To stop pension contributions

[intothegreek]

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?

Only do this if you are actually desperate and would need to go into debt otherwise.

If you are on PAYE then you are leaving free money on the table in the form of employer contributions by doing this, and increasing the amount of tax you pay as you get tax relief on contributions you make. Plus, the money will be worth far more in the future if you are investing your pension wisely.

Edit, just saw that you said you're in the NHS scheme - you need to look up and understand the implications of not contributing to this, as it works differently to the schemes used by most employers. There could be penalities involved

As a pensions consultant, my advice in these cases is that stopping pensions contribution is always the very last resort. It may seem a painless way of saving money now, but the long term effects on your standard of living when you have retired can be (& usually are) disasterous. Don't do it if there is any sort of viable alternative.

Don't overlook the death in service benefits through your pension should the worst happen.

Remember the terms for many of these schemes are not as generous so you could go back in on different terms.

I'd plug the figures into the salary calculator to see how much you'd actually come out with, because it won't be nearly as much as the deduction you see going in.

Your plan to work until you drop might not pan out. There are a lot of things I’d give up before pension contributions.

We stopped after child # 2 with intention of returning as soon as we were out of the wood with massive childcare bills (and a mortgage that seemed massive in 1995). Unfortunately DP never got her act together to start it again. If she'd done it her pension would be around £12k pa rather than around half that.

Aka some of the worst advice ever given on here.

Dying too young to access any pension is very rare. Average lifespan is in the 80s for both sexes now. Becoming too ill to work, or experiencing a long period of decline in health, is not rare at all. The odds of a future in which you have to cope with poor health on very little money are not in your favour if you don't save a pension.

If you really, genuinely have done everything you can to reduce costs and increase income elsewhere and this is what it takes to keep a habitable roof and food on the table, then fine. But you get back far less even than the immediate amount credited to your pension, and way, way less again to what it is worth in the long term. Pulling out of an NHS pension without exhausting every other option is financially about the worst decision you can make.

And death in service benefits may be quite generous, some schemes will also pay an allowance to a surviving child for some time, but please look into all this independently.

I wouldn't. If you step out now,what if the rules change and you rejoin on less advantageous terms?
I am 55 and reckon I can cope with going to 60 by saving lots between now and then but honestly you will regret it

It's a dreadful idea. You are 40 and only have 9 years of contributions. Also when people say they will stop contributions for x number of years they get used to having the extra cash and then can't give it up. Also your employer often pays more if you pay more. You need to check that out before making any decisions. I knew a teacher who opted out of Teachers Pension for a year she said initially, then she never got around to signing back up. She is still teaching and will have to carry on teaching until she drops. She said there was never a good time to start it up again.

No, NHS is all or nothing.

The NHS pays a dependants' pension to children until they are 23.

OP given that the NHS pension also has a generous death in service and will pay a small pension to a dependent child until 23 previous poster said can't you find other ways to get by? Maybe give up Netflix or downgrade your internet package.

Some people don't have this option though.

I would do it as a last resort, do you have the option to reduce to a minimum % so at least there's something.

As others have said, it isn't ideal. But you know that already. It would be one of the last things to cut - but, if is really the only option, then doing so for a temporary period isn't the end of the world.

The hard part is ensuring it is only temporary - and not allowing it to go on for a year or more for instance. So I'd ask yourself what the conditions are to be able to restart it in say 6 months - to help shape up a bit of a plan

Stopping your nhs pension should be the absolute last resort as you will loose your employers contributions. Check it out as I'm not from Scotland, but I think these are about 14%.

A friend of mine did that and never found herself able to afford to pay it. When it's automatically taken out it's completely different. I know she bitterly regrets it, particularly as her ex didn't do the same and is now happily retired.

do you have the option to reduce to a minimum % so at least there's something.

Not with the NHS pension - the percentage is fixed.

you will lose your employers contributions

Not really relevant for the NHS (or any defined benefit pension) - the employer pays a hefty percentage to the pension scheme, but it doesn't go into your own pension in the way it does for a defined contribution pension.

Same

It depends how much you earn and how much you contribute? I would only be £60 better off a month if I stopped contributions but much much worse off in the long term.

There are great arguments for continuing with your contributions. I suppose it comes down to how hard up you really are at the moment. If you are seriously up the creek without a paddle maybe think about stopping once all other avenues are exhausted.

Absolutely do not do this.

Thank you all, it's a resounding no and I'll take the advice. I'll just need to stay where I am until I can find an affordable solution housing wise. It's not as if renting is any cheaper than buying here, it's a false economy. I'll need to try and up my income sooner rather than later. Much appreciated!

OP if you can avoid it then please do. I work in the nhs too and although a bit younger than you there’s several people in my work who made that decision years ago to come out of the pension scheme and now are watching collegues who are the same age and younger retire/semi retire and everyone regrets it. Sometimes life just makes what you know you should do and what you have to do different though. I hope it works out for you and your littlies