NHS Pension and Mortgages

LucyClarke

Hello, wondering if anyone else has been in a similar boat and can offer some advice. I'm a junior doctor looking for a mortgage, but a number of lenders I've spoken to have advised that they will need to take into account my NHS pension deductions (12.5% of salary) which will result in only being able to access a smaller mortgage.

I'm quite surprised and it's the first time I'm hearing about this kind of policy. It's particularly frustrating as I'm already having to navigate a number of intricacies around how much of my overtime can be counted towards the mortgage amount etc.

Given the NHS is such a big employer, I'm guessing I can't be the only one who has come across this challenge? I'd welcome hearing your experiences and advice.

aoleks

No direct experience with that, but it’s quite logical that pension contributions would be taken into account.

Rich2808

I think it also depends on the lender.

Obviously you need to do your own research but this article may help.

https://www.theguardian.com/money/2015/may/07/i-failed-to-get-a-mortgage-because-of-my-pension-contributions

As stated 'some lenders – such as Barclays, HSBC, Virgin Money, Coventry building society – do take contributions into account and some, such as those in the Lloyds Banking Group (which includes Halifax), Royal Bank of Scotland and NatWest, don’t'

I have also seen Nationwide assume everyone contributes an average - so it makes an estimate.

It is of course quite ridiculous - if the choice is between losing your home and your pension contributions you aren't going to prioritise the latter. And the NHS pension scheme is an excellent one - so don't quit it at your age just to secure a mortgage.

Based on my public sector pension scheme I will get more annual pension from paying into that for five years than I will get in state pension for 35 years of paying in. And I earn a lot less than a GP or consultant!

If you are concerned use a broker - who can advise on who best to use.

MaryNB

Rich2808 said:

I think it also depends on the lender.

Obviously you need to do your own research but this article may help.

https://www.theguardian.com/money/2015/may/07/i-failed-to-get-a-mortgage-because-of-my-pension-contributions

As stated 'some lenders – such as Barclays, HSBC, Virgin Money, Coventry building society – do take contributions into account and some, such as those in the Lloyds Banking Group (which includes Halifax), Royal Bank of Scotland and NatWest, don’t'

I have also seen Nationwide assume everyone contributes an average - so it makes an estimate.

It is of course quite ridiculous - if the choice is between losing your home and your pension contributions you aren't going to prioritise the latter. And the NHS pension scheme is an excellent one - so don't quit it at your age just to secure a mortgage.

Based on my public sector pension scheme I will get more annual pension from paying into that for five years than I will get in state pension for 35 years of paying in. And I earn a lot less than a GP or consultant!

If you are concerned use a broker - who can advise on who best to use.

I think that article is quite out of date. I heard that fewer banks are concerned now compared to a few years ago since pensions contributions are quite flexible (can't remember where I heard it though). I don't think barclays account for it anymore and I'm pretty sure my friend didn't have an issue when they got a mortgage with virgin money.

OP, if you're concerned go to a broker, they'll know different lenders' criteria. I wouldn't worry about it, plenty of lenders don't include it in their calculations. I went with Halifax. My pension was briefly discussed during my application over the phone but was never an issue and my mortgage is based on my gross salary. 

I would strongly advise not reducing your pension contributions just to suit a lender, find one that isn't concerned.

MaryNB

aoleks said:

No direct experience with that, but it’s quite logical that pension contributions would be taken into account.

Unlike other outgoings (bills, loans etc) pensions contributions can be easily reduced or cancelled if needs be. Many banks don't take it into account. 

Windofchange

I'm in the NHS and brought a couple of years ago. Halifax were our lender and took my gross income, so weren't fussed about pension. They also gave me I think from memory 100% of my overtime, though it could have been less, I can't remember. As per the above, you either need to do some shopping around or engage with a broker as different banks have different stipulations. 

LucyClarke

OP here! Thanks everyone, this is incredibly helpful and I'll reach out to a broker to explore my options - it's good to understand that there's quite a lot of variation between lenders, so hopefully I'll find one that works well for my particular circumstances.

MaryNB

LucyClarke said:

OP here! Thanks everyone, this is incredibly helpful and I'll reach out to a broker to explore my options - it's good to understand that there's quite a lot of variation between lenders, so hopefully I'll find one that works well for my particular circumstances.

It may be a case that a lender asks about your pensions as part of your general outgoings when they do their affordability checks but plenty don't use your post salary sacrifice salary when they use the salary multiplier. I briefly discussed my pension with Halifax and my friend said the same when she went with virgin money. It was mentioned as part of her affordability checks but she got a mortgage or 5x her pre salary sacrifice salary. 

diggingdude

I ran into a couple who factored my LGPS payments into affordability, I'm currently with Skipton who didn't. I think it's quite hit and miss 

amnblog

Speak to a Broker that is experienced in dealing with Doctors.

kingstreet

I can think of a lot more lenders who ignore pension conts than those who don't.