way forward.
 Most people on this site spend less than they earn, thats it, in a nutshell.