Re: Taking workplace pension at 55
Originally Posted by Realist
A reasonable plan Swims so long as one is able to survive on that lower paid job wage. Comes down to lifestyle choice and living within one's means I guess.
My adage has, and will always be, make paying any debts off the first priority because debts accrue interest. Pay the debts off and you massively reduce the overall amount that you will have to pay. Same goes for a mortgage. Pay it off as soon as humanly possible as it can knock tens of thousands of pounds off the total repayable amount.
There's an interesting debate to be had about whether it is better to sit with debts and pay into a pension, or whether it is better to temporarily stop paying into a pension and instead use the available money to pay off the debts.
In the first scenario, running with debts and/or mortgages, you are accruing lots of interest payments making the total repayable amount much higher than it otherwise would be. In the case of a mortgage the difference in interest paid and total repayment amount is staggering. Pay an extra £100 a month off your mortgage and you could save a stonking amount on the total loan and see the mortgage paid off years earlier.
In the second scenario, you put all available monies into paying off the debts and mortgage instead of paying into the pension pot. So your eventual pension amount is less than it otherwise would be but you've saved a collossal amount of money paying the debts/mortgage down.
You're only getting 20% tax relief on the first £2,880 paid into your pension
. The amounts you save by paying down more towards a mortgage is surely phenomenally better no?
Interested to hear yours and others thoughts on the debt vs pension equation.
I beg to differ.
When I took redundancy, I could not go back to working for the Government as a direct employee for a year and a day without having my Pension reduced.
Time out, back again, part time, 29 and a half hours a week, fixed term contract and paid the lot into a Private Scheme, full tax relief and then took 25% of it, Tax Free, when I finished 3 years later.
If I had worked 30 hours a week, I would have been classed as full time and lost my original Pension.
The rules are complex, but workable.