Withdraw from Public pension scheme?

Krach78

I pay £187 Per Month into my public sector pension. I am 33, and can not retire until I am 68!(at the moment)
I have two young children, a mortgage, and child care costs as my wife and I both work.

The question is, should I consider withdrawn from the Pension Scheme for the next 4 years, in order to make our lives less stressful money wise, then put back into the scheme once the kids are in school?

My pension pot would remain frozen, then I can start in the same scheme with same benefits, and start adding to that pot again after 4 years.

I am struggling to see a down side to this, but am concerned I have missed something? Any advice appreciated.

RAS

You lose continous service, immediately lose the death in service benefits and potential dependant's pensions.

You cannot add the 4 years back except at a high cost.

BigAunty

Wrong forum. There is a pension and retirement forum. Post your query tehre.

Any particular reason, though, that you can't shave off £50 a week in your outgoings through being a bit more frugal? or up your income?

Download the MSE budget planner, work through the site and see if you can't reduce your outgoings by £6 per day rather than doing something as drastic as suspending your pension payments. For example, switching tariffs for telecoms, energy, insurance, cheap recipes, cheaper groceries, reducing travel costs, etc. Many forum members live thrifty and frugal lives and have a good or better quality of life than those on higher incomes.

Also, double check your benefit entitlements.

What % of your net household income does this £187 represent?

Does your household have any debts? If so

zagfles

Krach78 wrote: »

I pay £187 Per Month into my public sector pension. I am 33, and can not retire until I am 68!(at the moment)
I have two young children, a mortgage, and child care costs as my wife and I both work.

The question is, should I consider withdrawn from the Pension Scheme for the next 4 years, in order to make our lives less stressful money wise, then put back into the scheme once the kids are in school?

My pension pot would remain frozen, then I can start in the same scheme with same benefits, and start adding to that pot again after 4 years.

I am struggling to see a down side to this, but am concerned I have missed something? Any advice appreciated.

It would probably be the worst financial decision of your life if you voluntarily withdrew from a public sector pension scheme. Public sector pensions are very good value and still will be even after the proposed changes.

Have you actually worked out how much better off you'd be if you came out? Bearing in mind you'd pay more tax (as you get tax relief on contributions), you'd pay more NI (as the scheme will probably be contracted out of SERPS - you will automatically contract back in, you have no choice), you'd probably get less tax credits since pension contributions reduce your income for tax credits purposes, and you might get less in other benefits.

Public sector pensions are probably the best investment you could ever make. Just post on the pensions board and see what they say.

Look for savings elsewhere. The debt-free board will give you loads of advice on what you could cut back on.

xylophone

Does your pension scheme also carry death in service / dependents' benefits - what would be the financial consequences to your wife and children if you were to die while not contributing to the scheme? What would be the effect on your own eventual payout if you do this?

I would be very careful and make sure you have all the facts before taking any action. You will need to consult the Trustees.

Krach78

Thanks for all this advice. To answer some questions: I would be about £115 better off per month. The service does include a death in service. The 6 years worth would still be paid out, and we also have life insurance on us both incase the worst happens. The proposed increase would ad an extra £85 per month on my contributions, and I am just getting fed up of working myself, ourselves, into the ground, and having no money left over. I am at a point where I am thinking a 4 year break would make a big difference now, where in 35 years time, the Mortgage would be paid off anyway, and those 4 years out wont make that much difference. I would still have 30 years service. Unbroken, if I freeze for no more than 4 years I was told.

jackyann

As a public service pensioner (NHS) myself, I would advise you to think about this very carefully indeed. Sometimes a break in service means that certain conditions are lost.
I know that this seems very hard at the moment and you are thinking of your family; but if you can manage it then you will all be better off in the long run.
I speak from no financial expertise, so please look elsewhere for that. I also know that none of us has a crystal ball to know how things are going to be in 30 years time,
But I can only say that I am so glad that I have my safe pension, can treat & look after my family etc. (and as I have posted elsewhere, I do believe I've earned it!).

Adereterial

It's EXTREMELY unlikely given the proposed changes that you'll be able to buy back in under the same terms in 4 years time. I'd think very carefully about this, if I were you. £115 a month is not a significant enough increase in salary to be worth the thousands you'll lose at the end. Remember you'll also lose the generous employer contribution too.

Can you switch to a lesser scheme, rather than opt out entirely?

zagfles

Krach78 wrote: »

Thanks for all this advice. To answer some questions: I would be about £115 better off per month. The service does include a death in service. The 6 years worth would still be paid out, and we also have life insurance on us both incase the worst happens. The proposed increase would ad an extra £85 per month on my contributions, and I am just getting fed up of working myself, ourselves, into the ground, and having no money left over. I am at a point where I am thinking a 4 year break would make a big difference now, where in 35 years time, the Mortgage would be paid off anyway, and those 4 years out wont make that much difference. I would still have 30 years service. Unbroken, if I freeze for no more than 4 years I was told.

How have you calculated this? Are you getting tax credits at more than the family element ie more than 545 a year? If you are that is definitely not right - tax credits alone would probably reduce by 41% of your gross contribution, tax would increase by 20% of your gross contribution, NI would increase by 1.6% of all your earnings between above £5000 and £40000... plus maybe at 12% on your contributions if they are taken as a salary sacrifice.

As well as the above I strongly suggest you post on the pensions board and listen to what they say.