NHS Pension - worthwhile?

mollycat wrote: »

If you're referring to my post (#8), no; people just think they are getting "done" if they don't fully commute.

When I explain to them they are borrowing from their future self under poor terms they don't want to hear it.

Have seen people take the bigger lump sum for this reason, spend a big chunk on car/holidays/etc, then return to work as their retirement income is inadequate.

Each to his/her own I suppose, but it's not my idea of retirement.

I know what you mean re people over doing the lump sum - at the moment though keep getting told (by IFA and accountant) to take more lump sum to avoid paying extra tax. I end up with spreadsheets trying to balance extra tax against lower pension in the future

I think 2% may come from 1/54 (each year in the scheme accrues yearly pension of about 1/54th, or 2%).
Yes I know it requires effort to make sense of NHS pension as one can not just ask a colleague as they likely not to understand it themselves.
Op, basically if you earn 40 000 than a year of scheme membership gets you roughly early pension of £800(2 % of 40 000). You say you contribute 12% of your pay into it, ie £4800. If you invested those £4800 general assumption would be that it would grow at about 4% per year avove the inflation which by the age of 70 would give you £23 000 according to compound interest calculator. You could buy an annuity (yearly pension for life) of about £800 for it according to annuity calculator . As you can see it is the same as your NHS pension. So not any better. There are many many variables in this calculation - annuity rates , possibility of drawdown, investment growth number is guessed and so on but as those are unknown I did not take them into account. So as you can see the basic numbers are pretty much the same whether you go NHS pension route or investment. In practice though NHS pension is likely to work out better as there are many details to it not taken into account in the above calculation.
NHS pension has an uplift of 1.5% per year in addition to RPI increase. If investment performance is not good over next 40 years or there is a downturn in the last years of your investment period or you invest it not carefully or whatever else the final number will be lower while NHS pension is as guaranteed as anything can be. If you have to ask about it your understanding of the subject is not good enough to DIY. Administering it takes time of your life while NHS would not. NHS comes with perks like sick pay. Annuity that you would have bought unlikely to have the same inflation protection as NHS pension.
That is my understanding ,if I am wrong in anything I am sure I will be corrected. As I have been in op's shoes I understand showing one why one is wrong is likely to be more helpful than just stating "you are wrong" even if the numbers in illustration are not exact and there are minor errors (hope no large ones)

brewerdave wrote: »

For info. - my wife has recently retired from the NHS with a modest pension under the old Scheme rules - we didn't want the lump sum as we preferred a bigger monthly pension but we were told that the lump sum was "compulsory"- no reverse commutation was possible.

Yep. Reverse commutation would be ideal, suit me down to the ground.

Try selling that idea to the people that only see the £££ signs of the biggest lump sum.

Silvertabby wrote: »

Same in the LGPS. I would say that 90 to 95% of pensioners take the maximum commution (1:12).

Taxpayers cheer.:beer::T:rotfl:

I am a taxpayer, have a LGPS pension and took the minimum lump sum.

The guy in the pension dept said "are you sure? Nobody does that!"

As a nation we just do not understand the value of income over capital.

As a retired LGPS administrator, I would never question someone's decision to take the standard lump sum (even though it was rare!).

As I wasn't allowed to give advice, I would have to 'speak carefully' but would gently ask for confirmation that the pensioner had ticked the right box if they had gone for something that may not have been appropriate. For example, pre pension freedoms, someone with an in-house AVC account that took them over the 25% tax free limit had the options of taking the the residue as extra LGPS pension, or an annuity with the Pru, or an annuity/other on the open market. One lady had a residual amount of just £6K ish, yet had gone for the open market option. This was so unexpected, I rang her to ask if had ticked the right box. 'Yes', says she - 'the financial papers say that you will always get more on the open market'.