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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

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:
DerAlteMann · 06/02/2022 20:52

Get back into it ASAP. The NHS pension is probably the best available. When your finances are better give very serious thought to paying additional voluntary contributions to "buy-back" the period of pensionable service you opted-out of. I say this as someone who ran occupational pension schemes.

millytint44 · 06/02/2022 20:53

I put my mortgage on payment holiday rather than cease pension contributions when I had nursery fees after maternity leave. Is this an option for you?

FFSFFSFFS · 06/02/2022 20:54

MASSIVE MISTAKE

PigletJohn · 06/02/2022 20:56

@Polkadotties

I find it hard to believe what you say.

Surely you are not suggesting that

Person A works for 20 years and contributes for 15

Gets the same pension as

Person B works for 20 years and contributes for 20

Original poster
pensionoptout · 06/02/2022 20:58

@millytint44

I put my mortgage on payment holiday rather than cease pension contributions when I had nursery fees after maternity leave. Is this an option for you?

No because we are renting, no mortgage.

OP posts:
Original poster
pensionoptout · 06/02/2022 21:02

@AnneElliott

I agree with everyone else op - don't do this unless there is literally no other option. I agree a loan for the childcare would be a better option.

What scheme is your DP in? And being unmarried you are taking a risk.

He's in the civil service pension scheme.

OP posts:
Abigail12345654321 · 06/02/2022 21:02

@Polkadotties

The accrual rate depends on the years paid in. If you opt out for a few years, you get reduced benefits. Obviously.

Dixiechickonhols · 06/02/2022 21:03

CAB has decent guide re unmarried v married differences.
If only you opt of pension and you later split there’s no pension sharing like you get in a divorce if you are unmarried.

Polkadotties · 06/02/2022 21:04

[quote PigletJohn]@Polkadotties

I find it hard to believe what you say.

Surely you are not suggesting that

Person A works for 20 years and contributes for 15

Gets the same pension as

Person B works for 20 years and contributes for 20[/quote]
No because person A hasn’t been an active member of the scheme for the same amount of time so they would get a smaller pension.
If we assume they both earn the same salary.

pleasehoover · 06/02/2022 21:04

@PigletJohn

No, you have to make the contributions to earn the year of service. So if you contribute for 15 years you get 15 years worth of benefits, even if you worked there for 20 years.

What @Polkadotties is saying is that the benefit you receive does not depend on how much was actually contributed, it is based on the formula for years of service and salary.

Unlike a defined contribution scheme where the contributions are invested for you and the amount you get at retirement depends on how much the investment has grown to.

Polkadotties · 06/02/2022 21:05

[quote Abigail12345654321]@Polkadotties

The accrual rate depends on the years paid in. If you opt out for a few years, you get reduced benefits. Obviously.[/quote]
Everyone has the same accrual rate.

Abigail12345654321 · 06/02/2022 21:06

But it doesn’t matter if it’s a defined benefit pension or not. What matters is that the op will lose out significantly if she opts out even for a year or two.

Abigail12345654321 · 06/02/2022 21:07

@Polkadotties
What point are you trying to make to the Op? It sounds like you are minimising the impact of opting out - which wouldn’t make any sense. If that isn’t what you are trying to say - what are you trying to say?

Original poster
pensionoptout · 06/02/2022 21:10

To be honest I've got a bit lost now 🙈
Defined benefit etc... it means nothing to me. I really don't know anything about pensions! Perhaps I should learn. I feel a bit naive and stupid now.

OP posts:
Polkadotties · 06/02/2022 21:11

@Abigail12345654321 I am most definitely not minimising! I was one of the first on this thread to point out the loss of death in service benefits!
I have tried to explain that the NHS is defined benefit scheme, what she pays in does not determine what she gets out.

timeisnotaline · 06/02/2022 21:11

We are paying extra into my pension this year, because I have had non paying periods during may leave (different country so different system). Theres actually more in my pension than in dhs and we are married so it’s irrelevant whose gets the extra but it’s the principle of the thing. We agree that having our baby shouldn’t be my financial cost. Your dp can only do that overtime because you’re looking after baby. So if you do stick with this plan I would do the 9 months each if you are allowed to opt in and out with that timing.

I’m concerned you’re trying to drop a day of work to save childcare costs and haven’t worked out if you’ll be better or worse off! Obviously if you are worse off doing that don’t do that, and it will be too late once it’s done to realise!!

Abigail12345654321 · 06/02/2022 21:13

[quote Polkadotties]@Abigail12345654321 I am most definitely not minimising! I was one of the first on this thread to point out the loss of death in service benefits!
I have tried to explain that the NHS is defined benefit scheme, what she pays in does not determine what she gets out.[/quote]
Ah good - was confused about what you were trying to say! Yes appreciate the scheme is about duration and final salary rather than actual £ paid in but for her purposes it’s the same difference - she shouldn’t opt out!

Dixiechickonhols · 06/02/2022 21:15

Op check he’s nominated you as beneficiary under his scheme as you don’t appear to have ever nominated him.
As you are unmarried you won’t get lump sum and £350 a week bereavement support payment (widows allowance) if one of you dies.

Abigail12345654321 · 06/02/2022 21:16

@pensionoptout

To be honest I've got a bit lost now 🙈 Defined benefit etc... it means nothing to me. I really don't know anything about pensions! Perhaps I should learn. I feel a bit naive and stupid now.
It just means that with some pensions if you pay in £100 a month and your employer pays £100 a month, then £200 a month is invested and you get out whatever that investment makes. So what you get depends on the investment market and how much your pension portfolio makes.

However with nhs pension it doesn’t work like that. You pay in and regardless of how investments go, you get a specific amount based on how many years you paid in and your salary band. The scheme before 2008 was different to the current scheme but both are pretty good.

Original poster
pensionoptout · 06/02/2022 21:17

@timeisnotaline

We are paying extra into my pension this year, because I have had non paying periods during may leave (different country so different system). Theres actually more in my pension than in dhs and we are married so it’s irrelevant whose gets the extra but it’s the principle of the thing. We agree that having our baby shouldn’t be my financial cost. Your dp can only do that overtime because you’re looking after baby. So if you do stick with this plan I would do the 9 months each if you are allowed to opt in and out with that timing.

I’m concerned you’re trying to drop a day of work to save childcare costs and haven’t worked out if you’ll be better or worse off! Obviously if you are worse off doing that don’t do that, and it will be too late once it’s done to realise!!

So we've just looked over wage slips at the differences in our pension contributions. Mine is 3 x DP's. He doesn't make any higher contributions with overtime, it's the same amount each month. That means we wouldn't be able to claw back as much per month if he opted out instead of me.

I feel a bit lost with it all now tbh. Maybe just need to sleep on it and re read all of the very helpful advice on this thread with a clear head tomorrow.

OP posts:
Polkadotties · 06/02/2022 21:17

@pensionoptout

To be honest I've got a bit lost now 🙈 Defined benefit etc... it means nothing to me. I really don't know anything about pensions! Perhaps I should learn. I feel a bit naive and stupid now.
Defined benefit means the benefits are defined I.e you can work out what you will get at retirement. Unlike SIPPS which are based on stock markets which can fluctuate and you cannot be certain what you will have in your ‘pot’ at retirement
Zilla1 · 06/02/2022 21:17

Simplistically, OP, what will you do if you get disabled or die while working and opted out? Do you pay for sufficient additional life assurance and permanent health insurance (I suspect not but am trying to make the point) to enable your DC and DP to survive without your income?

babyjellyfish · 06/02/2022 21:18

I have tried to explain that the NHS is defined benefit scheme, what she pays in does not determine what she gets out.

That's not the point I was making though.

She is still losing employer contributions, because to get your £X amount of pension per year of pensionable service, the scheme invests both the employee contributions and the employer contributions. The employer contributions are part of the OP's benefits package. The OP (along with most people in the public sector) gets paid a lower salary than she would get in an equivalent job in the private sector with less generous employer contributions. So by not contributing to her pension and losing the employer contributions, she's effectively losing part of her salary.

TheKeatingFive · 06/02/2022 21:18

That would be a really, really, really stupid move OP.

Abigail12345654321 · 06/02/2022 21:19

Honestly Op- see if you can find any alternative to opting out from either of your pensions. Even if it means a painful 18 months or so. Could you extend the term of your existing debts to reduce the burden?