To opt out of pensions

[pensionoptions]

Sorry, posting here for traffic. And name changing cos of figures.

AIBU to consider opting out from pension contributions to free up a bit more money each month?

Disclaimer: I'm good with money, we are careful with what we spend. But I'm not that clued up on taxes, savings, etc.

Things have just got so expensive, we need to free up a bit more money each month.

I'm self employed and haven't contributed to my pension in 2-3years, cos I just can't afford to.

My DH works for a large corporate and contributes 12%, in return his employers also put in 12%. This is around £400 a month pre tax off his salary.

I think if he was to opt out he'd get a extra £300ish a month into the bank. However he'd be loosing £800 a month into his pension.

He thinks it's a good idea. I'm less convinced. But honestly don't know where else we can get £300 a month from. Maybe getting into debt or freeing up some equity from the mortgage be a better option?

The pension minus a year or two worth of contributions for my DH, and maybe 5 years worth of contributions for me.

If it stands for anything I reckon our current combined pension pots are larger than most people our age. It's not a case of if we opt out for a little while now we'll be completely screwed in retirement.

I'd really consider getting a Saturday job, or anything rather than doing this. Maybe you as a couple need to realistically look at if both of you can work office hours with such a high childcare bill.

Ex financial advisor and would not advise it, and as someone else has stated he would lose the tax break on his payments so you would probably not end up with £300 extra

How can he think it’s a good idea when he looks at those figures. He’d be crazy to give up that employer contribution.

You need your own pension as well. Don’t rely on his. Most people need to up their pension contributions rather than stop them.

I agree, this could be so so costly for you in the long term.

There's always some people with knowledgeable advice on here, as a starting point:

forums.moneysavingexpert.com/categories/pensions-annuities-retirement-planning

I would also put on a full breakdown of your outgoings versus income as someone might have an idea that you've missed.

And what about the 10 pounds a day thread on here to try to top up? It sounds like you need a temporary stopgap until you get the free hours? If so, is there anyway to pick up a few shifts of something at night/weekends when your DH is back from work? I've had to pick up a couple of late weekend shifts in hospitality and DH has picked up a driving shift. They're so desperate for people we named the times we could do and they took it.

Keep paying for pension, old age comes along quicker than you may think.

Your childcare fees seem very high for 3 days a week? Is there no way to find a cheaper nursery/childminder? Maybe my maths is wrong, but does that not work out around £65 per child per day? And presumably that is what you are paying yourself so it's actually more expensive when you add on what you're getting from the government through tax free childcare?

Opting out of your pension and renting a home instead of buying one are the worst financial mistakes that anyone can make.

Show me a rich person who rents their home and doesn't have a pension.

Your maths is wrong here. The OP says it's £400 pre tax, which would make his gross salary £40k.

"Larger than most people our age" is pretty meaningless as most people are woefully underprovided on the pension front.

What numbers are we talking here - how big are your pension pots currently, what are your current earnings, and how old are you?

If you're not able to live more frugally, stretch your money further, or earn extra income now, then you're going to find it even harder to do so in your old age.

I’ve worked in finance for a lot of years and all I can say is if this is really a must (as in for food/bills) and you have no other option is the only time this should really be considered.

best intentions aside it happens all too often that people get used to the additional surplus income, over and above that even if you don’t you will still lose the growth that would of accumulated if standard pension if not and it’s a defined salary or average earnings I would look into scheme rules (as in seek advice) as to what the ramifications of leaving for 2/3 years would be

I know it’s easier said than done (we’ve all been there even those who don’t admit to it) but maybe look at all household bills to check you are with the best providers, do you actually need everything that’s bought in a weekly shop - how much of this ends up being used, do you need all your monthly subscriptions (can you cancel) and the killer. . . do you have 2 cars if so do you really need 2 cars (e.g work commitments) or do you/you both have an expensive car could you possibly downgrade? x

Currently breaking even but without having to go to extreme lengths to cut back.

Nice things we still pay for are:

• £7 a week (term time) for a baby/toddler class for each child.
• £30 once a month to have the extended family around for a meal.
• Around £35 a month on petrol to drive to days out at the beach or a national trust (membership paid for by MIL).

We could probably also cut back our food bill. My daughter likes expensive fruit: strawberries, raspberries, mango, avocado. For convenience I often buy pre-marinated meat rather than marinate it myself, or get a microwave meal a couple of times a week. I know if I convinced my daughter to eat a banana instead and found time to cook from scratch every day I could cut a good £25 a week off my shop.

Suppose these are probably the sacrifices we'll have to make. Whether they make up for increasing costs is yet to be seen.

@Octomore ”If you're not able to live more frugally, stretch your money further, or earn extra income now, then you're going to find it even harder to do so in your old age.”

I disagree with that. This is not about someone not able to make good choices with money. She’s already earning £30K+ for 3 days of childcare costs! That won’t be a factor in old age, and won’t be such a high cost in just a few short years. If there is nowhere else to take the money from, it’s a legitimate decision to suspend the pension contribution. Just a really last resort one!

Not even last last resort… someone suggested a Saturday job. Personally I’d miss £x in retirement to have that time with my family now. The x there is different for everyone though.

The question here for me is if there really is no other way to get the money, and to understand exactly the impact. OP isn’t there yet - they don’t know if the 12% is a strict match, or if they’d be opting out of a scheme they couldn’t opt back into.

Because the £15-20 is after around £130 a day nursery fees for 2 children.

SE commuter belt, that's the standard rate around here.

@WhoKnowsProbsNotMe makes an excellent point about cars. That’s often the quickest way to free up money - not leasing, or cashing in the “equity” with a downgrade.

The gender pension gap is just under 40% You need to pay into a pension if you don’t want to end up in poverty or depending on pension credits. In the future you could divorce, suffer from Ill health or a disability or your husband could die. Smart women look after their financial future. I would also encourage you to stop talking about the cost of childcare as a cost relative to your salary only, you both need childcare to work.

This is a long shot and incurs its own costs…
But any mileage in renting out your house for a couple of years and in turn renting somewhere much smaller until the nursery fees are done? Could work if you’re swapping a 3 bed for a 2. Or if you have a 3 bed, and you’re SE commutable, a Mon-Thu lodger? No-one wants a lodger but if it’s just for one year, could get you just enough, and tax free. No long term loss of the room. Language student over the summer?

I'm sorry my equivalent to £50k a year job isn't a sensible mature enough job for you

I won't bore you with how broke we were twenty years ago, but we prioritised DH's pension, we retired last month and have swapped a like for like lifestyle, well energy bills aside that is.

Don't touch the pension, you will IMO regret it.

This is correct, and the standard price around here.

It's £75 for the under 2, and £58.50 (£65 minus 10% second child discount) for the over 2.

We've looked at alternatives but everywhere is either the same price or has a huge waiting list.

The pension is free money from the employer and tax free saving. It would be false economy to give it up for a short term reduction in outgoings.

Does your husband have student loans etc to pay off too?

The way pension contributions worked when I was in the private sector is that they were pre tax, but also pre NI and pre student loans.

So on a £400 contribution you were only "spending" £230 to get £400 of your own contributions. You then get another £400 on top in employers. So that's £800 for the price of £230.

AKA you'd be better off getting a Saturday job in a supermarket than giving that up.

It’s no good getting defensive OP- your finances have gotten away from you, and the most efficient way to bring that into balance is to reduce your spending not cut pension contributions.

To be honest if you have a combined income of at least 70k and you are struggling to live off that then you are managing your money poorly. Have a look at money saving expert to help get your finances back on track. And the money boards on here are also very good as well.

We have a 14 year old car with 135k on the clock. Which we've had for over 10 years.

We only really use it on the weekends. If it broke we'd want to replace it. But if we couldn't afford to straight away it'd be an annoyance rather than a huge deal.

It would be absolute madness to give up £4.8k of free money in your DH's pension each year rather than cut back on these luxuries. Utter madness.

Just accept that for the next few years you are going to have to cut your cloth to factor in childcare costs.@