Should I opt out of pension?

Shilly

I am looking for some advice on whether I should opt out of my pension for a few years. Here's the situation-

I am a 25 year old teacher and I currently pay around £120 per month into the teacher's pension scheme. The problem is that I am trying to save a deposit to buy a house and I feel that having an extra £120 per month that I could save would be really helpful.

I am thinking about opting out for 2 years or so but I am worried about the long term effect of this. Any advice would be greatly appreciated.

Aegis

From what I've gathered, you have one of the better pension schemes going. If so, you would have to be almost crazy to opt out of it if it only costs you £120 a month, especially since this would probably only make you around £90 a month better off after deduction of basic rate tax and national insurance.

McKneff

And you would aslo not be getting contributions paid into your pension for two years, which for 40 years growt will amount to a llot of money in your pension fund.

Never say no to free money.

hugheskevi

It would be very foolish to opt out of the pension scheme, losing out on a lot of employer contributions into a very good scheme.

There are plenty of posts on the pensions thread about this issue if you go and search there - everyone would agree that you shouldn't opt out of the scheme.

CLAPTON

you are contributing 120 less tax relief and some NI so in reality about £95
the taxpayer is contributing between 300 to 400 per month
and check that you can rejoin at any time

pandora205

As a former teacher and current local government employee who is much nearer retirement than you are, I'd advise very strongly not to do this. At your age pensions are the last thing on your mind, so it will all seem quite irrelevant. However, as you get closer you will be glad you have contributed. In my 20s I didn't save anything, had a mortgage, then children a few years later. I had no idea what a good deal I was getting (ie tax relief plus employer contribution on top of my own contribution). My only regret is that I didn't keep it going for the few years I had a career break.

dunstonh

The teachers scheme is one of the best going. As the others have said, you would be daft to opt out. It would cost you a fortune in the long term for the benefit of saving under £90pm. If you cant afford to put aside £90 a month now when interest rates are at an all time low then it perhaps indicates you cant afford to buy a house. What are you going to do when mortgage interest rates go up 50% from their current position and you are talking many hundreds of pounds per month difference.

custardy

also dont assume the scheme you have now will be in place or available to you in 2 years!

Pwilky

I strongly urge you to keep with the Pension definitely!

jem16

Shilly wrote: »

I am looking for some advice on whether I should opt out of my pension for a few years.

If you are in the scheme from before April 2007, you have a retiral age of 60. If you opt out and rejoin you will have to rejoin in the new scheme which has a retiral age of 65. That is assuming the final salary scheme would still be available.

For every year you opt out you will lose at least £425pa of pension. So for one year's contribution you will save approx £90 x 12 = £1080. To buy £500 of additional pension would cost you £3340 if bought as a lump sum or £5616 if bought as monthly payments of £23.40 over 20 years.

Is it worth it? In my opinion no - stay in.

Shilly

Thanks to everyone who has replied and given advice. It seems the consensus is to stay in. I think one of the major problems is seeing so far ahead into the future when retirement is at least 40 years away! I guess it will just take me a little longer to save up for that deposit, which isn't the end of the world. Thanks again.