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

AnotherJoe

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.

Perhaps you should if the question is along the lines of "doctor should i rip this IV out of my arm so i can walk outside for a quick fag?

Kynthia

You'll lose the membership benefits during the time you are opted out so make sure you understand what they are. Death in service would be gone should anything happen to you.

If you've calculated you would make £5k contributions in 18 months, if you opt out you'll only save £4k as you'll be taxed on the income.

Then that 18 month break will cost you by reducing your pension, and your spouse/children's pension. Let's say you're earning about £35k a year, you'll lose £1k a year for your entire retirement. Most people would pay a lot more than £4k to get a grand a year when retired.

Triumph13

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.

It does seem rather uncharitable for so many people to have immediately assumed that you are an idiot. In there defense, there have been many previous threads asking about opting out of excellent DB schemes and in the great majority of them idiocy has turned out to be a reasonable assumption.
Let's assume that you are a sensible person and have therefore already realised that you would be paying tax on the contributions you are looking to opt out of. If I have done my sums right, that would mean that to save £5k post tax over 18 months in this way you are on about £45k pa. You would therefore be giving up £1,250 pa of gross pension when you retire which would be £1k pa after basic rate tax so probably something like £20k to £30k over the course of your retirement in exchange for that £5k now. That seems pretty overwhelmingly in favour of staying in the pension, but that doesn't take into account the relative utility of money now and in retirement - eg if you are currently a junior doctor with expectations that your salary will increase very considerably over the next few years then financially the pension might not appear so favourable - eg if you end up hitting the LTA and being a higher rate taxpayer in retirement then tax would bring the foregone pension down to £562 pa - which would still probably bring in more than double your £5k, but at a time when an extra £562 wouldn't mean much to you, compared to £5k now which might get you to a lower LTV band on your mortgage.
Even if you are in that enviable position, I personally still wouldn't opt out until I had exhausted every other possibility for saving that £5k by cutting living expenses to the bone. The reason for that is uncertainty. You might expect to have a glowing career lasting several decades, but nothing is guaranteed. By opting out you lose all manner of insurances and benefits during the period you are opted out. You also lock in the fact that you HAVE TO work up to 18 months longer before you can afford to retire, no matter what happens to you or how much you grow to hate your job.

paparossco

Ah see, you made the classic mistake of asking a question and expecting a straight answer. Some of the boys & girls here like a pithy response. The faux ‘shock horror’ is a standard reply in this area but behind their little bit of fun is usually sensible advice. As stated before this is a forum but I like to think of most of those who take the time to reply as ‘volunteers’ trying to assist others with less experience in dealing with pensions. Humour them and listen to what they say then form your own opinion. Over the years I learned a lot from here, not always by posting but reading what others asked. It allowed me to retire last year after 40 years in the NHS fully prepared.

Thanks for working in the NHS, you have a career not just a job, and best of luck in the future.