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anyone know about LGPS? should I stop paying into pension to pay debt?

(16 Posts)
pensionquestion Mon 11-Apr-16 18:25:18

Through a combination of various factors (divorce and other things) I find myself in a significant amount of debt.

I am now considering whether or not to stop paying into my pension to further pay it down.

I have approximately £18,000 on credit cards. About £7,500 on a 0% card which expires June this year, £7,500 on a 0% card until October next year and £3,000 which I'm paying interest on.

All of my bills and spending money (for food etc and modest social life, hobbies etc) except paying debt comes to approx £2,500 per month. I currently take home around £3,000 per month.

My pension comes out of my gross pay at approximately £380 per month. It's a average salary local government pension so my employer pays in.

 is it worth it to stop paying into my pension to pay down debt? 

How do I work out the impact on my take home pay? Is this a mistake long term? Grateful for any opinions, thank you.

chanie44 Mon 11-Apr-16 20:57:01

When I looked into opting out of my civil service pension, I found out that I would only be about £30 a month better off - due to 'contracting out' you pay less tax, so if you stop paying into the pension, you won't be £380 a month better off, as you'll end up paying more tax. Contracting out ended this month, so I have no idea of the affect.

I used one of those tax calculators online and I input my salary details and it worked it out for me. A Google search should bring one up. You can input your details both with and without pension contributions.

awishes Mon 11-Apr-16 21:01:43

Depends on your age aswell.
Generally it is better to stay in due to the amount that your employer will be contributing to your pension pot.

chocoshopoholic Mon 11-Apr-16 21:10:20

The LGPS brought out a 50/50 option recently, pay half in and receive half the benefits. I only glanced at it in the magazine but it might be worth looking into if you're struggling.

PrincessHairyMclary Mon 11-Apr-16 21:19:07

Do you have a house you can release equity in? Remortgage and pay off all debts?

JapanNextYear Mon 11-Apr-16 21:25:46

I'd find some other way, it does depend on your age. You'd be hard pushed to get the same benefits any other way.

pensionquestion Mon 11-Apr-16 22:07:35

Thanks for your responses.

I'm 36 and rent so sadly can't remortgage or release equity

AndNowItsSeven Mon 11-Apr-16 22:38:48

Keep paying your pension you will be fit later far more than you will save now.
£2.5k seems excessive for monthly outgoing though. Could you post a breakdown and posters can help you save money that way.
" hobbies" shouldn't really be on the cards when you are £18k in debt.

AndNowItsSeven Mon 11-Apr-16 22:39:28

Benefit! Not be fit

titchy Mon 11-Apr-16 22:43:55

Leave the pension alone. Try and cut back a bit more. But you can repay your debt at £500 a month. If you can juggle interest free periods you'll be debt free in three years. Less if you can make some cutbacks, eBay stuff etc.

EllieFredrickson Mon 11-Apr-16 22:47:33

The reduced contracted out rate of NI has gone from start of this tax year so you will be paying extra NI - about £40 on a salary of £42k. Are your contributions really that high a month? I take home £2.5k and my LGPS contributions are 6.5% of salary.

Look at 50:50 scheme but I think you should stay in if you can. The current scheme still gives really good benefits.

EllieFredrickson Mon 11-Apr-16 22:48:53

Sorry that should say extra NI of £40 a month

potap123 Mon 11-Apr-16 22:50:42

Message withdrawn at poster's request.

pensionquestion Thu 14-Apr-16 11:42:40

Thanks for your thoughts on this

I am now wondering whether I am better consolidating my credit card debts into a loan and paying that off, over say four years? Would that be sensible? Interest rates are so low and I wonder if that would be better than swapping cards and paying the associated fees all the time

Also I should bear in mind that I may be lucky enough to come into a sizeable chunk of cash early next year. The intention for this would be to put a deposit on a house. So I need to consider how my mortgage affordability will be impacted by my debts.

If I pay circa £350 a month on debts I should be able to get enough of a mortgage to buy what I need (I could of course overpay the loan until I get the mortgage?)

JapanNextYear Thu 14-Apr-16 12:33:12 is a really good website with lots of good information on debt consolidation and how to manage payments. (Don't leave the scheme!).

Passthecake30 Thu 14-Apr-16 21:23:57

I'd leave the pension. Are the credit cards 0%? If not, can you get at least some of the debt transferred to a 0% card?

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