Leaving pension short term

[LosingGrip]

I'm after a bit of advise. I'll speak to someone at work when I'm back from leave.

I've got some debts currently, nothing major and all manageable. Will be all paid off in three years at current rate. Maybe sooner.

I pay around £360 a month into my pension. I want to buy a house sooner rather than later and having zero debt will help massively.

If I opt out of my pension for a year. Use that £360 a month towards overpayment (can be made with no penalty) it will help massively.

My concern is the future. Would staying at work an extra year make up for not paying into it for a year? Or does it not work like that?

[worsy]

Doesn't work like that due to compounding. The younger you are the more chance that money has to grow. Your final working year will require many multiples of that to make up the lost growth.

Edited the bold as additions-

Edited by worsy on Thursday 25th January 10:57

[Countdown]

is it a DB or a DC scheme?

if it's DB then not all allow you to leave and then re-join.

[LosingGrip]

Countdown said:

is it a DB or a DC scheme?

if it's DB then not all allow you to leave and then re-join.

No idea. Its a police pension. I know I can leave and rejoin later just not sure about the other bits.

[Countdown]

LosingGrip said:

Countdown said:

is it a DB or a DC scheme?

if it's DB then not all allow you to leave and then re-join.

No idea. Its a police pension. I know I can leave and rejoin later just not sure about the other bits.

AIUI it's a DB scheme (but unfunded).

Anyway if you can leave and rejoin you should be a fine. It's a CARE scheme so, for any years that you miss, you'll lose out on the annual revaluation uplifting for that specific year but if you've got more important things to spend the money on then so be it.

[Tim330]

Is that £360 per month from your gross pay? Remember if you take it as salary you need to deduct the tax (20% or 40%) and NI (10 or 2%) to see the increase in take home pay.

[okgo]

Take a second job - you’d have £360 a month doing a couple of evenings of deliveroo id have thought.

[mike9009]

In the immediate short term you would lose about £4360 pension payments. Compound that over 25 years at 5% it would be around £15k from your pension.

This ignores the tax benefits - as you do not mention whether the amount is gross or net and what tax rate you are at.

My suspicion is the reduction in the pension pot could be greater so maybe £25k over 25 years......

[Countdown]

I was going to add that, as well as the Employee's contribution, the OP would also lose the Employer's contribution. However - as it's a DB CARE scheme I think the best way to look at it is that the OP will lose 1/55th of his salary from his annual pension.

So, assuming he's currently on £40,000 his pension will be reduced by 1/55 x £40,000 - £727 per annum.

[Pent]

i would reduce your pension contributions to the lowest you can , but also look for a second job.

i have done it many times in the last 3 years and most super markets are paying £11-13 per hour to do sweet FA

easily bang £400 a month extra

[Deesee]

LosingGrip said:

Its a police pension.

Police? Overtime? would not have thought you would be allowed a 2nd job?

Would not recommend going rouge, you could lose all of it.

Good luck OP.

[Collectingbrass]

I'd make sure you are paying the lowest possible rate of interest on the debts first. Can you move it on to a 0% credit card, or at least can you get a new loan at a lower APR?

Also sign up for a Blue Light Card (https://www.bluelightcard.co.uk/) if you don't have one already and maximise the discounts available to cut your day to day spending, and especially when you do move into the house.

And finally as others have said, grab as much overtime as you can. Stopping contributing to your pension should be your last resort.