Insight  

It generally makes sense to try and pay off debts as you near retirement. In fact, it’s a great idea to pay off debt at any stage in your life.

The logic behind this is simple. Usually, the interest you pay on your debt is likely to be higher than you could achieve by investing your money - unless you’re prepared to invest in riskier investments.

Here are a few things you should also consider:

• You may have to pay a penalty if you repay your debt early. If an early repayment penalty applies, it may be best to maintain the debt, at least until the penalties no longer apply.
• If you can’t pay off all your debts by the time you retire, target the ones with the highest interest rate, as they'll cost you the most in the long-term.
• You may be able to take a tax-free lump sum from your pension savings, to pay any remaining debt when you do retire. Taking a lump sum is likely to reduce your overall pension benefits at retirement.

When you reach age 55 (changing to 57 from 2028), we offer you a range of pension options. These may differ to other products and providers and it's important to consider your own retirement needs.

The value of an investment can fall as well as rise and isn't guaranteed. The final value of your pension pot when you come to take benefits may be less than has been paid in.

This content is general high-level information only and shouldn't be interpreted as a recommendation or advice. Because the circumstances of each reader will be different and not known to us we recommend that tailored advice from an expert is sought. There may be a charge for financial advice.