If you are paying high interest on credit cards or other debts should you use every penny possible to reduce your debts? You certainly shouldn't have a lot of savings whilst you are in debt, but there are many good reasons why you should continue to make pension contributions. Nearly 10 million people have started saving money into their pension since auto-enrollment came in, where employers … [Read more...]
Pensions and debt
It can be hard to balance the need to make long-term savings for your old age against your short-term priority of dealing with your problem debts. After April 2015 it has become possible for many people to take money from a personal pension if they are over 55 and the most common reason for doing this is to pay off debts.
These articles look at whether this is a good idea and what the drawbacks are. And if you are already in some form of debt management, or are insolvent (bankrupt, in an IVA or in a DRO) or thinking about some of these options, you need to know how your pension could be affected.
The Pensions and Debt Overview page groups articles by topic. This pages lists the articles in date order.
Following an Appeal Court ruling on Horton vs Henry, published in October 2016, pensions are once again safe if you go bankrupt. The full judgment is here. The background to this case was: before 2000, pensions formed part of a bankrupt's estate and would be taken once the bankrupt reached pension age; the Welfare Reform and Pensions Act changed this. For people going bankrupt after … [Read more...]
If you are over 55 and thinking of taking money out of a personal pension so you can clear some debts, one of the things you need to be especially careful about is "pensions recycling". If you accidentally get caught up in these tax rules, HMRC can impose an additional tax charge of up to 70% of your tax-free cash - ouch! Use a pension to pay off debt - then rebuild pension There many other good … [Read more...]
If you expect to go bankrupt soon you may be worried about whether your pension will be safe. The pension changes in April 2015 made it possible for many people to take money from their pension from age 55, even if they are still working, and there were concerns that this would change the protection for pensions in bankruptcy. The Insolvency Service has published a summary of its new guidance … [Read more...]
You may be worried about whether your pension will be safe if you are already in, or have finished, a Debt Relief order (DRO), or if you are thinking about applying for a DRO. The 2015 pension changes mean that many people over 55 can now withdraw some or all of their pension. so what happens if you take money out? Can you lose your pension? Can you get a DRO if you have a good pension? I … [Read more...]
The pension changes that have just come into force have given many people over 55 a new option for paying off their debts, by taking money from their pension pot. I've looked at whether this is generally a good idea in Should you use your pension to pay your debts? but in this article I want to focus on people who are already in a Debt Management Plan (DMP). This article is relevant for people … [Read more...]
In 2017 more people than ever are retiring with significant amouts of debt. One in four people planning to retire this year will still have a mortgage or other debts to pay off, on averager owing about £24,000. 38% of these people will still have a mortgage; 51% will have credit card debt. And annuity rates have continued to decline. So with more debt to pay and their likely pension income … [Read more...]
Many people who are over 55 can take some or all of their pension pot in cash before they actually retire. You need to know how this may affect you if you are considering an IVA. If you already have an IVA, you may be wondering if your pension is safe. First a warning: IVAs are individual arrangements and it is possible for almost anything to be included or excluded in the detailed terms and … [Read more...]
On 26 March 2015, the Insolvency Service published Undrawn pension entitlements: Summary of guidance for insolvency practitioners and debt advisors. With "pensions freedom" coming into force on 6th April 2015, the Insolvency Service's aim was to clarify the murky situation around bankruptcy and pensions. Further clarification then came with the Guidance Issued to Receivers and Guidance Issued to … [Read more...]
This is a guest post by Nick Lord. It argues that the new pension rules are a game-changer for debt advisers and that debt advice agencies need to put measures in place to ensure that their advisers can provide best advice post April 2015. Nick is a consultant on money advice and personal finance issues working with Government departments, regulators and firms. His past posts include senior Money … [Read more...]