Nhs pension-opt out?

Nurse2047

Are you bottom band 7, mid or top band 7? From what I have researched nhs bands don’t hit highter tax bracket until band 8 as starts on 

£50,952 where top 7 is  £50,056. Unless doing a lot of overtime?  Any agency work you can do to boost income or self employed side hustle?  I know it’s a big chunk of our wages every month but try and remain in it for all its benefits.

JoeCrystal

kezzygirl said:

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

It's unbelievable, especially since you have a family as well. Sorry, but £450 per month is cheap for what you are getting. If you want a dirty and quick comparison and your NHS pension scheme is worth a third of your salary... you are basically on an equivalent of £72k thanks to a very generous NHS pension scheme. Even more so due to better than inflation index- linking and so on.

So basically, if you do opt out, you are taking a significant cut in your overall remuneration, and I, as a taxpayer, would like to thank you for saving the HM Treasury and taxpayers a large amount of money throughout your retirement. Even a year of opting out would protect HM Treasury and the taxpayers (if aged 40 and living to 87, drawing from 68) more than £20k in today's money. And that is just one year.

You are spending far more overall, taking a significant cut in your retirement to cover some debts. You are on an excellent income, and pension contributions should be the last thing you should cut, so there must be other areas you can cut back on (Barring genuine emergencies ofc).

Stubod

..opt out of the NHS pension????????....are you MAD!!!!!!!!!!!!!!

GDB2222

QrizB said:

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:

I guess the OP works with very sick people, so overestimated her chances of dying young.  It’s a natural reaction.

Albermarle

GDB2222 said:

QrizB said:

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:

I guess the OP works with very sick people, so overestimated her chances of dying young.  It’s a natural reaction.

Even a lot of people who do not work with sick people, tend to significantly overestimate their chances of dying early.

Emmia

Opt out, and you won't opt back in, that £450 a month would go on other things, and then in 10, 15, 20 years you'll be complaining about your reduced pension, not being able to retire early etc. If you died early, your spouse would also receive a lower widowers pension. As everyone else says, you would be absolutely nuts to opt out

I'd pop over to the debt free boards to find other ways to sort out the finances / reduce outgoings.

DoublePolaroid

I suspect OP has probably already been convinced by the consensus, but as others will read this, some numbers based on the following assumptions:

• Current salary = £50k

• Will remain an active scheme member for 20 years after time out of the scheme (thereby getting the 1.5% annual uplift above CPI)

• Draws pension at age 67 and lives to age 87

• Takes one year out of the scheme

That one year out of the scheme would have produced an annual pension of £925 (£50k/54) and compounding 1.5% annually over 20 years works out as an annual pension of £1250 in today’s money by the time the pension is drawn. Multiply that by the number of years it would be drawn for means that taking a single year out of scheme would cost £25k in 2023 money. 

I will add, given some of the incredulity posted, having considered doing this myself, there are (or at least were, prior to the recent changes to LTA/AA) circumstances where this might be a valid option for a short period of time but these are edge cases for very high earners not relevant to OP. 

Dazed_and_C0nfused

DoublePolaroid said:

I suspect OP has probably already been convinced by the consensus, but as others will read this, some numbers based on the following assumptions:

• Current salary = £50k

• Will remain an active scheme member for 20 years after time out of the scheme (thereby getting the 1.5% annual uplift above CPI)

• Draws pension at age 67 and lives to age 87

• Takes one year out of the scheme

That one year out of the scheme would have produced an annual pension of £925 (£50k/54) and compounding 1.5% annually over 20 years works out as an annual pension of £1250 in today’s money by the time the pension is drawn. Multiply that by the number of years it would be drawn for means that taking a single year out of scheme would cost £25k in 2023 money. 

And they would have been paying more tax now for the privilege 😳

xylophone

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

Then (morbid thought I know) what benefits would they lose in the event that you were not a member of the scheme when you died?

I have mentioned in previous posts the case of a young wife and mother of two very young children whose husband was a member of LGPS and who died in the course of carrying out his duties.

Nothing could mitigate her grief and loss but at least his pension provided for her and the little ones.

dunstonh

 I am also conscious that many people don't meet the pension age, so would rather use the money for now. 

I would hope that someone working for the NHS would have more knowledge on life expectancy than that.  However, perhaps you are not part of the medical side of the NHS.

but I'm just considering my options

It would be possibly the worst financial decision of your life and could cost you tens or even hundreds of thousands of pounds.

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

The NHS pension is worth around 30% of your salary.    You are paying 10% of that and get tax relief and a reduction in NI.  So, its not really costing you 10% net.

It just killed me seeing £450 paid to my pension this month from my wage.

£450 before tax and NI.  So, you wouldn't get £450 if you opted out as you would need to pay tax and NI on that.  You could find yourself reducing your or even losing child benefit as well.

If you do decide to opt out, I thank you on behalf of all taxpayers for your generosity to the Treasury.