Opting out of NHS pension for 1 year

[PensionShmension]

i have been qualified as a nurse since September 2021. I work as a band 5 nurse, I work in clinics 9-5 so no enhancements. I LOVE my job but there was no overtime opportunities plus I am a single parent so would struggle to find childcare.

Anyway, this year I have quite a lot to pay for. My car is on its way out (it’s 9 years old), it’s SCRAPED through the Mot with loads of advisories. It truly is on its last legs, cutting out, needs loads of work doing to it etc. I live in fear it just won’t work one day. I work in a community job so need a car. I have no savings after putting myself through uni, I don’t struggle day to day don’t get me wrong I live fine but definitely only have a few pence left in my account by payday. With the cost of living etc my wages aren’t going as far, DS is getting bigger and is needing new clothes all the time (get most of them off Vinted!). Just life it a lot more expensive (as it is for everyone).

my priority is getting a new car (well, new to me). I’ve done the figures and basically there’s no way I can afford a car on finance on my current wage, i budget strictly and there’s no leeway. I move up slightly on the pay scale come September. I have been thinking of opting out of my pension for 1 year (I have been in it for just over 1 year). This would allow me the extra funds to pay for the finance on the car. It would only be for 1 year. In feb next year some I will be receiving some money (not a life changing amount, approx £4,000) so enough to cover the car payments and I will rejoin the pension. I am not stupid, I know what a good pension it is but right now I feel like I can’t get on any kind of even keel. I am not on the breadline in anyway, we have enough for food and for heating and have a secure roof over our heads but I don’t smoke, don’t have any subscriptions (that I pay for anyway, thanks mum 😂), no foreign holidays etc. I can afford to have my hair done every 8 weeks, ds has an extra curricular so like I say, we aren’t dirt poor but cutting out my £40 hair cut that I have 6 times a year isn’t going to help pay for a new car!

wow this is long. So yeah, I know it is last resort but right now I think it might be the right choice? I don’t claim any benefits (not entitled), exdp pays £150 maintenance so my monthly income is approx £1600 but that’s for EVERYTHING. My pension is approx £170 a month

Have you taken into account any employer contributions you’d be missing out on? Plus you might not be able to cut contributions completely - normally 2% is the minimum you can pay.

Could the car wait until you get the £4000, or wait until your current car conks out/next MOT?

Or get a car on a 0% credit card then pay it off when you get the £4000?

If your DS is in any childcare (eg wraparound?) are you sure you don’t qualify for tax credits towards the cost? Or are you claiming tax free childcare?

Like you say, I think it’s a last resort to not reduce your pension contributions (and don’t be tempted to let your fear drive you into getting a new car before you absolutely need to - new cars can be bought very quickly if needs be!), but otherwise your reasoning seems sound to me.

I'd ring the money advisory service just to talk it through because pensions and employer contributions are so valuable. But I agree with PP on the face of it. Also, community nursing isn't easy. Thank you for all you do for us.

Back in the day, I was a SAHM as was usual then due to very little options on childcare.
After two DCs the result was 8 years out of my pension contributions from my professional job, it didn’t make a huge difference. When I eventually went back and my salary improved I also paid into a free standing pension to make up some of the difference.
As long as you can rejoin, I’d go for it.

I have just checked my ESR and my employee contribution says £2034, so I’m assuming this is how much they have paid into my pension? So over 12 months I’m looking at about £4000 ‘missing’ from my pot if I opt out

If you work in the community you may be eligible for a lease car through the nhs - it's worth checking this out, especially if you are looking at smaller cars as it can be quite cost effective.

yes I think I would opt back in and pay an increased % to make up the short fall (probably 1%)

This may be morbid but if you die whilst opted out you will lose your death in service benefit - spouses and dependents pensions. These can be extremely valuable and so it's something worth considering. Defined benefit pensions are worth so much more than the contributions that you pay in.

The lease car scheme includes insurance, tax, servicing and maintenance, as well as break down cover. It's also usually done as salary sacrifice, meaning the lease fee comes off your salary before tax and ni.

Honestly its a really good pension the value of it is much higher than what you pay in. So I would say try and find an alternative way round this. If you don't have a credit card then maybe getting a 0% credit card until your 4 grand comes through may be an option, I took one out with TSB they offered me £1000 on 0% but within a few months they raised it to £3,700? Or could you use a credit union?

@sparklingtree thanks, i am entitled to a lease car, most of my colleagues have been in the scheme and would never go back in it. The cheapest car I can find is approx £270 a month (all in). Even minus the tax and insurance I couldn’t pay I couldn’t stretch, the extra £200 is just money I don’t currently have.

my next MOT is due in November but I had so many advisories, even taking it to a garage where I know the owner the cost quoted for the work was £1500, my car isn’t even worth anywhere near that plus I don’t have £1500. I did think of just waiting and seeing BUT if my car broke down completely tomorrow I would
be totally screwed, I do approx 300 miles a week in my job (cover a huge area), I wouldn’t be able to go to work, have no one to borrow a car off, couldn’t get Ds to school etc. he’s not in any childcare (parents pick him up 3 nights a week, exdp 1 night, me the final day) so nothing to claim there.

@BlackLambAndGreyFalcon i know that’s my main concern, I’m only young(ish!!) but obviously anything can happen at anytime

Then again I work on a team of 11 and 5 have confided in me ( since I mentioned I was considering opting out) that they have opted out as they simply cannot afford not to 😔

I opted out on and off over the years. Massively regret it now.
Can you get a loan or 0% card til your £4000 arrives ?

Remember that the NHS pension is not a ‘pot’ as such, it is now a career average pension. Therefore opting out for a year will not have a significant impact on your overall pension at the end of your career (as it is based on 80ths or 60ths, I can’t remember at the moment, so you will just earn 1 less of these by the end). For this reason you cannot pay more in once you rejoin, as the percentage you pay is set based on your salary.
The only other thing you need to consider is the death in service benefit which you would not be eligible for whilst you were opted out.

Otherwise it makes sense to use the money to make life easier for yourself now

You’re making a common mistake a lot of people do

Say you pay £200 in to your pension each month, withdrawing from the pension won’t give you that extra £200 - it will then be in the pot of money to be taxed and NI taken.

Plus if you are a single mother and you’re paying childcare I presume you get some universal credit (I do and I work full time for more than your wage). In which case you will also lose money from your universal credit

If I were in your shoes I’d drag the car kicking and screaming through this year or even buy a £200 piece of crap and wait for the 4k to hit your bank

Can you join the nurse bank or an agency & pick up a shift that way for a bit of extra cash,
I def wouldn't opt out of pension.

What make of car? one of ours is 20 plus years!

Could you get a new leased car via the nhs salary sacrifice system? No deposit required and really good deals for cars. Look into it. I would not advise ever breaking your pension - after tax it will barely be worth it and over the longer term you'll regret it. But I understand - I've heard other nurses do this but I still think it's a mistake if there is any way at all you can avoid it. If not - it is what it is. Sending sympathies. I'm a nurse too.

Anyway.

I'd say go for it's on two conditions.

You do save hair money and you do start it again ASAP.
My biggest fear woud always think think the money can do something else

The current (2015) scheme is 1/54ths.

I am a nurse and work for the NHS.

I would seriously do your research before leaving the pension scheme.

You save 20% tax on the contributions we have to pay, so if you pay £170, you will only be £136 better off a month.

Each year you pay into the scheme, you accrue a "pot" that is 1/54 of your earnings for that year. The employer contributions don't actually change anything. Each year you pay into the scheme, your "pots" for the previous years increase by a set amount. If you don't pay in, they don't increase.

The 2015 scheme will probably be updated to a newer shitter deal in the near future. If you have had a break of longer than 12 months you will probably be forced to join newer scheme.

I'm not explaining it very well, but I would give up other things before your pension. You should be able to book am appointment with a pension adviser through work to discuss it.

Can you reduce the amount you put in?

*I forgot to take off national insurance, so you'd be £115 better off instead of £170. And worse off in the long run.

Could you do agency when your DS is with his dad? Tricky when you work Monday to Friday 9-5 as you need a break as well.

Could you borrow it off your DM and pay her back once you get the lump sum?
Any option for agency working even once or twice a month?

I know it's tempting when there is no money anywhere else, but opting out of a pension should be the absolute last resort.