Nhs pension-opt out?

kezzygirl

Hello everyone. I have an nhs pension that I've been paying into for 8 years. I am now a band 7 which means 10% of my wage is being taken every month for pension. I have some debt that I'd like to clear and I am contemplating dipping out of the pension for a period of time and then rejoining. I am also conscious that many people don't meet the pension age, so would rather use the money for now. Thoughts? I know the pension is good, currently my death in service benefit is 93k, but I'm just considering my options. Thankyou in advance

r6mile

The NHS pension is one of the best in the country - opting out, even temporarily, is a phenomenally bad idea. 

I would advise to find other ways if you can at all to manage the debt!

hugheskevi

I have an nhs pension that I've been paying into for 8 years. 

This 8 years of accrual is increasing by CPI+1.5%. If you leave, that becomes CPI. So by leaving, not only do you accrue less pension, you also reduce the value of your accrued pension.

I am now a band 7 which means 10% of my wage is being taken every month for pension. 

The value of the pension is considerably more than this - work on it being worth about 30-35% and you won't be too far wrong. Opting out is akin to volunteering for a 20% pay cut. Also remember that 10% gets tax relief, so the net cost after basic rate tax relief is only 8%.

I have some debt that I'd like to clear and I am contemplating dipping out of the pension for a period of time and then rejoining.

Very bad idea. You are sacrificing income in the future for a bit more capital now, ie, similar to borrowing at a very high interest rate so that you have some extra money now but will have to pay much more back in the future.

I am also conscious that many people don't meet the pension age, so would rather use the money for now. Thoughts? I know the pension is good, currently my death in service benefit is 93k

A lot more people do reach pension age than do not. As well as the pension, you also lose death-in-service protection, enhanced survivor pension (both partner and children), and ill-health protection should you become unable to do your own or even any job. Just replacing these things alone with commercial insurance would reduce the 8% additional income significantly.

Forget about leaving the pension scheme and look elsewhere to either enhance income and/or reduce expenditure. If you do it anyway, make sure you rejoin within 5 years, as then your previous service is joined up with your new service and the enhanced in-service revaluation applies to the whole pension.

xylophone

Do you have a spouse/children?

kezzygirl

xylophone said:

Do you have a spouse/children?

xylophone said:

Do you have a spouse/children?

Yes, I have a husband and 2 children of 17 and 14

kezzygirl

hugheskevi said:

I have an nhs pension that I've been paying into for 8 years. 

This 8 years of accrual is increasing by CPI+1.5%. If you leave, that becomes CPI. So by leaving, not only do you accrue less pension, you also reduce the value of your accrued pension.

I am now a band 7 which means 10% of my wage is being taken every month for pension. 

The value of the pension is considerably more than this - work on it being worth about 30-35% and you won't be too far wrong. Opting out is akin to volunteering for a 20% pay cut. Also remember that 10% gets tax relief, so the net cost after basic rate tax relief is only 8%.

I have some debt that I'd like to clear and I am contemplating dipping out of the pension for a period of time and then rejoining.

Very bad idea. You are sacrificing income in the future for a bit more capital now, ie, similar to borrowing at a very high interest rate so that you have some extra money now but will have to pay much more back in the future.

I am also conscious that many people don't meet the pension age, so would rather use the money for now. Thoughts? I know the pension is good, currently my death in service benefit is 93k

A lot more people do reach pension age than do not. As well as the pension, you also lose death-in-service protection, enhanced survivor pension (both partner and children), and ill-health protection should you become unable to do your own or even any job. Just replacing these things alone with commercial insurance would reduce the 8% additional income significantly.

Forget about leaving the pension scheme and look elsewhere to either enhance income and/or reduce expenditure. If you do it anyway, make sure you rejoin within 5 years, as then your previous service is joined up with your new service and the enhanced in-service revaluation applies to the whole pension.

Thankyou for your post. I think you're right. It just killed me seeing £450 paid to my pension this month from my wage. I have been doing overtime and if I manage 3 shifts a month without feeling like I may drop, this bumps my wage significantly. Guess I just need to keep it going and keep working hard then reap the benefits later

badmemory

No one on here is going to tell you this is a good idea.  Please do not do it.  You will regret it.

On-the-coast

If 450 is 10% of your monthly salary, then that takes you well into 50% tax territory. And probably doesn’t include overtime pay?  

So taking that 450 as pay would only see you receiving about 58% of it. 

Also does your husband earn more than you (or yo put it another way you could lose child benefit as well as 42% of that perceived pension comtribition…
basically - don’t do it if at all possible. 

QrizB

kezzygirl said:

I am also conscious that many people don't meet the pension age ...

If youre 40 and female, according to the ONS you have something like a 90% chance of reaching pension age:

Marcon

kezzygirl said:

Thoughts? 

I think you've probably had a fairly good range of people responding - but as you'll have spotted, those thoughts are only going one way...

Kim1965

Most tax payers would like the nhs pension to be less generous... Kinda of tells you all you need to know