If your income includes or is based entirely on pension payments there is nothing to stop you starting a Debt Management Plan (DMP).

The amount you pay into your Plan each month is based on your disposable income. This is simply the difference between your monthly income and reasonable monthly living expenses.

Whether your income is made up of pension payments, benefits payments, wages or indeed a mixture of all of these does not matter. We will take a more detailed look at starting this type of debt solution if you are receiving a pension and the affects it might have on your pension overall.

Can my pension fund be touched if I start a Debt Management Plan?

If you start a DMP you do not have to worry about any money that you have already paid into your pension fund. Even if you have the opportunity to release money from your pension fund while you are in your Plan you cannot be asked to do so to pay your debts if you do not want to.

Having said that if you reach the time when you can start drawing on your pension during your Plan and have the opportunity to release a lump sum it might be sensible to consider doing this. You could then use some or all of the cash to make full and final settlement offers to your creditors.

In this way you might be able to write off a portion of your debt and become debt free.  You would then not have to worry about making any further ongoing payments to creditors once you are retired.

Do you want help to start a DMP? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

What if my pension payments reduce during my DMP?

If your pension payments go down either because the payment physically reduces or  wider cost of living increases mean the payment is is going down in real terms you could then start to struggle to pay your agreed DMP payments.

Where this happens the Plan is flexible meaning that the payments you make into it can be reduced to fit the change in your circumstances.

BMD Tip: Your reduced payments will have to be re-negotiated with each of your creditors in the Plan. This may mean that they start to add further interest or charges to your accounts again until the new payments are agreed.

A DMP allows flexibility if you are receiving your pension

Because a DMP is an informal agreement with your creditors it is the most flexible debt management solution. This flexibility means that when you are calculating your disposable income it rarely matters how your income is made up.

If your income is based entirely on pension payments it does not matter. In addition if you need to change the amount you pay this can be achieved relatively simply and as such a DMP can be a very sensible choice for someone whose income is dependent on pension payments.

However this solution is not always the right way to resolve a debt problem. One of the problems of using a debt management plan is that it will normally take a very long time to repay your debt. As such if you owe a lot of money relative to the amount you are able to repay each month it might not be the best solution for you.