Break from pension contributions to pay off credit card

B

Ballygriffen

Registered User
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I'm 39 married with 3 kids, wife is SAHM. My Salary is 85k Currently putting 500eur pm into my company pension scheme. I was a late starter and only have approx 25k in there so far. I have credit card debt of 8k (had debt for 2 years ..currently on 0% transfer rate) that I can't see being paid off anytime soon. Should I take a break from contributing to pension to clear this. Interst rate will be reverting 17% in the next few months. Thanks.
 
If it was me I wouldn't trick about with the pension contribution. Rather I'd cut spending and target savings at CC. If you're looking for a less painful solution then perhaps request a 6 month mortgage payment holiday and direct that at your CC.
 
I took a 6 month break from mortgage during the recession when I was made redundant so I don't think thats an option for me again.
 
If you take a break you will loose the tax relief presumably at the higher rate - so the 500 pension reduction would only give you a much smaller amount to pay off the CC each month. Could you make a plan to pay off the CC before the 17% kicks in from your existing salary or reduce pension contribution to help. It does not seem good planning to loose the tax relief.
 
The debt isn't going to go away and soon it is going to cost you 17% in interest. You have a certain amount of money being earned every week, so you will have to manage that money in a way that works for you best. If you can't see it being paid off anytime soon, does that mean that it will only accumulate if you don't pay off the full interest each month. Even if you do, the debt of €8,000 is still there.

Better to bite the bullet and get the decks cleared and get your finances under control. Some employer schemes will match the employees contributions so I would have a word with your boss and explain the situation and ensure the employer money is still going in.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Just check that if you take a contribution holiday whether the Employer contribution also ceases. Whilst it makes sense to pay off expensive debt, I would be reluctant to forgo any Employer contribution to the pension plan if possible.
 
Clearing the debt makes sense but be prepared for how long it would take. if you are contributing €500 at present, after tax you would have an extra €300pm to clear the debt. So how long would it take you to pay off the €8000 if you were using that €300 in addition to whatever payment you are now making? Both at the current rate of 17% or at a better rate if you get a cheaper loan to clear down the CC debt?

You may be looking at 2-3 years (I don't know what your current repayments are but I am guessing you are making some). Would your employer continue to contribute for that period allowing you to continue building your pension fund?

Needless to say but just in case, the first thing to do is to stop using the credit card completely.
 
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