NHS Pension - buying first home

mad310

I have began in a nursing profession and want to buy my first home. I currently pay approx £200 a month (8.3%) to my NHS pension and they give me back 23.7%. I am aware this is an amazing pension however buying a house isn't cheap. Should I temporarily opt out of it and save that £200 a month and put it towards my deposit fund? Furthermore I am looking to buy on my own and have a single persons income to purchase with and so doing this could increase the amount I can borrow for a mortgage - if I opt out.

Bookworm105

don't know what age you are, but in principle opting out of an NHS pension is a bad idea 

Dazed_and_C0nfused

mad310 said:

I have began in a nursing profession and want to buy my first home. I currently pay approx £200 a month (8.3%) to my NHS pension and they give me back 23.7%. I am aware this is an amazing pension however buying a house isn't cheap. Should I temporarily opt out of it and save that £200 a month and put it towards my deposit fund? Furthermore I am looking to buy on my own and have a single persons income to purchase with and so doing this could increase the amount I can borrow for a mortgage - if I opt out.

Honestly, it's a terrible idea.

No idea where you get 23.7% from but the NHS pension is a defined benefit scheme where you get a pension based on the scheme rules, the contributions don't build up a pension pot.

Say your salary is £29,000 and you pay £200/month.  Firstly it's really only costing you £160/month because of the tax you don't pay due to those pension contribution.  So real cost of £1,920/year.

And in return you get an inflation proofed pension of £537/year 😃 from the schemes normal pension age.

Emmia

If you opt out for a couple of years to save the deposit, you'll not opt back in for substantially longer... Because you have that extra money in your pocket, you can afford a slightly bigger mortgage, have an extra holiday, a slightly nicer car etc.

You'll get to 40, 45* and suddenly realise you've no pension and getting yourself back to where you'd be if you'd just been paying in will be eye wateringly expensive - as in many 10's of thousands.

In addition there is the possibility that the pension scheme changes in the future, to something good, but not quite as good as the current scheme - by being "in" you usually carry on paying into the better scheme for longer.

Finally (and I'm sorry to raise this), death in service is often tied to your pension - you're single now, but in 5 years you might be married with children. No pension contributions means no death in service payout/dependents pension (if it's offered) for your spouse/partner/kids... at a time when they'll need that money.

In short, don't do it.

*I have assumed here you're in your 20's/30's

Flugelhorn

NO! really not a good idea to leave the scheme - you are buying future pension now very cheaply and as @Emmia hints there will never be a "right time" to opt back in and if you do the scheme may not be as generous in times to come.

I worked for the NHS, bought my first house in my 20s, 13.5% interest, would have loved to have had a bit more cash to pay that and the other bills - but more than one senior colleague has drummed into us to keep paying the pension!  Now having retired I am glad I had second hand furniture and learned to do a lot of DIY but stayed in the scheme 

Jami74

OP, I'm just about to buy my first home, on my own, and I'm NHS. Don't opt out of pension. If you are still at the collecting deposit stage and a long way from actually putting an offer in, then there are lots of ways to increase the deposit by using the right savings accounts (eg LISA if the right age, higher interest savings accounts etc), making the most of bank switches for rewards, using cashback and rewards on your shopping etc.

jimbog

Terrible idea. A colleague who was a teacher did this and while the rest of us retired at 60 with a good pension he'll was ploughing on until 67 for the state pension

gwynlas

Rather than come out of the pensio scheme for a very short term gain £2.4k pa  why not endeavour to earn an extra £200 per month by doing a few bank shifts?

Also if you come out in order to save for home  you might be tempted to not reinstate asap but use money too replace appliances etc

Emmia

The other thing, is if you don't pay in then the employer doesn't pay in...

If you opt back in later, the thing you'll miss is the employer contribution, which you've effectively lost (they won't backdate that when you opt back in) so to catch up later you effectively have to pay your contributions and the employer contribution that is missing - a quick Google indicates that your NHS  employer puts in 23.7% of your pensionable pay. You can't have that money any other way than through the pension.

LightFlare

OP - don’t do it

Retirement may be decades away - but when you finally get there, you will be grateful for every £ you paid in

BonaDea

No!  It would be absolutely mad to give up that bit of pension, even for a short while.  It will be worth a fortune in 30 or 40 years.  As others have said, it would be better to find the money other ways - extra shifts, smarter spending etc.  What are your current living arrangements?  Could you move to a cheaper home?  Could you walk or cycle to work instead of paying for transport?