Should I opt out of my pension

[Stillto]

I'm living hand to mouth at the moment. Literally ran out of money last month and had to make £20 last a week. I've always paid into a pension (NHS) but now i'm thinking that I should opt out for a year and clear down some debts. What happens if I opt out? Do I lose all the money i've paid in?

All good suggestions. Also find out the very minimum payment you can make while continuing to pay into it. It might be as low as £25.00 per month, or could even be £10.00.

You get 25% added to that from the government, and you employer's contribution on top so if you can find the minimum payment just while you get through this difficult patch it is definitely worth continuing if you possibly can.

@thisgardenlife unfortunately the NHS scheme doesn't work like that, there is a fixed percentage contribution to retain your membership.

@thisgardenlife

All good suggestions. Also find out the very minimum payment you can make while continuing to pay into it. It might be as low as £25.00 per month, or could even be £10.00.

You get 25% added to that from the government, and you employer's contribution on top so if you can find the minimum payment just while you get through this difficult patch it is definitely worth continuing if you possibly can.

OP said it's the NHS scheme, which is defined benefit so she won't have the option to reduce contributions.

I would echo PPs - don't opt out! Even if you opted back in again later that could affect your total pension if the two periods of service aren't counted together. Depending on when you joined originally, opting back in again might also be on a less generous basis. (Ex pension actuary here!)

Oh that's a shame @alsopeggy . Thanks for clarifying.

No don't opt out.

The NHS pension is massively valuable and whilst I can totally understand your contributions being very much needed you would be losing 14% of employers contributions by opting out.

How old are your teens?
Are they sensible enough to even let you do one overtime shift occasionally? A sunday every other week would be great

Check your intranet. There are staff benefit schemes. Im not fully sure what they are but know at our place they talk of financial assistance x

I have around 7k debt which is about 350 a month repayments. If I could cut those repayments I could make it work until some of it is paid off but that relies on nothing breaking or needing buying in the meantime as there is no spare money or cushion.

OK, so the problem isn't actually your pension payments, it's your debt payments. I understand you've already made lots of other changes such as reducing your shopping budget and selling things but your next step should be contacting one of the debt charities (I'd recommend CAP) and them helping you find an easier way of paying off your debts. Once you have authorised CAP to deal with your debts your creditors have to work through them so you don't even have to deal with any of the paperwork. This will be a much better, less expensive, less stressful and more effective way of dealing with things than stopping paying into your NHS pension. (As a PP noted, if you're not paying into the pension scheme you won't lose what you have paid in but you will reduce your final pension amount but much more than you'll save in the short term and you'll also temporarily lose your death in service benefits which I would be loathe to do as a single parent in particular.)

Another one saying don't opt out.

1. Your employer also contributes. (you would lose that)
2. You don't pay tax on payments into your pension.
3. As others others have said, it is difficult (mentally) to restart. It can lead to "I'll start next month, after Xmas, and so on... "

First look at if you are claiming enough. As a lone parent you may be able to claim back benefits especially towards your childcare bill. Single person council tax discount. Tax free childcare scheme via work etc

Then look at the debt itself. Speak with one of the organisations listed above to make sure you are paying as little interest as possible.

How old are the teens?

If you go on to Money Saving Expert - Debt free wannabes you'll get some excellent advise re your debts and what you can do to make them more manageable.

Opting out of your NHS pension would be a very last resort but if you honestly think you can opt out for one year, use the money to reduce your debts to a manageable level then opt back in I think it's to be considered. It's easy for people on here to say don't opt out but they don't feel the pressure you are under. If it goes some way to reducing your stress then ultimately that's what's important now. Why not approach HR and ask is it possible to pause for say 6 months then automatically start contributions, just to give you some breathing space?

How long have you been contributing for?

*advice

Please don't opt out. I paid into the Local Government Scheme and was able to retire, early on a good pension. I worked with people who chose not to join, and they are now panicking about how to afford retirement. Please contact CAB or Christians Against Poverty or Step Change to help you sort out debt and to check you are getting all the benefits that you are entitled to.

It's particularly unadvantageous to be deferred on the 2015 scheme if you stay out 5 years or more because you don't get the same upvaluation each year. See below from 2015 booklet.

"f you rejoin this Scheme after a break of five years or less, your previous period of contributions will link
with your current period and the pension rights you built up before the break will receive full in-scheme
revaluation for each Scheme year during the break. This is determined by Treasury Orders plus 1.5%.

If you rejoin this Scheme after a break of more than five years, your previous period of contributions will not

link and your benefits for the earlier period will be calculated separately. Only your new period of benefits
will receive in-scheme revaluation as described above. On retirement the earlier period of benefits will be
revalued from the date the break began by the application of Pensions Increas"

There is talk of changing the scheme so you'd have to keep an eye on that too

www.gov.uk/government/consultations/nhs-pension-scheme-proposed-changes-to-member-contributions/nhs-pension-scheme-proposed-changes-to-member-contributions-from-1-april-2022

Don't opt out if your pension. Really don't. There will always be a reason not to opt back it. Or the rules will change and you'll have a far worse deal than before.

Are you paying in the minimum you can to your pension? Reduce the amount but don't stop.

You are paying a lot back on your debt, get help there first.

Check out Turn 2 Us and the Smallwood Trust too.

www.nhscreditunion.com/

Have you looked at consolidating your loan with the nhs credit union?

I know very little about the NHS pension, but don't ditch/pause it.

Get in contact with your local Citizens Advice. There are invariably little pots of money to help ease the pain of utility bills and unexpected costs. I admit it differs immensely by area, but there are some very generous people/charitable trusts that like to help people who are struggling. My local Citizens Advice also redistributes the (pensioners) winter fuel payment from people that don't need it.

Be honest to the teens (presumably at least one or two are able to get some paid work).

Now is the time to look at outgoings. Are you on the best mobile phone contracts? Can you swap TV and broadband deals (do you even need them)? Can you all pop a few layers on/turn off a few lights?

Go to StepChange and start a DMP for your debts. I owed £18,000 at one point (crazy mess I got myself into. all paid off now) and at the start of my DMP paid off £150 a month. It will trash your credit score temporarily but it will give you a lot of breathing space.

Thank you all for the advice. To answer some questions

I have separate life/critical illness cover, I hate the thought something could happen to me and the kids and the kids wouldn’t have anything, I’d be loath to cancel this for the £19 a month it costs me.

No child maintenance, CMS are useless and he’s at around 6k debt now. Occasionally pays £50 here and there but nothing to make any dent

Debt is purely just trying to live. I haven’t been on holiday in years, I don’t smoke, I don’t have sky or any of that stuff. Rent takes around 45% of my income. I don’t qualify for anything other than child benefit and CTC which covers some of my childcare. I’m just over the cusp of being able to claim anything else. One thing I don’t get is that if I put my income and circumstances into the “turn2us” website it says I would get about £500 more than I do on universal credit?! I’m still on the old legacy child tax credit system and I’m terrified of leaving and moving to universal credit in case the numbers aren’t right and I have to go ages without any money.

I very nearly signed up to a debt management plan with step change but I wouldn’t be able to access any more credit. If my car broke down or something happened I would be screwed.

My job isn’t one where I can work overtime (I’m not clinical)

I’m going to look at the make £10 a day threads

16 year old already works whilst doing her A levels. She pays half her phone bill and buys some groceries

They can’t collect DD from school as they don’t get here via bus in time

Your NHS pension is like deferred payment, equal to another 20% on top your salary.

I echo posters suggesting ways to tackle the debt before opting out of pension. Really really it's the better option.

Opting out of NHS pension scheme would have to be an absolute last resort for me. Once you’re out I think you’d find it hard to start paying back in again and it might end up being years which you’d regret later.

Would suggest trying Stepchange for advice.

Is there any option to reduce the rent? Are the children sharing rooms as much as possible to get the property size down?

@alsopeggy

PP have lots of good suggestions to avoid opting out.

Check carefully what death in service benefits you would miss out on if you do opt out - unless you have good life insurance in place these are very valuable by themselves, in addition to the generous pension benefits.

This is a really good point. My work runs a similar pension scheme so excellent employer contributions co alter to what we put in. It also has a death in service benefit of 4 x salary. Last year a young colleague who had opted out died suddenly and the benefit was therefore only 1 x salary covered by our employers life assurance.

Can you look for a different job within the nhs? Maybe look to go up a band?

I absolutely agree with previous posters to look into if you can do anything with your outgoings. A lot of this depends on personal circumstances and specifics of your situation.
I would have a look at whether your scheme offers a reduced contribution for a set period of time. I think some dB pensions have the option to pay 50% for a period of time (like a holiday) without coming out of scheme but it will impact the defined benefit paid out and I would chat that through with HR to ensure you fully understand the impact before considering it.