NHS Pension Additional Payments - yes or no?

nicknameless

Hi All,

First post and very naive in these matters so please go easy on me here

Without wishing to pour fuel on the public sector pension debates i have a question about my NHS pension and whether it would be worth my while to buy additional pension or not. There are a few probably naive questions which are puzzling me about this.

A bit more information about me and likely pension at the mo;

Have been paying into the NHS scheme for the last 13 years.
Currently a higher rate tax payer with a salary of 44k and using the calculator available on NHS pensions website (and using an estimate of 2015 for the pension reforms which are inevitably coming) have worked out that i'd qualify for an annual pension of approx 8,800 at 60.

I have the option to buy added pension from 60 at the moment but not sure whether to.

Using the calculator for additional pensions if i buy the max (5k from 60) over 10 years via installments this would cost me 600 per month for a total of 72000 over the 10 years. But i have a few questions i need to answer in order to decide. Here goes (be gentle);

(1) if i paid the 600 per month do i actually see a 600 reduction in my monthly take home or would that actually be less with tax relief and NI adjustments (this is adjusted through PAYE for installment plans)?

(2) this would be bringing me into the realms of paying tax on the pension if i took it at 60 (especially if i took the remainder of my built up pension after the govt has fiddled with the retirement age actuarily reduced should i want to retire @ 60). Not sure how to fully work out the implications of this and whether i might prefer savings or investments to avoid this and keep the flexibility of those?

(3) When the inevitable public sector pension changes come in will these impact on any added pension e.g. would a new retirement age of 65 mean that i'd only get the added pension i'd bought before the pension changes @ 60 and the remainder @ 65? Does this mean a lump sum purchase prior to the pension changes (if affordable) would make more sense?

My probably naive plan is to try to retire @ 60 with my OH so that we can enjoy some of our 'third age'. I'm trying to work out how feasible that might be and what we need to do from here on in to make that happen.

I'm sure more questions will pop into my head at some point but until then can i say thankyou in advance for any pointers you might be able to give. I realise i'm in a relatively fortunate position with the pension provision i'm already entitled to and might be able to build up over the coming years but just want to make some good decisions now which will hopefully benefit myself and my OH down the line.

Oh and by the way - hello all!

Cheers,

N

P.s. Edited to add that this is not intended as our only income from 60 until state pension age. My OH is also paying into an inferior public sector pension to mine, and we are trying to build up as much savings as possible to use as income to supplement pension provision. Part of the conundrum here is whether to concentrate on those savings, or buy additional pensions for either or both of us.

Koicarp

How old are you?
Tax relief on AP is through PAYE.
Which part of the scheme are you on?

nicknameless

Koicarp wrote: »

How old are you?
Tax relief on AP is through PAYE.
Which part of the scheme are you on?

39 (very soon to be 40!!) and 1995 section.

Sorry to be stupid but does that mean that i pay the 600 minus tax relief?

kidmugsy

In your shoes I'd at least try to avoid higher rate tax by paying additional contributions. Mind you, the payments would be modest: £44000 - £42475 = £1525 p.a. You would be out-of-pocket by £1525 x 0.6 = £915 p.a. I suppose you should compare that with paying £1525 p.a. (gross) into a private pension, which has the advantage that it's accessible from 55.

Anyway, once you've persuaded yourself to pay the £1525 p.a. (gross) by whichever route, the next question is whether it's worth making extra contributions when the tax saving is just 20% - and it might even become a tax loss if you are going to be paying a tax rate above 20% in retirement. I'd expect tax rates to rise in the next twenty years, wouldn't you? After all, the public finances really have been ruined by Blair and Brown.

bigjl

nicknameless wrote: »

39 (very soon to be 40!!) and 1995 section.

Sorry to be stupid but does that mean that i pay the 600 minus tax relief?

You can no longer buy additional years and remain in the 1995 section.

Or at least that is what i was told in 2008 when i started my additional.years contract.

The cut off was your birthday in 2008 according to my pensions officer.

Also if you buy additional.years you have to retire at 65 as i later discovered.

The 2005 section is not where you want to be. Any long standing NHS employee will tell you that nothing is ever changed to benefit staff.

I have been asked at least eight times if i want to change.

snowcat53

bigjl -
You are right but what is being discussed I think isn't the 'added years' or 'addtional years' scheme, it is 'additional pension' where you buy a fixed extra pension with your contributions. This IS available to 2008 members.

nicknameless

yep talking about buying additional pension which is open to all.

nicknameless

can anyone shed any light on my third question above?

bigjl

That wasn't what I meant.

I didn't mean that 2008 scheme members can't buy extra pension or added years.

But I have been told that the deadline has passed for 1995 scheme members to increase their pension benefits or added years unless they transfer to the inferior 2008 scheme.

I hope that is a bit clearer.

The OP can buy extra years and increase benefits, but only by leaving the 1995 section and going onto the 2008 section.

The deadline for any changes to a 1995 section was the last birthday of the member in 2008.

I don't work for NHS Pensions and I am not a Pensions Officer at a NHS Trust but this is the info I was given by my Pensions Officer back in 2008.

I personally only made the deadline by a month.

Sorry if this isn't the news the OP wanted to near.

Best advice is speak to your Pension Officer or NHS Pensions directly.

There may be a way round this deadline.

nicknameless

i'm not sure that that is the case re additional pension but i will certainly check.

jem16

bigjl wrote: »

The OP can buy extra years and increase benefits, but only by leaving the 1995 section and going onto the 2008 section.

As with all public sector pensions, the right to buy Added Years has closed from 2008. If you were paying them you were able to continue doing so. There is no mention of having to leave the 1995 section to do so.

http://www.nhsbsa.nhs.uk/Pensions/2660.aspx

From 2008 only Additional Pension can be purchased (or money purchase AVCs) by either section.

This FAQ will help anyone considering it.

http://www.nhsbsa.nhs.uk/Pensions/2660.aspx