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Would you be surprised to learn that more and more of UK debt ridden pension polices holders are cashing out a pension to pay off debt? Debt in the UK is rising, and the burden of personal debt mean that the public are using their frozen pension or whatever pension they may have to cash out and use the cash to pay off debt. It is tough times out there and with an increase in unemployment it is that people understandably want to cash in or cashing out their pension to pay off their debt!
We can see why it does make complete sense to pay off your debt with your pension, bus just ask yourself one key question: Should I cash out my pension to pay off debt? By asking yourself this question and by being true to yourself in terms of making sure you still have enough for retirement that yes you then cashing out a pension to pay of any debt makes sense! At the end of the day it is your money, it is your pension cash! And only yours!
Sometimes though dealing with your pension provider and going the whole process to cash out a pension can sometimes be a difficult and un-clear task! When you explain to your pension provider that you wish to pay off your debt using your pension pot may put off some pension providers, unless you exampling in a clear manner why you need the cash so much! The last thing you want to do is go into detail, point by point exactly what you owe and the amount of debt you have!
Credit cards: according to some debt research companies by the end of 2016 the average UK household will be in about £10,000 worth of debt. That does seem a lot but when you use a credit card interest free card then maybe it is not so bad, but it is totally understandable why people do use these methods.
Unsecured borrowing: It has been reported amongst some finance websites that unsecured borrowing will rise each year by about 5% to 7%. So it is no wonder that people in the UK often ask themselves; ‘Should I cash out my pension to pay off debt’? This is quite an increase, and with more and more people now facing job losses or unemployment you do have a degree of sympathy. An average household income V’s the debt ratio is expected to rise by 172%.
Your mortgage repayments vs cashing out a pension: Cash in a pension to my off debt maybe one thing, but to try to cash in a pension to pay off your mortgage maybe the best and most sensible idea. If you had to prioritise your debts in order of the most important, then surly you will agree that having a roof of your head is far more important!
Beware of pension liberation though, as this can be tempting and can be tempting when websites and other offline marketing offer promises such as; cashing out a pension.
If you do want to cash out a pension bear in mind you could face a 25% tax bill, even you want to try and cash out more to cover your debts then you could face an even bigger tax bill so you really need to think long and hard about whether this is the right thing for you to do.
Recently in 2015 there was changes made to pension in the UK, these changes were introduced to help people access their pension cash in a much more accessible way. This new pension changes is turning out to be very popular. The reason why? Because people are in debt so they take up the option to cash in their pension to pay off these debts. So the new pension changes are now providing quite useful to those that take up the option.
Cashing out pension to pay off debt can be a daunting process, and if you have not done this before then you may have a lot of questions that need answering. If you would like our help or a friendly person to talk to about your pension let us know and we will try and do our very best to help.