Taking a break from NHS pension to save more for house deposit?

bluenose1

sc87 wrote: »

Yes I'm trying to educate myself...hence asking for help. Not looking for a barrage of abuse. Maybe I'll respond this way next time someone asks me a medical question on ICU.

Hi sc87,
Yep there can be some sarcastic comments on this Board, but take it all with a pinch of salt as their bark is worse than their bite.
Plus the advice they give is normally great, I have found out more about pensions on here than anywhere else.

You need to think about what annual pension you will lose if leave scheme, even for a short period. Could be several hundred a year, then think about your life expectancy as an indication of how much it may cost you in the long run.
Good, that you are asking the question before doing it and good luck saving for a deposit.

dunstonh

sc87 wrote: »

Hi,
Have been saving hard for a house deposit, and think I should be ready to go in 2020 - I am wondering whether I should take a break from my NHS pension payments for the next 18 months in order to be able to build this pot by a further £5000?
I would then look to rejoin the scheme (currently been paying in for 8 years).
Any advice would be appreciated,
Thanks

Ridiculous idea.

The amount you would save per month would be very small and the cost of lost pension entitlement could end up in the tens or hundreds of thousands of pounds.

If you cannot afford to save for a house without cutting off the pension, then you cannot afford to live in a house you own.

£5000 of contributions not paid would not mean £5000 in your pocket.

atush

sc87 wrote: »

Yes I'm trying to educate myself...hence asking for help. Not looking for a barrage of abuse. Maybe I'll respond this way next time someone asks me a medical question on ICU.

Dont be petulant.

And dont respond in kind at work, as you wont be able to buy house if you lose your job.

This forum isnt work for us, it is a passtime. Dont confuse the two.

Ask any question you like, and ignore any insults.

atush

Paul_Herring wrote: »

£5,000 over 18 months is ~£280 per month, ~£64/week, ~£9/day.

Is there nothing you can cut back on to get that? It would be more advantageous to you (since you will still accrue a pension over that time,) and in doing that exercise may find you can actually save more.

Another disadvantage of 'stopping your pension for only 18 months' will be finding excuses in month 19 as to why you can't/don't want to start it back up again.

I agree.

Can you pick up some overtime- extra shifts?

Dox

Have you used the online calculator to check the effect on your take home pay - and also the factsheet on opting out: https://www.nhsbsa.nhs.uk/member-hub/leaving-or-taking-break-scheme

molerat

How much will the extra insurance cost to cover what you are giving up ?

Benefits you will be giving up if you opt out of the NHS Pension Scheme
• Your right to any further benefits from the Scheme in this employment.
• A pension payable for life fully guaranteed by the Government.
• If you are a member of the 1995 Section you will also get a retirement lump sum. This is usually tax free.
• If you opted out before 1 April 2008 and do not rejoin this Scheme you will not have the option of giving
up some of your pension for a bigger lump sum. This option would normally allow you to receive £12 of
lump sum for every £1 of pension you give up. Lump sums are usually tax free.
• Enhanced ill health retirement benefits if you become too ill to work.
• Life assurance cover (a lump sum payment) and family benefits if you die – pension benefits for your
dependants, including children.

kidmugsy

I repeat my old song: we should scrap DB pensions for government employees. As long as a large part of the work force is too dim or too ignorant to understand the value of them then the pensions are a stupidly extravagant way to do the job of attracting and retaining labour.

DC pensions and pay rises all round would be a much cheaper way to get the required effect.

Paul_Herring

I repeat my old song: we should scrap DB pensions for government employees.

[...]

DC pensions and pay rises all round would be a much cheaper way to get the required effect.

But, but, but, their wages would have to go up to adjust for the lack of pension contributions. Otherwise complaints about remuneration in the public sector being lower than the private may gain some traction due to it subsequently actually being true..

http://www.timworstall.com/2018/12/09/pensions-are-indeed-deferred-wages/

justme111

Yes , ok, they/we are not the fluffyiest creatures on here.
It can be very useful though I think so I am willing to put up with short sarcastic remarks for the use of it - just imagine , due to suffering one remark you got £1000 and clearer understanding in your pocket - good deal if you ask me.
Bow, to answer your question- just to give you an idea of the scale of disparity between mortgage and NHS contributions - I believe it would be advantageous to redirect your money from pension to mortgage if you paid about 300% mortgage rate. Hope it does show the scale of disparity .
It is not that simple of course and there are these and those factors that may change it .
You could calculate it yourself - how long living in rental would those £5000 represent to you (we don't know that), how much money would you lose in that time because you lived in rental ( rent minus interest part of morgage). Compare that with the benefit you would get from those £5000 being in pension scheme ( what pension would they give you and how much you would have to contribute privately to obtain those benefits) and then see for yourself. Circumstances differ; who knows - may be in your case it would be comparable. You get 1/55th of you superannuable pay and let's say your contribution rate is 8% . So if you contribute 5 k over 18 months it means about 3300/year. If your salary is let's say 38 k for those 5 k you bought a promise to pay you about £2700/year in pension from the state pension age till the end of your life. Likely to be 20 years for example- £54000. So you would forgo £54000 in the future for the sake of £5000 now. Which represents forgoing 1000% increase. Your mortgage is likely to be at 3%/year - would not it make sense to pay that mortgage from your pension instead of now?
The numbers are very approximate hopefully just enough to show the scale of magnitude of a difference.

Dazed_and_confused

But it is highly unlikely to actually be £5,000 the op has available from stopping paying into the pension.

It will only £4,000 or possibly even as low as £3,000 because these contributions will be reducing the tax paid by the op so stop paying them and your tax will go up as a result.

So yes the payslip will have no pension deduction but it will have a larger tax deduction.

Apologies in advance if the op has actually factored into the £5k figure but given they asked the original question in the first place I think it is highly unlikely they had considered the other impacts of stopping contributing to the pension.