To opt out of NHS pension to make childcare more affordable?

[pensionoptout]

Am I going to regret this?? I've temporarily opted out of my NHS pension contributions to make our childcare expenses more affordable. It will probably be for around 18 months or so I think, hopefully less. Has anyone done this? Is it a bad financial decision?

Do not do this!!

Use the tax free childcare and thatll save 20%...

How old is your child? You could look into childminders or a nanny which can be cheaper than a nursery.

If you can work flexibly look for nurseries thar offer shorter days..my sons core hours were 9-3...we paid for breakfast club so he started at 8 but i collected him at 3 (i was part time).

Can you drop hours so you dont need as much childcare?

Terrible decision and yes I would bet money on you regretting doing this in years to come.

Ask yourself why you are doing this and not your DP? I would absolutely cut everything else out first before doing this.

I have a small DB pension alongside my DC pensions. I am so glad I never 'opted out' when I was hard up at the time.

I did the exact same. The pension is a huge chunk of my wage and it’s the difference between putting food on the table or not. You’ll get automatically re-enrolled in 3 years which is perfect timing for free hours reducing your childcare bill.

Assuming your on a post 2015 pension then 3 years out of a 46ish year career will barely effect your monthly payout. Just make sure you set up some life insurance for those years as you won’t have your death in service.

Honestly the nhs pension t&cs are not so sublime that you should risk food and heating or getting into debt)….unless your on one of the pre 2008 pensions which are literally worth their weight in gold and you should keep paying into at all costs)

We are using the tax free childcare already, it's still tight. I've submitted a request to reduce my hours but it hasn't been reviewed by my manager or approved as yet. If it's approved that will save us a day of childcare but I'll also lose more of my salary by dropping hours so I'm not sure we'd be in any better a situation.

Can you make the childcare cheaper eg switch from nursery to childminder? Or are you already in the cheapest childcare situation you can get?

You don’t pay tax on those contributions saving you at least 20% and they pay in 22% contribution as well.

This is possibly the worst financial decision you could make.

@Catsaysmeiow

I did the exact same. The pension is a huge chunk of my wage and it’s the difference between putting food on the table or not. You’ll get automatically re-enrolled in 3 years which is perfect timing for free hours reducing your childcare bill.

Assuming your on a post 2015 pension then 3 years out of a 46ish year career will barely effect your monthly payout. Just make sure you set up some life insurance for those years as you won’t have your death in service.

Honestly the nhs pension t&cs are not so sublime that you should risk food and heating or getting into debt)….unless your on one of the pre 2008 pensions which are literally worth their weight in gold and you should keep paying into at all costs)

Thanks for this. How do I know which one I'm on? Is it as straightforward as the year I started working for the NHS?

No no no noooooo. You’ll never opt back in again. Don’t do it.

@stuntbubbles

Can you make the childcare cheaper eg switch from nursery to childminder? Or are you already in the cheapest childcare situation you can get?

Already cheapest option, we have a childminder.

Normally it's the year you joined. But you should have an annual statement letter from the scheme

One big thing that come with your pension is death in service benefit. If you die die whilst still employed, your dependents would get 3x your salary as a tax free lump sum, and some of your pension.
Every year you fail to pay contributions might equate to £1000k less pension a year when you do retire dependent on your salary.
Not paying pension contributions will mean you pay more tax, as the contributions come out of your pre tax salary. It’s a very very false economy.

I’m an NHS nurse. I’ve paid into a pension scheme all my working years. I was out of the NHS for 7 years and returned 20 years back. I regret it now as the private pension I accumulated is nowhere near the NHS.

Agree with everyone else. Opt straight back in.

Do a Statement of Affairs over on the debt free board of MSE, and cut down elsewhere.

Get overtime at weekends when your husband is able to do childcare, or get an evening pub job or stack shelves on a night shift ina supermarket.

My role is one where there is potential for and high likelihood of progression up the pay bands over the next 10 years or so. My partner thinks this will compensate for the 18 months or so of lost pension, since I'll be paying in more to my pension when I climb up the bands and opt back in. He thinks it will even itself out. I'm not sure if this correct... I'm just trying to do what I need to to keep us afloat for now.

The short answer is it’s almost always a mistake to stop contributing to retirement funds for short term gain. Just as it’s a long term mistake to stop working because “I’m just covering childcare cost”.

You mention that things are ‘tight’. What does that mean? No holidays tight or no food tight? How long will things be tight, you mentioned 18 months, what changes in 18 months?

^Dishwashersaurous

Honestly I can't do the maths without exact figures but long term you would probably be better off borrowing to pay for the childcare and stay in the pension.^

Agree with this

That's a real last-resort choice. I'd cut back anywhere else than this.

Terrible idea. I continued paying my pension contributions during maternity leave, even when I was on SMP. There’s no way I’d stop contributions to pay for childcare.

@pensionoptout

We are using the tax free childcare already, it's still tight. I've submitted a request to reduce my hours but it hasn't been reviewed by my manager or approved as yet. If it's approved that will save us a day of childcare but I'll also lose more of my salary by dropping hours so I'm not sure we'd be in any better a situation.

If you can’t afford it you can’t afford it, and if it’s only 18 months it isn’t the end of the world… but I would be regretful and do whatever I could to stay enrolled given how good your pension is you.

I would want to sit down with your DH and look at if properly you see if you can opt back in and have your DH opt out of his.

Also I’d look at MSE and see where else you can cut back or save money (things like reselling things on eBay, buying second hand for your baby, downshift challenge on weekly shop, cancelling subscriptions and holidays)

I wouldn't if you can avoid.

However, I do get it and I'm worried I won't be able to afford it much longer if the cost of living continues to rise ☹

@pensionoptout

We are using the tax free childcare already, it's still tight. I've submitted a request to reduce my hours but it hasn't been reviewed by my manager or approved as yet. If it's approved that will save us a day of childcare but I'll also lose more of my salary by dropping hours so I'm not sure we'd be in any better a situation.

Unless you are clinical so basically guaranteed to get the hours back I wouldn't do this. If your post 2015 scheme opting out will make little difference especially for 18months to what you eventually get especially if you can move up the pay bands. The NHS is great for flexible working can you not ask to rearrange your hours and work day afternoon and early evening so your only paying for half days at nursery and DH can pick little one up.

We have worked opposite shifts from DS being born until now, it was hard but saved us so much money.

Nope. Nope. Nope.

I'm not sure your husband is quite right since your eventual pension is based on the number of years as well as career average salary, but you may be able to buy some of it back - I don't know.

Anyway, it's done now. Just make sure you have a firm date to opt back in and DO IT. Don't let the date drift for any reason.

I extended my mortgage to grt us through a difficult childcare patch, also an expensive way to borrow over the long run but you do what seems necessary at the time and take the consequences.

@saltinesandcoffeecups

The short answer is it’s almost always a mistake to stop contributing to retirement funds for short term gain. Just as it’s a long term mistake to stop working because “I’m just covering childcare cost”.

You mention that things are ‘tight’. What does that mean? No holidays tight or no food tight? How long will things be tight, you mentioned 18 months, what changes in 18 months?

We aren't at the point of struggling for food. Absolutely no holidays though, and just a very strict budget with little wriggle room for emergencies or any savings etc.

We have some debts that will be repaid in 18 months.

I'm just trying to do what I need to to keep us afloat for now

Is he also?