Should I continue to pay into my pension or put my money elsewhere?

Kysa85

I am a 37 year old teacher and I haven't been paying into my pension as I have been working on buying my first house. Around the time the house sale completed I was automatically enrolled back into the teachers' pension scheme and I have been paying in for about 3 months. The contribution per month is 9.3% which works out about £250 and I am finding this a bit of a stretch, I have two small children, the house is a renovation project, I've moved further from work so I am spending more on petrol. I have been thinking of opting back out for a bit but I am aware that I do need to be planning for the future. 

Do I...

continue to pay into the teachers' pension with the added bonus of the employer's contribution but live hand to mouth every month.

Pay less per month into my LISA for retirement but give myself some breathing room.

Pay less per month and put it in my husband's LISA. We bought this house solely in my name but the next property we want to buy together and as he will be a first time buyer we can use what is in his LISA.

Dazed_and_C0nfused

Is it really £250 or is that the cost without factoring in the tax relief?

Assuming it's the gross value then that suggests a pensionable salary of £32,258.

So in a year you will have contributed £3,000 but the real cost, after tax relief, is only £2,400.

In return you will earn a pension of £565.

If you opt out you will effectively be giving up a significant part of your remuneration and have to pay more tax for the privilege.

The employers contributions really is irrelevant.  You get a pension based on the scheme rules.

If it's a choice between TPS or a LISA then I can't see many suggesting the LISA is the better option.

Gary1984

You should never have stopped paying your pension but the damage is done. Keep paying your contributions, nothing else will come close to it as an investment for your future. 

Marcon

Kysa85 said:

Do I...

continue to pay into the teachers' pension with the added bonus of the employer's contribution but live hand to mouth every month.

Pay less per month into my LISA for retirement but give myself some breathing room.

Pay less per month and put it in my husband's LISA. We bought this house solely in my name but the next property we want to buy together and as he will be a first time buyer we can use what is in his LISA.

Three thoughts:

• you get tax relief on your contributions to the pension scheme but not to a LISA (yours or your husband's)
• you get a hefty boost from the employer contribution to the pension but not to a LISA (yours or your husband's)
• if you become too ill to work again, or die (sorry!), a pension carries benefits for your survivors. A LISA does not (other than the actual fund value). If you don't have permanent health insurance (aka salary protection) and life cover....

r6mile

Your Teachers Pension, as a defined benefit pension scheme, is far more valuable than a LISA. I would very strongly suggest you prioritise remaining in your pension scheme and forego the LISA if you are struggling.

barnstar2077

The first few years of owning your own home are the hardest financially, but should pay off massively in the long run.

I would see opting out of the pension as an emergency measure, not to be done unless you have no other choice.  I would consider extending the term on the mortgage if it really came down to the wire myself.

Are there some savings you could make elsewhere?  It may be worth a read on the various boards held here to get some ideas that may be able to save you some money. 

Kysa85

Thank you, I can see the general consensus would be to stick with TP. I was only thinking of coming out for a year or so until things weren't so tight month to month but I will try to ride it out.

Dazed_and_C0nfused

Kysa85 said:

Thank you, I can see the general consensus would be to stick with TP. I was only thinking of coming out for a year or so until things weren't so tight month to month but I will try to ride it out.

👏.  You won't regret it.

Universidad

Kysa85 said:

Thank you, I can see the general consensus would be to stick with TP. I was only thinking of coming out for a year or so until things weren't so tight month to month but I will try to ride it out.

Good plan. If you think things are bad right now, try having no pension when you're too old to work!

GrubbyGirl_2

Kysa85 said:

Thank you, I can see the general consensus would be to stick with TP. I was only thinking of coming out for a year or so until things weren't so tight month to month but I will try to ride it out.

If you think things are tight now imagine only having £10,600 a year to live on without your teachers pension.  Unfortunately when you reach retirement age you'll wish you had never opted out in the first instance

xylophone

I am a 37 year old teacher and I haven't been paying into my pension

I have two small children, 

I was acquainted with a lady with two very young children. Her husband was killed outright in a freak accident.

It was a mercy that he was a member of a DB pension scheme.

At least she wasn't left destitute as well as heart broken.