Pension or House Deposit?

AnotherJoe

Edmond wrote: »

Could you explain this one to me? In my naive model I just put in 9.1% and 14% into an online calculator (I think it was on this site somewhere). Would this give me realistic retirement figures, given that the NHS pension is not like a private sector one?

No it wouldnt, not by a long way. It would be massively misleading and really downplay what you'll get from the NHS.

I think the point about 9.1% is that your income will not decline by 9.1%, more like 6% according to the calculation another poster did. Essentially because by giving up that 9.1% you pay less NI and less tax.

Edmond wrote: »

Also, given the political climate, is the pension always going to be like this, or is it at risk of getting signed away by future governments?

Its always at danger, but the ruckus would be massive and few governments would want to raise such a s***storm plus even if they did, its pretty much as certain as you can be that existing DB benefits would be kept, which is another reason to get in as soon as you can, take it while its going.

Edmond_2

AnotherJoe wrote: »

No it wouldnt, not by a long way. It would be massively misleading and really downplay what you'll get from the NHS.


I think the point about 9.1% is that your income will not decline by 9.1%, more like 6% according to the calculation another poster did. Essentially because by giving up that 9.1% you pay less NI and less tax.

You're right, just checked the blurb and it comes off before deductions. I used an online salary calculator, so I assume it would have taken that into account. My contribution to savings was based on that, so should still be correct.

JoeCrystal

Personally, you two should rejoin the NHS pension scheme right away. This scheme is incredible valuable for something that cost 9.1%. It is not just very good, it is amazingly good. Especially you mentions that you have no previous pension schemes which make such scheme even necessary. Have you consider ill-health retirement and host of other benefits from it?

A 35 years old on 33k, assuming he is with NHS pension scheme for 33 years can look forward to a pension of £20,166 per year at 68 (assuming that the revaluation of each year match the payrise at the time) (It is likely to be higher since the revaluation of each year is CPI + 1.5%! at the cost of £250 per month or £200 per month net. It is also ultimately guaranteed by the the Treasury.

To aim for something similar with a personal pension, an index-linked annuity (up to 3%) at 68 from age of 35 would need to contribute about £1,677 per month or 60% of the salary. Plus you have to hope for the stock market to be doing well overall and pray for no crash by the time you retire.

It shouldn't be either Pension or House, it should be both.

TheShape

Edmond wrote: »

Thanks.We're to the bone at the moment, but that's going to change spring next year when our son gets his 30 hours, and my wife and I get a large pay rise, so we're not waiting long at all until we can afford the money for pension/savings.

If you've absolutely cut expenditure to the bone then fair enough.

However, I know too many people for whom 'cutting expenditure to the bone' means they still go out regularly still have Sky Sports/Netflix, still planning on having a two week holiday abroad.

If you've still got any non essential spending (Sky, Netflix, Gym subscription, Friday night take away, planning a holiday, buying expensive gifts for birthdays etc) stop all of them now and rejoin the pension scheme. At worst you'll do without a few luxuries until next spring.

Alexland

TheShape wrote: »

However, I know too many people for whom 'cutting expenditure to the bone' means they still go out regularly still have Sky Sports/Netflix, still planning on having a two week holiday abroad.

So true and it's entirely possible to earn/save a few thousand pounds extra a year each by being keen moneysavers, frequent switchers and doing surveys, mystery shopping and consumer product trials. We sell our junkmail, use discounted reloadable supermarket gift cards, stooze credit cards, use cashback sites, collect loyalty points, etc to get the best outcome for our family.

Alex

Edmond_2

All money is going towards paying off debt currently. That should be cleared by spring/summer next year. There's nothing we could cut that would add up to the value of the pension contribution. It's a lot of money.

The main reason I see this as an either/or scenario is our age. I hear stories of people over 45 getting refused mortgages because they're too old. I also want to have it paid off before we retire. I feel like it's now or never.

TheShape

Edmond wrote: »

All money is going towards paying off debt currently. That should be cleared by spring/summer next year. There's nothing we could cut that would add up to the value of the pension contribution. It's a lot of money.

Would have been useful to mention the debt in the first post, apologies if I missed it somewhere.

I guess now the question is: 'How do you deal with the debt in a way that allows you to rejoin your pensions?'

What debts have you got, how much, what APR are they at?

If you can't cut enough to both rejoin, can you cut enough for one of you to rejoin?

Edmond wrote: »

The main reason I see this as an either/or scenario is our age. I hear stories of people over 45 getting refused mortgages because they're too old. I also want to have it paid off before we retire. I feel like it's now or never.

It's not an either/or. You've got a decent household income between you. Normal retirement age is 33 years away. Plenty of time to get a mortgage. Work out how to afford to rejoin your pension and then plan for the property purchase.

kidmugsy

Edmond wrote: »

The main reason I see this as an either/or scenario is our age. I hear stories of people over 45 getting refused mortgages because they're too old. ... I feel like it's now or never.

Hysterical tosh. Get a grip!

michaels

The pension certainly seems like a no brainer which is unusual as purchasing a house is normally much cheaper than renting the same house.


Wild card are the value you put on security of tenure (assuming you are renting on an AST) and how you value having an asset (the house) to pass on as inheritance).


I know there are potential deprivation of assets issues but could your parents consider a lifetime mortgage in order to pass some of their house equity to you sooner to use as a deposit?


Finally another suggestion to look at your costs and decide what is essential - are holidays/costas etc really more important than getting a house? WE have 3 kids, and after the mortgage and council tax we live on 1800 per month net, sure our mobiles are android not apple and we have freeview not pay tv, holiday in the UK, our cars are 3 and 12 years old and only eat out once a month but we still splash out on about 5 activities for each kid each week.

badmemory

If I were you I certainly wouldn't be looking to inherit any time soon. I was 69 when I did after a few years care home fees.


If you don't stay in your pension scheme when will you go back in. What excuse will there be to not go back in? Because that is what often seems to happen.