NHS: added years, AVC and AP

butterfly72

Hope you can help. I'm in the 1995 section of the NHS scheme and am buying added years (which are quite costly!). I've been looking at the website and discovered that I can also get an additional pension. This can be paid monthly or as a lump sum. For example, I can get an extra £1000 per year pension by paying a 10K lump sum. I'm due to retire at 60, so assuming I live to over 70, I'm quids in. Is that correct? Is it that simply or am I missing something? Compared to other pension options is this good value? Would the AVC option be better?

I'm just trying to do a bit of pension planning. I also pay into a S&S ISA towards my pension. I may go with the OH to a IFA, but just want to get some idea before i do.

thanks.

butterfly72

Bump... any ideas anyone??!

thanks.

sukysue

I inquired about buying years in the nhs pension scheme and the adviser told me it really wasn't worth me doing it . I took him at his word but prapps I shunt have I dunno however there are pension seminars you can book to go on if you are over 50 so I would ask or look on your trust intranet we have a lot about it on ours anyway.hth.Am not over 50 btw !!!!!lol!!!

dunstonh

added years appear to be the most expensive option but they also give the highest income typically. So, pro rata, its a good option. However, its not that flexible.

If you want to take retirement earlier then it may not be the best option or if you want to build up a greater capital sum it may not be the best option. Also, if the income in todays terms (plus state pension) will take you close to £22k then it may not be the best option due to age allowance reductions.

Contessa

dunstonh wrote: »

added years appear to be the most expensive option but they also give the highest income typically. So, pro rata, its a good option. However, its not that flexible.

If you want to take retirement earlier then it may not be the best option or if you want to build up a greater capital sum it may not be the best option. Also, if the income in todays terms (plus state pension) will take you close to £22k then it may not be the best option due to age allowance reductions.

Sorry to hijack this thread, but please could you explain more about age allowance reductions? Thank you.

jem16

Contessa wrote: »

Sorry to hijack this thread, but please could you explain more about age allowance reductions? Thank you.

At age 65 you are entitled to a higher personal allowance. However once you have income of aaproximately £22k you start to lose that extra allowance by £1 for every £2 over the limit until you reach the stage where you are back at the basic personal allowance.

Danamic

The NHS no longer offers added years, thats why the OP talks about APs.

Whilst 10k lump sum now for a 1k per annum income on retirement may look a good deal. You have to analyse the opportunity cost.

What is the required annual investment return on 10k until your retirement age to buy an annuity of £1000? Can I achieve a rate above this using the stock market?

A 60 yr old male would require ~£22,500 to buy a £1000 per annum income that would increase each year with inflation. (using latest annuity rates)

From my knowledge of dealing with NHS pensions I believe you are roughly 20 years from retirement. 10k to 22k in 20 years is ~4.1% compounded rate.

However the AP does apply inflation linking to units over time, thus making a more thorough analysis more appropriate.

butterfly72

Ok, I'm still pondering this!!

I don't think I'll be reaching 22K (NHS + State) tbh. At some point if I have children I will possibly go part time for some time and I'm only a nurse not an overpaid manager. I will retire at 60 - I won't be taking up the offer to move to the new section with a retirement age of 65.

Also, times are changing and private companies are starting to provide nursing services. There is a chance that in the future I'll be transfered to a private company and I assume the pension goes too. I will try and avoid this of course, by moving to another NHS job. I was hoping to try and increase my NHS pension whilst I can.

anymore thoughts anyone?

many thanks.