Police Pension- Stay or Withdraw?

User897

Hi everyone,

I appreciate this is a bit of a niche area, but any advice would be greatly appreciated.
I’m a Police officer in my 20s and currently renting the house I live in. The police pension takes 12.5% out of my salary per month, which for me is a large hit. Financially I wouldn’t describe myself as being in dire straits, I have a few hundred pound a month disposable income, however as it is I’m not managing to save anything, and in that sense am living pay cheque to pay cheque.
I want to be able to start saving for a house, which in my current position I’m not able to afford. Removing myself from the police pension would free up that 12.5%, which I’d put in to a savings pot to be able to buy a property (eventually).

I know my employer contributes a large amount, and I know the point of a pension is to have money for retirement. However with the housing market being the way it is, and my current salary (factoring in annual increments vs inflation etc.), I wouldn’t know how to start getting myself in a position to get on the property ladder, without withdrawing from my pension to free up that money in my monthly pay. I feel if I stay in my pension, I’d be looking at renting well in to my mid-30s, which to me just seems like throwing money away.

I’d be interested to hear people’s thoughts on this, and if people are in the same situation I’d be interested to hear what you’ve done and how it worked out.

Thank you

sammyjammy

Don't even consider it, if you want to start saving then post a statement of affairs and get some advice on your spending

Lifematters

You would certainly be throwing money away if you withdrew from your Police Pension.

Universidad

The police pension is a really, really good pension.

It is worth more than you're paying in, by a LOT. If you work a full career with the police, you will get to retire earlier than most people, and every year you'll just get paid a pretty reasonable proportion of your annual salary for the rest of your life, without ever having to go to work again.

If you need extra money, it's a bad idea to take it from future you. But you don't. You just feel like you're wasting money on rent.

And you're kinda right, rent is like giving someone else money that you never see again, and I get that.

But giving up one of the best pensions in the country, when someone else is paying for most of it, is the worst act of throwing money away that I can think of - it makes paying rent look frugal.

By the time you're middle aged, you'll either be glad you stayed in the pension or hate yourself for not doing that.

Perksy5

Don't leave the pension. There must be other areas of your life you can save or cut back on. For most it's usually a car. However without more information all we can do is assume!

Universidad

Here's some real back of a napkin math to give you an idea of what the pension is worth.

Let's say you're on 28000 salary a year right now, just for the sake of argument.

That means you currently pay just under 300 pounds a month towards your pension scheme. A total of 3500 over the year. (at 12.5%)

3500 is not nothing. But what do you get back for your 3500? Well, forget what your employer pays in for now, it doesn't really matter to you. What matters is what you get out at the end.

The answer is: you get back about 500 pounds. Every Year. For the rest of your life. From when you are 60.

Let's say you live to 85. That's 25 years of collecting pension. That means you get back 12600 pounds over your lifetime, for a single year's 3500 pound investment.

What about over a whole career? Let's say you do 35 years, and never even get a raise above inflation or a promotion.

Even with that career path, you end up taking home nearly 18,000 pounds every year for the rest of your life from the day you turn 60.

That's nearly half a million pounds that you'd be effectively pawning for the sake of 300 quid a month.

Were you planning on buying a house worth more than half a million pounds with that 300 quid?

superstylin

Do not pull out of the pension for all of the reasons stated above. There are people that would love to have the pension you do. 

Where are you in terms of service and pay increment? If you're new in service it's only going to be 7 years before your wage has doubled with annual increments. Each of those increments gives you more disposable income to utilise as savings. 

What can you cut back on? What can you do to bring more money in? Overtime is readily available in the police. You can make thousands more a year if you're willing to give up your time. 

Dazed_and_C0nfused

User897 said:

Hi everyone,

I appreciate this is a bit of a niche area, but any advice would be greatly appreciated.
I’m a Police officer in my 20s and currently renting the house I live in. The police pension takes 12.5% out of my salary per month, which for me is a large hit. Financially I wouldn’t describe myself as being in dire straits, I have a few hundred pound a month disposable income, however as it is I’m not managing to save anything, and in that sense am living pay cheque to pay cheque.
I want to be able to start saving for a house, which in my current position I’m not able to afford. Removing myself from the police pension would free up that 12.5%, which I’d put in to a savings pot to be able to buy a property (eventually).

I know my employer contributes a large amount, and I know the point of a pension is to have money for retirement. However with the housing market being the way it is, and my current salary (factoring in annual increments vs inflation etc.), I wouldn’t know how to start getting myself in a position to get on the property ladder, without withdrawing from my pension to free up that money in my monthly pay. I feel if I stay in my pension, I’d be looking at renting well in to my mid-30s, which to me just seems like throwing money away.

I’d be interested to hear people’s thoughts on this, and if people are in the same situation I’d be interested to hear what you’ve done and how it worked out.

Thank you

But it wouldn't.

It would mean an additional 12.5% of your salary became taxable and you would most likely have to pay 20% tax on the additional taxable pay.

So in reality you would only see 10%, not 12.5%.

As others have said don't do this, you would regret it beyond belief in due course.

Scrudgy

If you pull out of the police scheme. The older you will kick the younger you up the !!!!!! for the rest of your life at such folly.

daveyjp

Promotion prospects are generally good in the police, so concentrate on that if its an option.

Friend's son has just retired after 30 years service. He was an inspector for about 8 years. 

Stubod

....leaving a Police Pension is soooooo wrong on sooooo many levels......just stop thinking about it, and don't do it!!