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Balancing pensions and debt

If you have debt to manage, you may not consider paying into your workplace pension a priority – but there can be benefits to doing both at the same time. Here, we explore the options that are available.

Why should I balance a pension with my debt? 

It’s more common and effective than you may think to continue contributing to your pension while paying off any existing debts such as long-term mortgages or temporary credit card bills. The idea might sound like a contradiction in terms, but it’s actually quite common for people to borrow and save at the same time. 

By saving with a pension while managing your debts, you can enjoy the benefits of seeing employer contributions, tax relief and compound effect of long-term savings build up your pension pot over time. So if it’s possible for you to balance both, it can be a clever way to save a lot more money than you personally contribute.

It’s all about what works for you

There’s no right or wrong answer to how you balance a pension and debt. It comes down to what the priorities are for you in terms of finances and your future. 

If, for example, you find yourself borrowing to afford the basics in life, you might decide to focus on debt repayment for a while and suspend your pension contributions. You can suspend contributions simply by logging into your online account or telling your employer directly. Your money is held in one pot, so once you’re ready to start contributing again all you have to do is notify your employer.

As an alternative example, you might find it perfectly manageable to pay off your debt in instalments whilst also paying into your pension fund bit by bit each month. Just remember that whenever you have the opportunity to put money into your pension, such as when you have cleared your debt, it’s a great way to save for your future.

Whatever you decide when it comes to a debt repayment plan, there are plenty of resources to help you on your way, like the Money Advice Service’s budget planner and NEST’s guidance and advice page.

Login to your online account

You can see how much you’ve got in your retirement pot, change your contributions and more at any time by logging into your online account.