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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To stop pension contributions

78 replies

intothegreek · 31/05/2023 17:40

I need to move from the marital home. To keep my kids near school in this area
I'd need to stop paying into my pension for the time being. I'm 40, 9 years contributions so far, and plan to work til I drop. Is this a mad idea or no brainer to use the money now when I need it?

OP posts:
FrownedUpon · 31/05/2023 18:22

I’d only do it as an absolute last resort. You’ll regret it further down the line. 9 years worth of contributions at 40 isn’t much to start with.

Allthings · 31/05/2023 18:22

It’s not something that I would advise. Due to tax, you may find out that you are not as well off as you think you will be if you stop paying into your pension. Does your pension have a life assurance element attached to it? You may find that is affect if you are not considered an active member of your pension scheme.

I know of a small number of women who stopped paying into their pensions as a temporary measure…years later they are still not making contributions.

Your plan my be to work until you drop, but you don’t know what the future may bring. I was very clear about what I was going to do and sadly health made things go very pear shaped.

GasPanic · 31/05/2023 18:35

Depends on so much doesn't it ?

Is it just a few years or lots ?

What is your salary likely to do in the future ?

What sort of contribution do you get from the company ?

Are you getting 40% tax relief (and thus by cutting them down get less benefit) ?

Are you on a huge salary or not ?

What sort of state contribution level have you got ?

People who say don't - fair enough but if you haven't got a choice what else can you do if you want to keep your kids the school ?

You may find that if you stop the pension contributions what it effectively means is if you have a property you may need to use that as your pension. Would you be happy with that and the consequences it has for your kids inheritance ?

And probably a load more stuff ...

Original poster
intothegreek · 31/05/2023 20:22

Thanks for the initial thoughts. I work for the NHS in a mid management role. My plan would be to stop the contributions to allow me to finish studying and then apply for a promoted post. That would bridge the gap. So maybe up to a 2 year break. I'm just inside the 40% tax bracket in Scotland at 46k

OP posts:
HadalyEve · 01/06/2023 09:12

intothegreek · 31/05/2023 20:22

Thanks for the initial thoughts. I work for the NHS in a mid management role. My plan would be to stop the contributions to allow me to finish studying and then apply for a promoted post. That would bridge the gap. So maybe up to a 2 year break. I'm just inside the 40% tax bracket in Scotland at 46k

If stopping the pension puts you into the 40% bracket, you may not be any better off. Or at least not enough more to justify the DC changing schools.

AlligatorPsychopath · 01/06/2023 09:30

I have never been an NHS employee, but if I recall correctly, there are other serious downsides to leaving the NHS scheme even temporarily, including the fact that you are no longer covered by other benefits and that depending on dates and specific schemes, you may rejoin the scheme on much worse terms.

Motnight · 01/06/2023 09:45

EarringsandLipstick · 31/05/2023 17:48

No.

They ate people who understand that the real value of the pension contributions now is infinitely less significant than their value at pension drawdown stage.

It isn't like just using the money now, then repaying. You can never recoup the value in the future.

Show quote history

Totally agree. Also, if I stopped my pension contribution my employer's contributions also stop (and they are higher than mine) and I have to pay more tax.

Artycrafts · 01/06/2023 09:47

Use the money now and make up the shortfall when you're back on your feet.

Allthings · 01/06/2023 09:47

@AlligatorPsychopath @HadalyEve you have both made very valid points.

I am in one of the NHS pension schemes and OP needs to look at things carefully before making a decision as it is not going to be as clear cut as just stopping contributions for a couple of years. it is also not clear as to how stopping contributions will allow studying to continue.

I had to stop working and I have lost a lot of future pension by missing 3 years of contributions, although I was in a higher band than the OP. Now I am close to being able to claim my pension at the appropriate age, I really wish I had paid into the scheme as soon as I started working for the NHS part time, but fell into the trap that pension contributions would be a lot of my part time earnings. It would however have made a reasonable difference to my pension.

Hazelnut5 · 01/06/2023 09:52

On your salary of £46k you are adding £850 to you pension each year (£46000/54). So if you stop for just one year then your pension will be permanently reduced by £850 per year.

If you live for 20 years after retiring then stopping paying in for one year will cost you £850 x 20 = £17,000.

Stopping paying in for 2 years will reduce your pension by £1,700 every year, or £34,000 over your lifetime.

That’s a high price to pay for the extra money now. But by all means, if it’s still worth it, then do it.

Don’t forget too that even though you feel now you would be happy working right up to retirement age, unexpected things happen and you may not be able to.

Letsallthinkofaname · 01/06/2023 10:01

I did it when younger and another saying do not do it. Find other ways to save the money

Belindabelle · 01/06/2023 10:01

If by stopping your pension your earnings go over £43633.00 you will be paying 42%.

Belindabelle · 01/06/2023 10:03

On anything over the £43633.00. Worth keeping in mind in you do any overtime.

BinturongsSmellOfPopcorn · 01/06/2023 10:08

NHS pension is taken before tax and NI, so you'd only get back approx 2/3 of what you're paying if you were a basic rate tax payer. As you're in a higher band it will be even less.

It is very hard (more so than with a typical private pension) to make up the difference later.

If you arent paying into the scheme you lose your deathb in service cover, so would need to pay for separate life insurance. You will also have less favourable ill-health and redundancy options if you're not in the pension.

Every £1 paid into an NHS pension now is worth aboit £5.50 in the future (in current value - will actually be a lot more once you take inflation into acount).

If you really, really have to then make sure you opt back in as soon as possible. But think very hard before opting out.

endofthelinefinally · 01/06/2023 10:18

Allthings · 01/06/2023 09:47

@AlligatorPsychopath @HadalyEve you have both made very valid points.

I am in one of the NHS pension schemes and OP needs to look at things carefully before making a decision as it is not going to be as clear cut as just stopping contributions for a couple of years. it is also not clear as to how stopping contributions will allow studying to continue.

I had to stop working and I have lost a lot of future pension by missing 3 years of contributions, although I was in a higher band than the OP. Now I am close to being able to claim my pension at the appropriate age, I really wish I had paid into the scheme as soon as I started working for the NHS part time, but fell into the trap that pension contributions would be a lot of my part time earnings. It would however have made a reasonable difference to my pension.

I agree with this. I opted out for a few years and it made a significant difference to my pension. I wish I had taken professional advice.

loislovesstewie · 01/06/2023 10:40

Don't do it! You will have death in service benefits now, your employer also pays into the fund and taking tax into account you won't be much better off. I am a retired public sector worker, I had colleagues who decided not to join the scheme or left for reasons similar to yours. They all now regret not continuing in the scheme. It's a temptation to think that having the money now would improve your life, but it will be harder to get back to a similar situation when you have been out of the scheme. And remember, this bloody government tries its hardest to change the payouts, if you rejoin you might not have the same preserved benefits as now.

Aposterhasnoname · 01/06/2023 10:48

Mad, do not do this. You will regret it.

TheDogthatDug · 01/06/2023 10:52

You are of the age where you will be working till you drop anyway so ditch the pension.

Tippexy · 01/06/2023 10:54

I knew even before clicking on the thread that the OP would work in the NHS. 😁

Yes, the pension contribution rates are high but you would be crazy to leave the scheme.

Noicant · 01/06/2023 10:55

If it’s a 2yr gap maybe look at it the other way round. It’s 2 years of some serious belt tightening and then hopefully better pay.

MatildaTheCat · 01/06/2023 10:55

Don’t do it. I was NHS and lost a year or so of contributions from when I was on maternity leave and couldn’t afford to pay. Later on I made AVCs to make up the shortfall and it was very expensive.

When I was 46 I suffered a life changing injury and couldn’t work anymore. Eventually I received ill health retirement and I received my pension ( not far short of my salary in my case).

I have already had 10+ years of my pension and have it for life. If I’d opted out I would have been massively impacted. You might intend to work until you drop but frankly that very unrealistic and poverty isn’t pretty.

GasPanic · 01/06/2023 11:04

It might make more financial sense to take out some sort of loan instead.

There used to be career development loans, now there are other types of support available.

Year12stressedmum · 01/06/2023 11:10

Does the nhs have a 50-50 scheme where you stay in pension but pay only half (and obviously accrue only benefits at half the rate). I think the civil service or local government do this.

VioletladyGrantham · 01/06/2023 11:16

Paperlate · 31/05/2023 17:41

A lot of people will tell you it's a bad idea. But needs must and you need the money now. So I would.

This!
Life is one big risk; you may not even be around at retirement age, and if your pension can't be passed to your children as a lump sum what is the point?

Everanewbie · 01/06/2023 11:16

Hi OP. The benefits paid by the NHS pension scheme are very generous and your retirement income would be reduced. I would suggest that these contributions be the absolute last thing to go when saving money. Obviously, if you cannot put food on the table then tough choices need to be made buy by the time you pay tax and NI you possibly won't have much more income anyway.