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?

OP, please opt back in asap. If you are not sure find out your scheme and what 1 year of contributions mean.

If you are in the 2015 Career average scheme the loss to your pension is 1/54th so if you earn £30k = £550, £50k =£925 pension a year. That’s a lot to replace.

Much better to drop a day and keep paying your pension. Your pension contributions come out of untaxed salary, so you pay less tax and your take home pay would not drop by 20% because it is the bit that is most highly taxed etc. Could you do 4 x 8 hour days?

Seems to me you did zero financial planning about affording a child and are just panicking right now and making really really poor financial decisions

I wouldn't say zero planning. Things have just worked out tighter than we expected.

@Marmm

Who is most likely to die/the family would struggle most without their benefits?

Partner has a job in which his life is definitely more at risk on a daily basis than mine.

Please check exactly what you're missing out on by opting out.

Death in service as pp have already identified. You'll need to pay for life insurance if you want to protect your family while you're out of the scheme.

Can you rejoin the same section of the scheme later on the same benefit levels or will newer benefits be less generous (quite common for long standing pension scheme members)?

I don't really follow the logic of the higher earner opting out because then you're giving away more free money than the alternative, and your pension contributions are tax deductible so you'll be paying more tax.

I also agree with pp that you need to really protect your earnings and pensions potential as you're not married.

If you can't afford it then you can't afford it but this is a considerable sacrifice and you should really understand the implications properly.

I find the comments so interesting. If you’re struggling to pay for something as important as childcare, why not stop paying into your pension for 18 months? People always act as if it’s a guarantee that you’ll be alive to see your pension. I wouldn’t struggle for something just because I’m hopeful I’ll live to see retirement age. You could literally die tomorrow or next year, all the while you’re struggling day to day. It doesn’t really make much sense to me

Lots of people opt out and don’t think about the death in service benefits. They assume that as they still work for the NHS, police, local gov etc they will still be covered, unfortunately that’s not the case

Opt back in asap and make cuts elsewhere. You need this, it's the best form of saving and investment going.

@astroboy45 it’s exactly because you COULD die tomorrow. No pension, no death in service benefits.

I've just read you say you aren't married. For goodness sake get yourself properly looked after and opt back in before it could be too late. I wouldn't bank on this pension being around in a few years time the way things are going either.

@PotteringAlong what does that even mean?

Nothing paid to family.

@Glittertwins

I've just read you say you aren't married. For goodness sake get yourself properly looked after and opt back in before it could be too late. I wouldn't bank on this pension being around in a few years time the way things are going either.

Do you mean the NHS pension might not be around in a few years?

@astroboy45 NHS pension scheme pays a lump sum and a dependents pension to the children and partner of a worker who dies in service while a member of the scheme.

Get married before you start messing with your pension or you'll face a really tough retirement.

@pleasehoover oh wow really I didn’t know that. Now I understand why so many people have said to not opt out, makes total sense

@op - yes I do. It's bloody generous and ripe for the picking I'm afraid. I would not like to bet it would be available for new employees or people wanting to re-enter.

@astroboy45 as others have said, if you die whilst working your pension pays a lump sum out to your next of kin, based on the years you’ve worked and your salary. But that is only paid out if you are a member of the pension scheme. So if you do die tomorrow and you’ve opted out then all of that money is lost and doesn’t go to your dependents. And that can be a lot of support pulled out from under your when you need it most.

@Soontobe60

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 have to look at my contract again but I wanted to know…does death in service depend on how long you’ve been with the company? Do you have to be with a company say 2 years (as you are still in probationary stage before the 2 years).

I’m in my early 30s and my mum has always told me not to mess around with pensions and opting out. I have been tempted at times but I figured the money I would ‘save’ would just mean it goes into taxes!

What I don’t understand about pensions is that what happens to your old pensions from old jobs? I can’t remember all of them. I always worry about this when I’m changing jobs. Do they just find you at 65 and give you your money?

Sorry to derail your thread OP. Don’t opt out!

OP, once you have opted back in (which you should do asap) in the nicest possible way, don't make any more big financial decisions without doing the research first.

You say for instance that you don't know if going down a day will save you money or not. This information is freely available! Make a spreadsheet and then decide!

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

I’ve said this often, but there should be a student loans type system where parents can borrow the cost of childcare for 5 years then pay it back over 20 years or whatever.

Eddy legally previous employers cannot touch pensions. They just sit there accruing. But you do need to claim them when you reach retirement age and for that you need to know what they are. There are services to help you find them - I think there's a free government one (PensionWise?)

If you are not married it is even more vital you opt back in. You are entitled to £0.00 of your partners pension if you split

[quote pleasehoover]@astroboy45 NHS pension scheme pays a lump sum and a dependents pension to the children and partner of a worker who dies in service while a member of the scheme.[/quote]
Would my partner still get this if not married?

Yes he will as long as you have nominated him to be the beneficiary

Thanks. I think I need to discuss this again with my partner and decide what to do...