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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

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

239 replies

pensionoptout · 06/02/2022 16:22

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? Confused

OP posts:
Dreamstate · 06/02/2022 19:02

You sya things will be tight if you stay opted in. So what. Betfer to still be opted in for lots of reasons. Its tight, you didn't sya its unaffordable or putting you into debt.

I'd rather have to be in a tight situation temporarily then pause my pension payments which can have greater consequences .

pleasehoover · 06/02/2022 19:02

@EddyF the Pensions Tracing Service should be able to help

mummykel16 · 06/02/2022 19:08

Have you made sure you are getting any help you may be entitled to op?

C152 · 06/02/2022 19:09

Yes, you will regret this. Please reconsider and, as you've mentioned you may do, look at where you can cut back elsewhere. It won't just be your contributions you'll be missing out on; you'll be missing out on the Government contribution (i.e. tax relief on your contribution) and your employer's contribution. No matter what state your finances are in in the future, you will find it really hard to 'pay back' the amount you miss out on by stopping contributions now - unless you win the lotto or gain a financial windfall in some other way of course!

Tootiredallthetime · 06/02/2022 19:09

@EddyF if you have a vague recollection of pension provider, give them a call. I did this with aviva I think and they ended tracking down 4 from various jobs! I consolidated them all with Vanguard (separately transfered) and my single pot is growing nicely due to lower fees.

VikingsandDragons · 06/02/2022 19:10

If you've just had maternity leave you've quite possibly already just had a break in pension payments. Regardless, you're not married, it matters not a jot you've got better career progression possibilities if you're potentially going part time, might have further periods of maternity leave etc. You are being financially disadvantaged compared to your partner on the basis of being female with no guarantee of any recompense at any point.

PotteringAlong · 06/02/2022 19:10

@pensionoptout he will only get it if you’ve nominated him because, as you’re not married, he’s not your next of kin. If you are married he will automatically get it.

pitterpatterrain · 06/02/2022 19:11

The comment about you not being married is relevant - he’s asking you to mess up your old age (and typically women have way less saved up for retirement) for benefit in the here and now for both of you and DC, yet if you split without being married he is fine for his pension but you can’t make that back easily

Seems an unfair balance there

(I know no-one wants to think about splitting up / planning for that)

Blossomtoes · 06/02/2022 19:11

Before I even opened the thread I was shouting “Don’t do it!” It’s one of the best pension schemes around, it reduces your tax bill and you’d be throwing free money (employer’s contribution) away. Please, please, don’t do it.

CornishTiger · 06/02/2022 19:13

Really bad idea!

Polkadotties · 06/02/2022 19:14

@C152

Yes, you will regret this. Please reconsider and, as you've mentioned you may do, look at where you can cut back elsewhere. It won't just be your contributions you'll be missing out on; you'll be missing out on the Government contribution (i.e. tax relief on your contribution) and your employer's contribution. No matter what state your finances are in in the future, you will find it really hard to 'pay back' the amount you miss out on by stopping contributions now - unless you win the lotto or gain a financial windfall in some other way of course!
NHS isn’t a DC scheme. Contributions don’t determine benefits
CornishTiger · 06/02/2022 19:15

As you rent and you have childcare have you done a universal credit calculation?

CornishTiger · 06/02/2022 19:16

policyinpractice.co.uk/software/

Lampshading · 06/02/2022 19:20

I opted out for 12 months and then opted back in and it was fine. I'm all for being sensible and considering retirement, but if you are struggling in the present then personally I don't see the issue as long as you 100% will opt back in ASAP.

pensionoptout · 06/02/2022 19:21

@CornishTiger

As you rent and you have childcare have you done a universal credit calculation?

We're not entitled to UC.

OP posts:
nannynick · 06/02/2022 19:22

Set a reminder in a digital calendar every 3 months, to remind you to look at the situation again, so you can Opt In as soon as possible.

When you are back in, look at catching back up again by buying additional year(s). www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/additional-pension

PigletJohn · 06/02/2022 19:22

for gods sake do whatever you can to continue contributing.

Making up a shortfall later is much, much harder and more expensive because you have missed out on growth and matching.

Outfoxedbyrabbits · 06/02/2022 19:26

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.

So:

a) You're not married, and therefore entitled to none of your partner's still-growing pension if you were to split

b) You're not sure this is the best course of action but...

c) You're considering it (or have already done it??) because HE thinks it's the correct thing to do?

No, no and thrice no. Your NHS pension is probably worth more than his (as you're the higher earner - on top of the NHS pension scheme being gold plated) and as PPs have said you would lose out doubly because firstly if you're not paying into the pension scheme you lose tax relief (and you must pay more tax then him) and secondly the amount your NHS pension is topped up is massive compared to other schemes. So overall stopping paying into your pension may not save you as much as you think (in both the short and long term).

On top of all that he is merrily continuing paying shed loads into his own pension (are his overtime payments pensionable?), which you would have no claim on in a split. All this is doing is worsening your financial situation, both jointly if you stay together and yours alone if you don't.

If you've been managing the debt repayments so far then keep on as you were, continuing to pay into your pension.

If you can't do that then find other ways of cutting back apart from pension payments - kids won't notice 18 months of no holidays/cheap days out/small presents. You should be able to manage without lots of things for only 18 months (it's unlikely you'll all need new winter coats within that time frame, for example).

If you can't do that then keep your pension payments up and stop his.

rambleonplease · 06/02/2022 19:28

Don't do it. It's a false economy! I have contributed to my NHS pension now for 22 years. The last 3 as locum staff. People always ask me why I don't work for an agency... I need to carry on with the pension scheme.

Lots of good advice on here apart from someone telling you that you haven't planned well for kids... hmmm not sure the fuel crisis, NI rise and general rise in inflation was on anyone's cards 2 years ago!! @bonetiredwithtwins

PickledOnionSandwich · 06/02/2022 19:29

Very bad decision. You’re basically giving up free money.

MatildaTheCat · 06/02/2022 19:32

Here’s my experience.

I opted out when I was on maternity leave and then rejoined ( I literally couldn’t afford it when I wasn’t working). Later when things were easier I pain ACVs to catch up. Buying back early years is REALLY expensive!

However I was incredibly pleased if made the decision because at age 46 I had to take medical retirement and I now have an income for life. It’s not enough to live on as I was part time but boy am I glad to have it.

Beseen22 · 06/02/2022 19:34

My NHS death in service is 2x my base salary. That would be £26k, wouldn't even pay off a quarter of my mortgage. I know you are renting so its not something you typically think about but if you have children look into life insurance. Especially if you are late 20s as after 30 it goes up. Its incredibly affordable and you can take out critical illness cover (you should). Not sure what your role is but there no way I could get a serious diagnosis right now and then be jumping straight back on to the ward to make rent that month. For example I pay £10 pm and that would give us our mortgage paid off plus about 40k so I could leave work if I had a terminal diagnosis.

PickledOnionSandwich · 06/02/2022 19:35

@pensionoptout If you go onto ESR, you can check which pension scheme you’re in. You can also see if different parts of your pension are in different schemes.

user1471555302 · 06/02/2022 19:40

I opted out for 18 months in my early 20’s ( a long time ago)- numbers would be different now but the approx £500 I saved would give me £2000 extra every year when I retire soon. Based on my experience I would say don’t do it unless you absolutely have to.

FrownedUpon · 06/02/2022 19:44

You’re quite vulnerable financially. Not married, renting and opted out of your pension. Good idea to do some research into strengthening your finances & then discuss more with your partner.