NHS pension- consequences of temporarily opting out?

Dane89

Yes alas extra shifts are not available in histopathology, and I am far too deskilled to pick up a clinical locum shift! I am careful with money and my savings are OK, the rate at which I'm saving just is much slower than I anticipated. Given the important juncture at which I find my life, it led me to consider whether the ~£4-4.5K/year extra I could receive now, would be worth more to me at present, than the scaled up amount that I would lose would be worth to me as a 68 year old- who would still otherwise have in excess of 35 years' pension contributions accrued. Some of the posts here though have been informative and I think I'm not sufficiently convinced to take it further.

jamesd

One thing to consider short term is borrowing combined with pay progression.

Say you use credit card 0% purchase deals. The effect on home purchase is:

1. greater deposit because some spending has accumulated on the card as a matching debt
2. reduced income affordability because the card payments will be taken into account

Depending on your specific blocking factors this could get you out of the often more expensive rental sector sooner.

jamesd

It's not really the 68 year old you. What getting the money then does is reduce the amount that you need to accumulate to retire earlier on any desired income level, because you need to provide less for the 68 and over part of your life. Some might also choose to bring income to an earlier than 68 age by using a mortgage that's repaid mostly after that age. Depends one the age and income profile that you end up wanting.

GingerJim

Dane, well done on the ST1 post; you’ll be getting a CCT/CESR in no time, it really does fly. I’d say remain in the pension scheme; it is a long term investment, which pays out (in many ways) much better than most. There are very simple ways to reduce outgoings to soften the blow of the additional deduction at source (limiting coffees from coffee shops, making your own lunch rather than buying it etc). It is unclear what will happen to the pension scheme in the future, but whatever happens, I suspect there won’t be any option again to buy back “years”, so any opted out years will be lost forever. The other consideration is that if you remain in now, you will just become accustomed to the 10% deduction every month, and learn not to miss it; if you were to wait until you were a higher trainee or consultant to opt back in, you may look at the then 14% deduction and be mortified at how much money that is and be frightened to rejoin. I pay nearly 20% of my pensionable pay into my pension through normal contributions and with added years in the 1995 scheme. I am hoping to just stay below the annual allowance limit and life time allowance limit, but need to keep any eye on it all; I suspect you will remain well under these unless the rules change again.

So i say stay, don’t opt out.

justme111

Hi Dane
While I will not offer an opinion on whether 4.5 k now is better than 30 k in the future I will draw your attention to the options you should have as you mentioned age 68. You could take your pension reduced at 60 and it is still a good proposition. In addition let's say by the age 50 you accrued enough in it to give you your desired standard of living from the age 60 . You can then opt out of NHS pension and redirect the money you paid into it in the private pension or just savings which you would be able to access earlier than 60. If you already have built a pension it may be easier for you to change career or take employment which is not with NHS - when one becomes fed up with some work stuff later in life