Pension or debt?

kitkatt1982 · 5 August 2018 at 7:23PM

Hi,
Looking for some opinions.
I’m 35 and have been a stay at home parent (and at college) for 4 years. During this time, having to rely solely on my husband’s income, we’ve accrued about £10k of debt. The repayments are manageable and on a zero or low interest rate until June next year when our current mortgage rate also comes to an end.
My youngest is off to school and I’ve just applied for a quite well paid job. I have a LGPS pension pot of around £22k from past employment with no intention of returning to local government employment. Considering whether, if I’m successful in my application, to take out the money and use it to clear the debt then reinvesting the remainder. I know having this debt is going to significantly impact on our mortgage options at renewal despite having around 60% equity on our home.
Lots of things to consider such as the final figures etc but as it is the lump sum would be more useful now than the pitiful amount it equates to as an annual sum on retirement. The new company has its own pension scheme I would be paying into plus paying what I’d be using to clear the credit cards to pay into a private pension.
Any thoughts please?

dunstonh · 5 August 2018 at 7:26PM

Considering whether, if I!!!8217;m successful in my application, to take out the money and use it to clear the debt then reinvesting the remainder.

You cannot access the money at age 35.

but as it is the lump sum would be more useful now than the pitiful amount it equates to as an annual sum on retirement.

I doubt it will be pitiful.

kitkatt1982 · 5 August 2018 at 7:37PM

Thankyou :-) I guess that!!!8217;s solved that dilemma then! It seems I!!!8217;ve been wrongly advised as was told I can take the money as I!!!8217;m no longer employed by them or does that only apply to transferring it to another pension? I!!!8217;m quite ashamedly naïve about pensions. I don!!!8217;t have the paperwork to hand but the forecast was pretty low.

Silvertabby · 5 August 2018 at 7:42PM

You may be able to transfer your benefits to another pension scheme (although note that the fact that you can doesn't mean that you should) but you still won't be able to access them before (currently) 55.

Your LGPS benefits won't stagnate if you choose to leave them there - your pension will increase in line with inflation each year.

kitkatt1982 · 5 August 2018 at 9:18PM

Thanks everyone, seems I had misinterpreted the advice I was given. Also just discovered the new company pay into the same scheme despite not being LG so everything crossed I get the job :-)

Thrugelmir · 5 August 2018 at 9:32PM

kitkatt1982 wrote: »

I don't have the paperwork to hand but the forecast was pretty low.

There's no such thing a free lunch. You'll only benefit if you pay in over your entire working life. To whatever scheme your employer offers.

CityOwl · 5 August 2018 at 9:45PM

kitkatt1982 wrote: »

Thanks everyone, seems I had misinterpreted the advice I was given. Also just discovered the new company pay into the same scheme despite not being LG so everything crossed I get the job :-)

I know that it must be disappointing to learn that you cannot access your pension until the age of 55, but it is a blessing in disguise. You will be pleasantly surprised what a difference a second salary makes, especially if you have been managing on one salary for a long period of time.

I was a stay at home mum for 5 years and, although my husband earned a good salary, we only really started to save once I returned to part-time employment. It felt like we had won the lottery every month, not the jackpot but one of the smaller prizes.

Really pleased to hear that you will be joining a decent pension scheme if you get the job, Good luck

thickasabrick · 6 August 2018 at 12:16PM

Earliest you can access your pension is 55.

Please get rid of the debt as quickly as possible with your additional income.

This article on Monevator has a way of explaining debt that really struck a cord with me.
http://monevator.com/why-you-must-get-out-and-stay-out-of-debt/

Mr Money Mustache has a very different way of describing debt which, whilst a bit alarmist, is nevertheless very worthwhile reading.
https://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/

Good luck with the job application.

kitkatt1982 wrote: »

Hi,
Looking for some opinions.
I’m 35 and have been a stay at home parent (and at college) for 4 years. During this time, having to rely solely on my husband’s income, we’ve accrued about £10k of debt. The repayments are manageable and on a zero or low interest rate until June next year when our current mortgage rate also comes to an end.
My youngest is off to school and I’ve just applied for a quite well paid job. I have a LGPS pension pot of around £22k from past employment with no intention of returning to local government employment. Considering whether, if I’m successful in my application, to take out the money and use it to clear the debt then reinvesting the remainder. I know having this debt is going to significantly impact on our mortgage options at renewal despite having around 60% equity on our home.
Lots of things to consider such as the final figures etc but as it is the lump sum would be more useful now than the pitiful amount it equates to as an annual sum on retirement. The new company has its own pension scheme I would be paying into plus paying what I’d be using to clear the credit cards to pay into a private pension.
Any thoughts please?

AlanP_2 · 6 August 2018 at 1:07PM

If the new employer's scheme is also LGPS then you might be able to combine it with your current deferred pension which may well boost what it pays out at retirement.

If you link the previous n years of service to a much higher (current) salary you get a larger actual pension.

Dox · 6 August 2018 at 5:40PM

kitkatt1982 wrote: »

Thanks everyone, seems I had misinterpreted the advice I was given. Also just discovered the new company pay into the same scheme despite not being LG so everything crossed I get the job :-)

If you have been told you could access the money at 35, neon warning lights should be flashing! You can access it before 55 by transferring it to a personal pension and hooking the loot out of that, but (unless you are doing so on grounds of ill health) it will be classed as something called an 'unauthorised payment'. You will pay a swingeing tax charge and the people helpfully giving you this marvellous opportunity to liberate your pension will take a very large chunk in fees.

atush · 6 August 2018 at 11:35PM

So f you arent used to having this salary, should you get the job- join the pension, pay off the debt, and save an emergency pot (so you dont go back into debt).

Should be easily doable to split your pay into 3 and do this. Proritise the debt over emergency cash at first, but so start it in case something comes up/

Pension or debt?

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