Pensions and Student loan debt....

Discussion in 'Finance, Property, Law' started by Green_Homer, Jan 12, 2009.

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  1. My girlfriend has just paid a visit to her work financial advisor to ask about their pension scheme and was "Strongly advised" that while she had a 'large debt' (about 12k, student loan only) that she shouldn't pay into the pension scheme.

    She was also told that it may affect her credit rating...!

    Now that just doesn't seem to make any real sense and contridicts a lot of what I knew about student loans, i.e. pay them off as a last priority and as a debt to the taxpayer and not a commercial debt they do not affect credit ratings!
    He then said something about being young (23) that it's not urgent to start paying into it...

    I was advised by my Dad and his financial advisor to start my stakeholder pension at 18 even if it was just making £20 contributions / month. I then had the importance of paying in as soon as possible reinforced to the point that my Dad took over the payments whilst I was at Uni as I couldn't afford them on top of my normal living costs!!

    Any finance gurus able to shed any further light on his 'advice' as it just doesn't sit right! 8O
  2. Sympathetic_Reaction

    Sympathetic_Reaction LE Book Reviewer

    Assuming she has the current version of the Student loan (active about 2000 onwards), then it is not a debt in the normal sense.

    You only have to pay it back if you earn over a certain amount, if you never earn over a certain amount then you will never have to pay it back and if this persists then the debt is written off. Once you earn over a certain amount the debt is repaid through PAYE at a set rate.

    Basically ignore it as a debt, but include it in your calculations as an expenditure once you earn over the threshold (so the value of the debt doesn't effect you the repayment amount does). Then work out whether you can afford to pay into a pension.

    Personally I paid into a pension from day 1 of work and have done since, I also opt out of S2P and have a personal pension which is topped up on the odd occassion. I'm reckoning that by the time I hit 60+ there will be limited state benefits for pensioners.


    p.s. obviously I am not an financial advisor and anything said above is my personal opinion and not given in any way as financial advise.
  3. Obviously !
  4. Thanks SR, exactly what I already knew... given that her work will match any contributions like for like this seems like quite daft advice to not take it up!

    edited for mong fingers
  5. Not a finance guru but...
    I have a similar debt as does everyone I graduated with, have been in work for a good number of years and we have all been paying into a pension for all of them. As work makes a contribution to the fund, perhaps the advisor is on the take from the company trying to squeeze it's books!

    Even earning the national average (median) wage of about £27,000, it will probably take decades to pay off a sum like that (with interest) at 90 pounds odd a month and it's just something you live with if you earn more than the threshold.

    Of course it might make things a little tight, but personally I'd rather take the hit now than when I'm old and grey and sat in the pub all day. If she has work-contribution pension provison it is a good opportunity, imho.
  6. Cheers Milsum, backs up what I thought even more so! By what she has told me, he is quite old and didn't seem to know much about the student loan system... :roll:

    Any finance boys/girls had a chance to have a look at this yet? Would be nice to have a more 'official' answer if I can :p
  7. just abit of a whinge :? Is it really as easy as it sounds to get cash off the government to study 8) ?after spending 20 years travelling in sunnier climes my brother returned to uk did not much fancy the idea of working8 or 9 hours a day so he started studying , he got his degree, liked the Idea of studying so he carried on :? now 22 years later, he is still a government financed pot smoking student, with 4 degrees, and he intends studying until he retires at 65 in a couple of years, surely the same options could be offered to homeless unemployed servicemen,no wonder england is going to hell in a hand basket!!
  8. UK is a very nice country because it really supports their people for their education. If you are from UK you must be very proud of your country.

    Simulation pret immobilier
  9. Gosh you're funny.

    I've done the numbers again and I will be paying at least £100 more a month in 'tax' for the rest of my working life, because to pay off the sum in one go would not make financial sense. If I put it in a bank account and didn't touch it the interest would pay it, but who has £15,000 just sitting in a bank account somewhere after graduation? Mine was the first year that introduced student loans and I have to say, to those just 1 year older than me who went to university, you lucky, lucky b'stards.

    Stealth tax by another name, to foot the bill of Labour's unnecessary political goal of sending 50% of school leavers to University. And for what? An expensive 3 year piss up for all just to take a call centre job at the end of it? As an academic I don't earn much more than many non-graduates, pay the same income tax, and will have this slice taken out of my wages until I retire, leave the country or go on the dole. grr. :x
  10. They are not discussing pensions, they are discussing cashflow.
  11. you're so right, there was no mention of pensions anywhere, even in the subject line........ :?