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.
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