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    • Edmond
    • By Edmond 4th Aug 18, 10:29 AM
    • 32Posts
    • 25Thanks
    Edmond
    Pension or House Deposit?
    • #1
    • 4th Aug 18, 10:29 AM
    Pension or House Deposit? 4th Aug 18 at 10:29 AM
    My wife and I both recently started working for the NHS. The we immediately cancelled the pension as we can't afford 9.1% of our salaries right now, but will be able to when our son starts to get 30 hours free childcare (or when he goes to school if that doesn't happen).

    It did get me thinking though - are we better off in retirement if we put 9.1% of our salaries into savings for a house deposit (we're currently renting) for 5 to 10 years. I crunched the numbers, and financially we seem to come out about the same in retirement, i.e. we either have a bigger pension, but don't own a house, or we have a smaller pension but own a house outright and don't have to pay rent.

    What's the better option?

    Some things to consider - my wife and I have virtually no existing pension between us at 35. The NHS contribute about 14% for our 9.1%, which is very good. My model for retirement finances is based on us both staying at the NHS until retirement, which is a risky assumption. My parents own their house outright, and I'll likely inherit half with my sister.
Page 5
    • Edmond
    • By Edmond 6th Aug 18, 6:16 PM
    • 32 Posts
    • 25 Thanks
    Edmond
    In the OP's defense, The one number we don't know is how much they are paying in childcare to enable both of them to work full time or close to it. It seems obvious that they should be able to pay pension contributions, save a deposit and still live well on2 good salaries, but if most of one salary is vanishing on childcare it all gets a lot tighter.
    It is also worth considering that if they did both join the pension now and stick at it until 68 then they would both be on significantly MORE when they retired than they are now as they'll have DB plus SP and no NI to pay - not to mention kids being off their hands and mortgage hopefully paid off. The fact that they don't have much pension accumulated yet isn't necessarily an emergency - yet.
    The big if in that though is the need for them both to keep working until 68. If they don't join the scheme soon then not only are they betting their whole future on the continued availability of these jobs with their excellent pension benefits, but they are condemning themselves to having to keep working at those jobs until they drop even if they grow to hate them or have health problems that make them a constant struggle. That is the reason why I would still say they would be mad not to join the scheme now. The house deposit can be saved once the childcare costs start to drop away and as their incomes increase.
    Originally posted by Triumph13
    Yeah, the pension is worth significantly more than I first assumed, so I do want to get back on it asap.

    I picked 68 out the air to be honest. I didn't think that any earlier would be an option, but if we do manage to stay in the NHS it could be. It's hard to say whether we'd be there all that time.

    Current plan is to get back on pension in April, then re-evaluate what we can put aside for a house deposit.
    Last edited by Edmond; 06-08-2018 at 6:22 PM.
    • Edmond
    • By Edmond 6th Aug 18, 6:23 PM
    • 32 Posts
    • 25 Thanks
    Edmond
    Can you opt for paying 50% into pensions in the meantime? I know that the local government pension scheme allows this, but I'm not familiar with NHS rules.

    It would be better than paying nothing for the next year or so.
    Originally posted by Sky_
    Not an option as far as I can tell. My wife had the same issue when she was teaching - the pension was crippling but it was all or nothing.
    • michaels
    • By michaels 6th Aug 18, 7:24 PM
    • 21,094 Posts
    • 97,565 Thanks
    michaels
    New car is nice and shiny and all - but if the alternative option is for both of you to retire 5 years earlier I know which I would choose.....
    Cool heads and compromise
    • GunJack
    • By GunJack 6th Aug 18, 9:44 PM
    • 10,273 Posts
    • 7,687 Thanks
    GunJack
    New car is nice and shiny and all - but if the alternative option is for both of you to retire 5 years earlier I know which I would choose.....
    Originally posted by michaels
    beat me to it.... OP, get to the Bangernomics thread on the Motoring board...cars actually cost peanuts
    ......Gettin' There, Wherever There is......
    • k6chris
    • By k6chris 6th Aug 18, 9:55 PM
    • 237 Posts
    • 432 Thanks
    k6chris

    The catch is that we'd be giving up the bigger house and the new car that we wanted - I'll have to work on convincing my wife to make do for another 6 years!
    Originally posted by Edmond

    Welcome to the real world.....
    EatingSoup
    • crv1963
    • By crv1963 6th Aug 18, 10:26 PM
    • 375 Posts
    • 869 Thanks
    crv1963
    It is all about choices! I did bangernomics for years, cheap car full service, mot and insurance= 1k= 20pw plus petrol! Scrap or repeat depending on next MOT!


    House start smaller- build up!


    You have to do what you can afford and not overstretch!
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • atush
    • By atush 6th Aug 18, 11:25 PM
    • 16,983 Posts
    • 10,601 Thanks
    atush
    I buy cars that are 1-2 years old with warrenties.

    Newish, but dont depreciate as badly.
    • Anonymous101
    • By Anonymous101 7th Aug 18, 8:49 AM
    • 1,130 Posts
    • 529 Thanks
    Anonymous101
    You can't come onto a pensions saving board saying you're "to the bone" and can't afford to save into a pension and then talk about buying new cars.

    You need to get your priorities straight. Cars that are 2,3 or 5 years old are perfectly adequate. If you choose to spend your money on a new car rather than looking after yourself in retirement then more fool you.
    Last edited by Anonymous101; 07-08-2018 at 10:40 AM.
    • Triumph13
    • By Triumph13 7th Aug 18, 9:37 AM
    • 1,262 Posts
    • 1,589 Thanks
    Triumph13
    You can't come onto a pensions saving board saying you're "to the bone" and can't afford to save into a pension and then talk about buying new cars.
    Originally posted by Anonymous101
    Oh yes you can. But if you do you can expect copious abuse

    You need to get your priorities straight. Cars that are 2,3 or 5 years old are perfectly adequate. If you choose to spend your money on a new car rather than looking after yourself if retirement then more fool you.
    They sound a bit new to me - I just replaced by 17 year old Volvo with an 11 year old one. Retiring at 52 is worth a lot more to me than shiny new(ish) cars.
    • swindiff
    • By swindiff 7th Aug 18, 9:42 AM
    • 338 Posts
    • 135 Thanks
    swindiff
    I buy cars that are 1-2 years old with warrenties.

    Newish, but dont depreciate as badly.
    Originally posted by atush
    Just bought a 1 year old Citroen C1 furio for the wife, who is about to go back into the NHS funnily enough. 4000 miles on it, looks like a brand new car. 6300. It therefore cost the 1st owner about 5k for 1 years ownership and 4000 miles motoring
    • Anonymous101
    • By Anonymous101 7th Aug 18, 10:12 AM
    • 1,130 Posts
    • 529 Thanks
    Anonymous101
    Oh yes you can. But if you do you can expect copious abuse


    They sound a bit new to me - I just replaced by 17 year old Volvo with an 11 year old one. Retiring at 52 is worth a lot more to me than shiny new(ish) cars.
    Originally posted by Triumph13


    Agree. 11 years old is much better. I have to have a car that's less than 6 in order to comply with my employers car allowance policy. If I didn't I'd be driving around in a 10 year old + car too and would prob be retiring even earlier. You can't put a price on your financial freedom.
    • atush
    • By atush 7th Aug 18, 10:26 AM
    • 16,983 Posts
    • 10,601 Thanks
    atush
    Oh yes you can. But if you do you can expect copious abuse


    They sound a bit new to me - I just replaced by 17 year old Volvo with an 11 year old one. Retiring at 52 is worth a lot more to me than shiny new(ish) cars.
    Originally posted by Triumph13
    My husband replaced his 17 yr old car with a 3 yr oldvone. Not as frugal as you, but not frivolous either
    • Spreadsheetman
    • By Spreadsheetman 7th Aug 18, 10:53 AM
    • 102 Posts
    • 84 Thanks
    Spreadsheetman
    My husband replaced his 17 yr old car with a 3 yr oldvone. Not as frugal as you, but not frivolous either
    Originally posted by atush
    That is my precise plan too for my 16yr old car when the time comes.
    • ilovehouses
    • By ilovehouses 8th Aug 18, 3:03 PM
    • 2,135 Posts
    • 2,553 Thanks
    ilovehouses
    New car is nice and shiny and all - but if the alternative option is for both of you to retire 5 years earlier I know which I would choose.....
    Originally posted by michaels
    In 5 minutes I could tell you the effect on my assumed retirement income if I chose to divert a pension payment to buying a new car instead. I imagine quite a few here could do the same but it's quite a niche hobby.

    Most people are sleepwalking and just not thinking in those terms.

    Not knocking the OP here but it's a good example of stated priorities being out of line with actions. If the OP posted a couple of bank statements we'd know in 5 minutes what their priorities were and wouldn't need to ask them.

    Human nature. My stated aim is to lose half a stone - spending on Indian takeaways in the last 12 months - 678.25!
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