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

Southend1

OP you need to look at your spending. I saved my £45k deposit plus £5k fees and costs on a salary lower than yours. All the while I was saving I was contributing to my pension and renting a home too. Yes it took a long time and no it wasn't easy but it is possible. I recommend you go over to debt free wannabe and do a SOA - the good people on that board have some fantastic ideas and advice for budgeting.

pathtofreedom

laurajane6486 wrote: »

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 am alone so I know how daunting it can be, also I doubt I'll ever get married - a long story - I have health problems too which mean I need to retire early and with all the problems with this house I started my pension late. I have a DC pension which means I have to just save as much cash as possible myself while I can.

It can seem impossible but you just need to break it down. Some people on the mortgage free board make a picture of a house and make each brick £1000 or something so they can colour that in and break it into smaller chunks.

If you make one for £10k or something (your £7k + fees to buy) split into £500 bricks it will help motivate you to save more. Sell old dvd's and books on places like ziffit going via quidco to get an extra 10%, cut everything down to the bone and you'll find you can save faster than you thought. Rather than holidays just go stay with friends in different places so it is cheaper and you're still having fun. Save up tesco vouchers etc to pay for dinners and trips out rather than cash, just don't sacrifice your future income you'll really need to get a house.

jamesd

laurajane6486 wrote: »

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.

To put that into context, I saved around £13,000 in one year at that sort of level, after adjusting for the difference in salary and your pension cost. Part of the difference is that I wasn't running a car, so you could be expected to do less than that. Rent was £425 for a one bedroom flat.

laurajane6486 wrote: »

£140k is for a new build 2 bed house.

OK, that's part of the possible problem, you're trying to go from non-owner to second home in one step, skipping the flat as first one.

laurajane6486 wrote: »

A non new build 2 bed house here would cost about £125-130k ... A non new build house is also likely to need new kitchen, new bathroom, new boiler, etc, which a new build wouldn't.

It isn't normal for used properties to require that sort of work. That sort of thing is for the heavily discounted big refurbishment project area, not usual sales.

How do prices for one bedroom flats compare? In less then ideal parts of the area or a bit out of town?

laurajane6486 wrote: »

A house share isn't really an option. Working shifts means I have to sleep during the day a lot.

Might be possible in some places but you're right that it can be an issue and a flat does beat a house share on that basis. I've been doing 7PM starts for around ten years in a flat.

I'm wondering, are you renting a house now or a one bedroom flat? That is, in effect, I'm asking whether you're living more lifestyle than you need right now and what a change in this area could do to help you to get to your objective.

laurajane6486 wrote: »

I also have two cats

As you'll know already, finding places to live with a couple of cats can take steps like offering the landlord extra money on exit to cover potential damage.

atush

work extra hours, lower outgoings further.

And consider moving to a cheaper place, maybe a house share?

Dont stop your pension.

hyubh

jem16 wrote: »

The NHS scheme is a Defined Benefit scheme so has no compound returns

Although, the revaluation rates of the new CARE scheme give rise to an equivalent consideration to compounding returns in a DC pot, do they not?

That is, opt out for a couple of years every so often, and even assuming the discontinuous periods of membership all get combined, the fact the rate in deferment is CPI but for active members it's CPI + 1.5% would mean the older periods would have lost value compared to if they had been part of one long continuous membership. Which isn't, of course, to say the difference in itself should be a greater concern then the mere fact of having opted out in the first place...

hugheskevi

That is, opt out for a couple of years every so often, and even assuming the discontinuous periods of membership all get combined, the fact the rate in deferment is CPI but for active members it's CPI + 1.5% would mean the older periods would have lost value compared to if they had been part of one long continuous membership. Which isn't, of course, to say the difference in itself should be a greater concern then the mere fact of having opted out in the first place...

As long as the break in service is less than 5 years, the entire service would be treated as active, and revalued at CPI+1.5%.

In practice, that would mean member opts-out for, say, 2 years. Over those two years they get CPI revaluation. Then on re-joining rather than receiving pension increases under 1971 Act (which for the time being is CPI with a floor of zero) they would receive increases for the two year period under the rates applicable based on the latest HMT Order (ie CPI+1.5, where CPI can be negative).

hyubh

hugheskevi wrote: »

As long as the break in service is less than 5 years, the entire service would be treated as active, and revalued at CPI+1.5%.

Sure.

In practice, that would mean member opts-out for, say, 2 years. Over those two years they get CPI revaluation. Then on re-joining rather than receiving pension increases under 1971 Act (which for the time being is CPI with a floor of zero) they would receive increases for the two year period under the rates applicable based on the latest HMT Order (ie CPI+1.5, where CPI can be negative).

Interesting... to be clear, are you saying that simply by rejoining within five years, what had been revalued by PI will now get retrospectively re-revalued for each of the years it had been deferred, in effect? This is distinct from the previously deferred pension just getting revalued by higher rate for active membership going forward.

hugheskevi

Interesting... to be clear, are you saying that simply by rejoining within five years, what had been revalued by PI will now get retrospectively re-revalued for each of the years it had been deferred, in effect? This is distinct from the previously deferred pension just getting revalued by higher rate for active membership going forward.

Yes - my understanding is that it is as if the leaving had never happened, so the end outcome would be the same as if the member had been on unpaid leave - in which case they would have been an active member but not accruing benefit.

This stems from rule 9 of Public Service Pension Act 2013, and in particular 9(6)

In the NHS Scheme Guide on page 16 it says:

Rejoining this Scheme before retirement
If you rejoin this Scheme after a break of less than five years, your previous period of contributions will link with your current period and the pension rights you built up before the break will receive full in-scheme revaluation based on inflation (currently CPI) plus 1.5% for each Scheme year during the break.

Although I should add that I haven't worked on this area directly, and as I am not a lawyer I'd probably double-check with a lawyer about the exact NHS scheme rules for absolute certainty if this point was significant.

wotsthat

Seriously you people!

The OP has identified a plan to accelerate their way to home ownership which has the added benefit of saving the taxpayer money.

Looks like a win-win.

hugheskevi

The OP has identified a plan to accelerate their way to home ownership which has the added benefit of saving the taxpayer money.

Never understand this 'save the taxpayer money' mantra.

The scheme is unfunded. Public service pension liabilities are not a part of the national debt. Therefore contributions received now go into the Exchequer, and in the dim and distant future a much larger amount is taken from the Exchequer to pay the pension. If the OP opts-out, the Exchequer has less now (as it pays the pension contribution out as salary, that is real money, that influences national debt and cashflows) but escapes the very long-term liability.

As the liabilities are not recorded against national debt, they do not influence short to medium term Exchequer plans. At some point they will show up in expenditure forecasts and influence tax considerations at that point, but that probably isn't until about 5 years before the pension falls due for payment. Whether or not it should work like that is immaterial, that is the system.

The long-run here is when the OP receives their pension. That will be in, give or take, 40 years time.

Personally I expect to be paying a lower tier of tax in 40 years time than I do currently. I expect many on the board will be dead So I - and probably many others - should be quite happy for OP to stay in the scheme, making contributions to the arrangement. That keeps my tax bill down, and it will be children and grand-children paying most the cost of extra taxes