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Which pensions – how do I pay my pension with debts?

Kate Smith, regulatory strategy manager at insurer Aegon UK, believes integrating pensions with other financial responsibilities would make saving for retirement attractive even for those with significant debts.
“Employees could request a pension payment holiday so that their pension contributions (minus tax relief) are diverted to repaying a consolidated loan for example, ideally at a reasonable interest rate, for a maximum period, say five years,” she suggests. “Existing savings would remain untouched, the employee could switch back to pension saving after the period, or once the loan is paid off – encouraging staff loyalty, good saving habits and raising awareness of financial responsibility.”
Ros Altman further suggests greater flexibility.  Many people are dissuaded from contributing to pensions because the money is tied up for decades with no early access, even in an emergency. With access only available from 55, Altmann recommends allowing people to tap into their pension when they want to, but only their contributions, not their employer’s or the tax relief. “In the case of NEST, people would still have half of their pension fund growing until retirement, even if they needed to draw out the other half,” she says.

Financial Services Authority regulations that act as a barrier to allowing employers to promote their pension schemes more effectively should be removed, says Smith, at the same time as jargon is eliminated she says. “Information provided to pension savers needs to be simplified; too much information is bewildering and off-putting.  Let one of BishopStortfords IFA’s help you through the jargon.

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