I want to retire, but I have unpaid debts. What can I do?
April 22, 2013
Retirement is a time we should all be able to look forward to, a time without the stresses and strains of work. But if you happen to have outstanding debt, you could be concerned about keeping up repayments when you retire.
Last year alone, research from retirement income specialist MGM Advantage revealed that the average retired Scottish resident has just under £9,000 worth of debt, so you’re not alone. There are always options to consider before making a final decision about what to do next.
Firstly, make sure you check all the benefits you’ll be entitled to should you decide to retire. It might be that these alone will be enough to help pay off your debts as well as to support your living costs etc. Perhaps speak to a professional adviser who can do some benefit calculations to assess how much you can afford to pay back and create an affordable payment plan, tailored to your individual needs.
It’s also possible that you may have been paying into a pension scheme. Perhaps you forgot about it, or have paid in much more than you initially thought. All of these options could help you to either repay your debt in full, to carry on making repayments as you did when you were earning.
If you’re over 55, but not yet ready for retirement and want to clear your debt, you may have the option to withdraw a 25 per cent lump sum from your pension in order to pay it off in full.
A pension should almost always be looked at as an investment for later life. Remember, this will need to be sufficient to support your living costs and everything else you would usually use your salary for. However, in certain circumstances, e.g. if your debts are currently manageable but likely to get out of control, it could be wise to use this lump sum to clear your debt and avoid it following you into retirement. It’s important to be aware though that taking out this option can often affect its tax-free nature, should anything happen to you shortly afterwards. These kinds of decisions should always be discussed with an independent financial adviser before taking any action, to ensure it’s the best option for you and to identify any hidden small print you might have missed.
Our specialist colleagues at Scotland Debt Solutions have an in depth knowledge of debt solutions and are always on hand to discuss options to suit your particular needs. Why not speak to one of our financial experts today. They can assist you in finding the best solution to enjoy a happy, debt-free retirement.
The start of a new year is the perfect time to take stock of your finances and put plans in place for a financially savvy year ahead. While you may feel your problems are insurmountable, there are always things you can do to help, most of them surprisingly easy. Here are 7 ways you can […]
If you have credit card debt which is attracting a high level of interest, moving this balance onto a lower interest card could save you a considerable amount of money. This process is known as a ‘balance transfer’, and if done correctly, this process could save you money and also reduce the time it takes […]
Many thousands of young Brits are being actively encouraged towards taking on debt and spending borrowed money even before they reach their 18th birthdays. That’s according to the price comparison website comparethemarket.com, whose research suggests that roughly one in four 16 and 17 year olds in the UK have been offered credit cards or asked […]
If you’re in serious debt with no hope of repaying your unsecured creditors, you don’t have to wait for a creditor to take legal action against you. You may be able to take matters into your own hands and apply for sequestration (bankruptcy in Scotland). This also prevents your situation from worsening. There are two […]
If you’re looking to save some money it’s a good idea to make a detailed budget that lets you see where your cash is currently being spent, and offers an overall view of your finances. You’ll need to collect together your income and expenditure details, including annual costs such as insurance, car expenses, birthdays and […]
Scotland has a number of formal debt solutions that can help you deal with a difficult financial situation. It’s advisable to take action as soon as possible, however, to prevent your levels of debt escalating when interest and other charges are added. Obtaining professional advice is key in this respect. An approved money advisor or […]