NHS pension- consequences of temporarily opting out?

Dane89

Hello, I’d be grateful for some pension advice. I’m an ST1 in histopathology and have been working in the NHS for under 3 years. I am enrolled in the NHS pension and appreciate it is a very good scheme. However, I’m wondering if it would be reasonable to opt out for 2-3 years, as the extra money in my pocket now will be incredibly helpful as I look towards getting on the property ladder/ getting married etc. I’d then look to opt back in with a view to- by the time of retirement- having in excess of 30 years’ pension contributions (mostly as a consultant) behind me. Indeed one of my colleagues has already opted out on this thinking. I am not too proud to admit that I am not financially-savvy however and am hesitant to do something that I may regret. What are people’s thoughts on this? Am I unaware of some significant consequences that may occur if I ‘take a break’? Thanks all for reading!

xylophone

I am not too proud to admit that I am not financially-savvy however and am hesitant to do something that I may regret. What are people’s thoughts on this? Am I unaware of some significant consequences that may occur if I ‘take a break’? Thanks all for reading!

"Opt back in"......famous last words? This year, next year, sometime, never?

You are willing to lose the employer contribution?

You are aware that your pension provides death in service benefits?

Supposing you have not opted back in by the time you have a spouse and children and you die prematurely - who is to provide for them?

All I can say is that I wouldn't do it.....

tibbles209

Don't do it. The NHS pension is outstanding value, and opting out essentially means handing back a big chunk of your renumeration package. There will ALWAYS be something to spend that money on that seems more pressing than saving for your retirement, but your future self will bitterly regret if you do not make your pension a priority now.

Edale

Assuming your pensionable pay is £50,000, your contribution rate is 12.5%. If you leave the scheme, taking tax and national insurance into account, your take home pay would be £4250 per year or £354 per month more. If you stayed in the scheme you would accrue pension benefits of 1/54 of your pay or £925 per year ie for one years contributions of £4250 net you would get £925 per year for every year of your retirement (from state pension age). This amount is increased by CPI inflation plus 1.5% each year so by the time you retire it should actually buy you more than £925 buys today and once you retire will increase with CPI. This is probably worth around £30,000 so your choice is to lose £30,000 value for £4250 in your pocket today. As Xylophone says you also get death in service benefits.


In summary, don't do it.

tibbles209

As an ST1 his pensionable pay will be closer to 30k, so his contribution rate will be lower (9.3%) making the pension even better value, and the increase in take home pay from opting out even smaller.

Flugelhorn

some doctors leave the scheme and then rejoin for one month a year, keeps the death in service benefits active

Flim

Please please do not opt out.....would be a very silly thing to do!

mollycat

This always used to blow my mind when I worked in the NHS; someone bright enough to become a medic, but thinks opting out of the pension scheme to have more money in their pocket short term is a good thing.

Just as well there are people around this forum to protect the OP and others from potential poor financial decisions.

You don't have to be "financially savvy" to know what you propose is a terrible idea. It's no excuse anyway, (go and find out about stuff).

Apologies for being blunt, others would love the security and advantage of the scheme that the OP does not appear to appreciate.

worried_jim

As a tax payer please do!

Flugelhorn

mollycat wrote: »

This always used to blow my mind when I worked in the NHS; someone bright enough to become a medic, but thinks opting out of the pension scheme to have more money in their pocket short term is a good thing.

Just as well there are people around this forum to protect the OP and others from potential poor financial decisions.

You don't have to be "financially savvy" to know what you propose is a terrible idea. It's no excuse anyway, (go and find out about stuff).

Apologies for being blunt, others would love the security and advantage of the scheme that the OP does not appear to appreciate.

Why I was a kid the NHS pension was just like this, we listened to the advice and on the whole have done fine ... apart from all those breaching the AA and not able to do an extra session as it costs them so much. Publicity is not good at the moment

BoxerfanUK

xylophone wrote: »

"Opt back in"......famous last words? This year, next year, sometime, never?

Just about says it all. You'll get used to the few extra quid and something else will come along and you'll put it off another year.... and again.... and again.

DON'T DO IT.