Continue pension contributions during career break?

daniel12345

Hello, I’m taking a years career break from the NHS and have the option to continue my pension contributions for the year. This will be around £5000. I’m in the 2015 part of the pension. Anyone have any advice? It’s a lot of money but I don’t want to screw myself over later on. I’m pretty confused about the whole thing! Thanks

Malthusian

The NHS pension scheme is exceptionally good value and normally if you can pay in you should.

Pension contributions are only tax relievable up to your earned income (or £3,600 if higher) but that may not be an issue if your year out spans two tax years and you will have enough earnings in both years. Even if you did not receive tax relief it may still make sense to contribute as the NHS scheme is such good value.

According to this guide, for the first six months you will have to pay contributions as currently, and afterwards you will have to pay the employer's contributions. This means the amount you pay in will leap dramatically after six months. Has this been included in the £5,000?

We can't say for certain whether it's good value - before and after you start paying the employer contributions - without knowing your pensionable salary and therefore the value of the extra year.

If you don't continue paying you also run the risk that by the time you return the NHS would have closed the 2015 scheme and opened a less generous one (as it did with the 1995 and 2008 schemes).

daniel12345

Thank you for taking the time to respond. Yes the £5000 is the total for both mine and my employers contributions. My salary is circa £28k but will be dropping to £22k on my return for the foreseeable future. I’m sorry I don’t understand the tax relief part? I won’t be paying any tax that year as I won’t be earning anything?

Malthusian

I probably overcomplicated things by mentioning tax relief rules - given the NHS scheme is "net pay" and the amounts involved, it's highly unlikely to cause any issue.

If for the sake of argument your year's contributions buy 1/55th of £28,000, which is £509pa, guaranteed and inflation linked for life from your normal retirement age, in exchange for £5,000, that is an exceptionally good deal.

I'm assuming that your pensionable salary for the year is considered to be your salary when you left - it wasn't clear from my Googling.

The only way you could be screwed over is if you died without a spouse or other dependents before retiring and getting full value back, so I would suggest not doing that.

daniel12345

Thank you that makes so much more sense! I shall try my very best not to die 😂 

OldBeanz

daniel12345 said:

Thank you that makes so much more sense! I shall try my very best not to die 😂 
Take care then - you can never find an NHS employee if you are ill - they are always away doing something else

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