Having a break from pension payments to save house deposit??

pathtofreedom

If you can't afford to save now and you think a mortgage payment would be a bit more than your rent I doubt you'd meed the affordbility critera to get that size mortgage. Also owning a house comes with a lot of extra costs, 2-3k when the boiler goes bang, few hundred here and there on general maintance a year. While you rent you don't have these extra costs, along with extra insurance for buildings, income protection etc. So if you're struggling this much to save 7k I think you'd need to look at cheaper places.

Also don't forget you're going to need money for solicitors, stamp duty, moving van, survey, valuation etc etc which would also be a few thousand.

Not paying into your pension and missing out on that free money is not a good idea, I don't know if nhs is db or dc pension but if it is dc have a play with some pension calcuators and see just how big a pot you need to save. The earlier you start the cheaper it actually costs you because you have more time for the money to compound. If you stop for a few years you'll end up having to pay more to catch up with the extra interest as well and not just the contributions you haven't made.

jem16

laurajane6486 wrote: »

I seem to have had mixed responses as to how much my pension would be affected...

Can't see where you're getting mixed responses - all have agreed it's a terrible idea.

My rough estimate of £1000pa was based on a salary of £30k. It appears to be higher than that as hugheskevi says.

what's a defined benefit scheme?

It's what the NHS scheme is. Basically it's a pension guaranteed to provide a set of benefits when you retire with no investment risk. Up until April of this year it was a Final Salary scheme and now it's a Career Average scheme.

Perhaps reading about it would be a good idea as you don't seem to realise how good it is and how much of a mistake it would be to opt out.

http://www.nhsbsa.nhs.uk/4017.aspx

jem16

pathtofreedom wrote: »

I don't know if nhs is db or dc pension

It's a Defined Benefit scheme.

but if it is dc have a play with some pension calcuators and see just how big a pot you need to save. The earlier you start the cheaper it actually costs you because you have more time for the money to compound. If you stop for a few years you'll end up having to pay more to catch up with the extra interest as well and not just the contributions you haven't made.

This doesn't apply as it's not a Defined Contribution scheme.

laurajane6486

Maybe you're right. Maybe I can't afford a mortgage. So I carry on renting forever. Not really the best option.

Yes I earn £34,000 a year. I have been trying to save for about 4 years. And so far have £1k. So it's easy for you to say I should easily be able to save £7k. But clearly I haven't and something's got to change to allow that to happen. I've tried cutting down my expenses. It hasn't really made much difference.

£140k is for a new build 2 bed house. A non new build 2 bed house here would cost about £125-130k, so yes I'd be saving £10k overall but I'd have to save £13k to get there. As we've seen, I'm struggling to get £7k together so £13k is never going to happen. A non new build house is also likely to need new kitchen, new bathroom, new boiler, etc, which a new build wouldn't.

A house share isn't really an option. Working shifts means I have to sleep during the day a lot. This is difficult enough on my own. In a house full of other people it'll be near impossible. How am I supposed to go to work, with other people's lives in my hands, with no sleep? Losing my job isn't going to help the mortgage or pension situation. I also have two cats, so finding a house share that would accommodate them would also be difficult. I'm also the kind of person who needs my space and I'm not sure I could cope emotionally living in a house with lots of other people.

The lottery comment was supposed to be tongue in cheek.

I'm not trying to find excuses. I'm just trying to find a solution to my situation.

BritPop

Hi. Saving for a house deposit is a big challenge, especially when you feel you can afford the monthly mortgage payments and the deposit feels like an enormous hurdle to get there.

Firstly as others have said, don't stop paying into your NHS pension. Even with the move to the 2015 scheme it's still a very generous pension scheme with lots of benefits.

The next step is to look at your take home pay, and make a list of exactly what you're spending each month and on what.

When we were saving for a house deposit, I found that an envelope style of budgeting was the best option for us. The system is based on the "old" system of allocating a set amount to certain categories each month and being absolutely rigid on what you spend. If you're dipping into your savings then something's not right.

Hope that helps, and good luck!

pathtofreedom

If you post an soa on the debt free board they will help show you where you can make savings so you can hopefully save more. Even buying a new build you will have some costs and you're also at greater risk of negative equity which is not a fun place to be, I speak from experince.

I have worked shifts living in a shared house before it isn't impossible. Could you put a note up at the hospital somewhere and see if you can find other people that work similar shifts so understand not making noise in the day?

The only way you're going to save the money for deposit and all the extra fees which will be a few thousand too, is to radically change how you're living now. Dave Ramsey has a phrase "live like no one else, to live like no one else". So if you look on the old style board you'll find ways to halve or more your food budget, you'll have to do things like not buy clothes for a year or two, or eat out or go out even. If you want this badly enough you'll find a way to do your budget to help save money. I'm a big fan of ynab which is budgeting software which really helps show where every penny goes and their whole concept has helped me save a lot more the past year.

We're not trying to trash your dream but if your current expenses while renting mean you can't save 300 a month which would be your deposit in 2 years, a mortgage company isn't going to give you a mortgage as they will assess your current spending and debts against a much higher interest rate than you can get today to protect you from yourself. So yes you might be lucky and buy a new build with no issues and a magic boiler that doesn't break the minute the warrenty is up but if that boiler goes bang the same time your mortgage payments go up it will be bad.

So could you look at different housing options like sharing for 2 years at a much lower rent, to have a much bigger deposit and give yourself more options. Or look at different areas to move to that also have hospitals which have cheaper places to buy.

Look on the mortgage boards and house buying board and you'll see how quick the costs add up and new build nightmears, owning a house isn't a magic fix to make you a grown up or complete. There is nothing wrong with renting if you can't afford to buy yet and by sticking with your pension it will help you make sure when you do get there you still have a way to pay to heat it.

PeacefulWaters

They might not all work for you but ...

Walk the daylight short distances (save £10 a month).

Beans on toast once a week (save £5 a month).

Cancel treats from the weekly shop (save £40 a month).

Give up coffee. And coffee shops (save £60 a month).

Sandwiches for lunch (save £60 a month).

Online surveys (in a poor period a few years ago I earned £50 a month).

Scrap pay TV (save £50 a month).

Sim only mobile contract (save £35 a month).

The person above would have £7k extra in two years.

Interest from best return accounts won't do any harm either.

But think about how you will fund legal and survey costs too. How you will withstand increasing interest rates. How you will replace your car.

pathtofreedom

Also are you a kid person, as if you might have a career break at some point to have kids that will be more years of pension you're missing out on so by paying more in now you're making up for missing out on even more later. With half of marriges ending in divorce you need to protect yourself.

I am obsessing about boilers as mine broke 3 months after I bought in 2007 and had to get a credit card to put the cost on. Then Northen Rock went bang and the house prices dropped and I am still in negative equity 8 years later. The house turned into a noose round my neck stuck not being able to remortgage for years at a high rate of interest. I was lucky I could over pay during this time so I'm better off than others in the same situation but it will be 10 years or more before the house prices recover around here, so I'm desperate to sell and move to a different area even if it is at a big loss. No one can predict the future just look at the bankcrupcy board and debt free one for stories simliar to mine, you don't want to end up on there too by over committing yourself.

laurajane6486

Thanks again for all your help and advice.

It does feel like a big hurdle, and doing it alone is daunting.

I am well aware of the risk of divorce, being already divorced myself I don't think I'd ever get married again. I don't imagine myself ever having children, although I'm aware I may not always feel like that. But if I had a 12-24 month pension break now (not saying I will) then surely that's no different in the long run to someone having 2-4 children during their lifetime?

I already do a modern version of "envelope" budgeting by keeping a spreadsheet for each month, budgeting for each category of spending (food, car, clothes, going out, gifts, household, etc) and making sure I stay within the budget for each. I'm going to try to tighten the budget for everything though.

I think with reducing my outgoings and trying even harder to earn extra money, £300 a month should be achievable. So that would be 2 years of saving to get my house. I think I can manage that. I'll see how it goes.

chiefie

Agree every - bad idea and you will never get the motivation to opt back in.
You are paying 9.8% contributions which is fair for such a good DB scheme. Many people would love to have that benefit.
Try starting a help to buy isa when they are available in the morning.
Make a spreadsheet and track all your expenses. A bit here and a bit there will add up if you stick to it. It all depends how much you want the house as to your motivation.
I did an exercise with my stepdaughter and found she was paying £80 per month for her phone, had insurances she didn't need and spent £30 a week on takeaways. she was also using her debit card for bits and pieces as it didn't feel like she was spending. She changed this to giving herself a cash allowance every week and it worked wonders.

Good luck