Nuvos or refund?

mcgoo1

Hi everyone, any advice on this would be greatly appreciated.

I'm a member of the civil service Nuvos pension scheme (defined contribution 2.3% annual salary). Before the 24 month mark I have the option of opting out and taking a refund.

Am I being silly even considering this?

I've paid in around £2.5k so far. I realise if I took the refund I wouldn't receive the £2.5k - due to tax relief and increased NI contributions that would be payable.

I think (though may be way off the mark) that I would get around £1k back if I took the refund. It seems this might be worth it to pay off my debt.

A bit of background - I'm 24 at the start of my career. I've left uni with credit card and overdraft debt - which I've not been able to pay off, and currently pay around £60 a month in interest.

mcgoo1

I should have said - I would be looking to re join after a few months of sorting myself out money wise.

So in essence I'd lose 2 years contribution, but still have 42 years of contributions (assuming I stay in the civil service)

marlot

I think it would be a mad idea. The real value comes from the employer contributions, which they wouldn't refund to you.

Instead I'd be looking at my monthly budget and seeing if I could trim £50 a month out.

dunstonh

Am I being silly even considering this?

Yes. Barmey. Crazy, Stupid even.

I've paid in around £2.5k so far. I realise if I took the refund I wouldn't receive the £2.5k - due to tax relief and increased NI contributions that would be payable.

And you would be giving up benefits that far far exceed £2500 gross of tax and NI.

A bit of background - I'm 24 at the start of my career. I've left uni with credit card and overdraft debt - which I've not been able to pay off, and currently pay around £60 a month in interest.

If you are in financial hardship then let the bank/card provider know. Many will suspend charges/interest for a period to allow you to get back on track.

hyubh

mcgoo1 wrote: »

I should have said - I would be looking to re join after a few months of sorting myself out money wise.

So in essence I'd lose 2 years contribution, but still have 42 years of contributions (assuming I stay in the civil service)

Given Nuvos is a CARE scheme, it is very easy to see what pension (and not just the more nebulous 'years of contributing') you would forgo with the refund. You don't say what your contribution rate is, but if we assume 5% then 2500 / 0.05 x 0.023 = £1,150 per year on retirement, index linked. Oh, but you are also thinking of staying opted out for 'a few months' - so the amount of pension lost will progressively increase.

That said, even if you do stay in the civil service for another 42 years (which is a big 'if'), it's highly unlikely the pension scheme will stay as generous for even a quarter of that. As such, better build up a decent DB pension now while you still can.

mcgoo1

Thanks everyone, I will drop that idea.

The idea came about as not many people my age have pensions, and I thought the money could be usefully used to get rid of some debt in ome swoop.

I realise now this isnt the best plan of action, and will keep bashing away at the debt on a monthly basis.

Thanks for your advice all.

BobQ

mcgoo1 wrote: »

Hi everyone, any advice on this would be greatly appreciated.

I'm a member of the civil service Nuvos pension scheme (defined contribution 2.3% annual salary). Before the 24 month mark I have the option of opting out and taking a refund.

Am I being silly even considering this?


t.

Silly hardly begins to describe it for the reasons others have given. You must judge this pension on the benefits it provides not the contributions you make.

If you do opt out and opt in , note that you will not be able to do this again in the same employment.