Will the NHS pension scheme be worth it for me? (Young, new member)

jac89

Hi,

With recent publicity of the public sector pension alterations I've been seriously sceptical about staying with the NHS pension scheme of which I joined only a few weeks ago, and I have 5 weeks to opt out of if I so wish.

I earn around 25,000 and am 22. Starting a career which I don't necessarily see finishing in the NHS but may well do.

The questions I have:
-With the changes to public sector pensions recently, isn't the situation only going to worsen? and if so,
-how does it actually affect existing members of the scheme?
It seems ridiculous that they can just change the goalposts so to speak.
-What is the worst that could happen?
-Even if it is a great deal, why not just save the albeit not huge amount to invest into a mortgage for what will be more valuable assets in the future and retire on those?
-Should I (or rather, if in my shoes, would you) stay on the scheme or opt out within my 2 month 'window'?


I think the deal that is offered currently is great, but I don't want to risk things changing dramatically in the next 40 years for me to come unstuck with loads invested in something I can't take as early as I'd like etc etc!

Thanks for reading!!

dunstonh

With recent publicity of the public sector pension alterations I've been seriously sceptical about staying with the NHS pension scheme of which I joined only a few weeks ago, and I have 5 weeks to opt out of if I so wish.

Only a fool would opt out.

-With the changes to public sector pensions recently, isn't the situation only going to worsen?

What do you mean by worsen.

-how does it actually affect existing members of the scheme?

There are minimal changes to benefits accrued on the existing schemes.

It seems ridiculous that they can just change the goalposts so to speak.

You are only 22. When you get to your 40s you will realise that goalposts change all the time. You will also have gone through more boom and busts.

-Even if it is a great deal, why not just save the albeit not huge amount to invest into a mortgage for what will be more valuable assets in the future and retire on those?

Nothing will beat the NHS pension scheme on a pound for pound basis.

You dont invest in a mortgage. A typical house bought on a mortgage ends up costing you two and half to three times more than you paid for it. You need somewhere to live. How is the house you live in going to provide an income?

-Should I (or rather, if in my shoes, would you) stay on the scheme or opt out within my 2 month 'window'?

Come up with something better and go for it. However, you wont.

BobQ

jac89 wrote: »

Hi,

The questions I have:
-With the changes to public sector pensions recently, isn't the situation only going to worsen? and if so,
-how does it actually affect existing members of the scheme?
It seems ridiculous that they can just change the goalposts so to speak.
-What is the worst that could happen?
-Even if it is a great deal, why not just save the albeit not huge amount to invest into a mortgage for what will be more valuable assets in the future and retire on those?
-Should I (or rather, if in my shoes, would you) stay on the scheme or opt out within my 2 month 'window'?

Thanks for reading!!

You would be silly to leave the scheme (which is the worst that could happen). Even with the changes you are still getting a substantial employers contribution which if you did anything else you would not get. To buy an equivalent pension you would have to make your current contributions plus the employers contribution and even then it would not be as good because unless you invested in another pension scheme you would also lose the tax relief.

You are right that changes to CPI indexation will affect your pension and that the move to a career average scheme is less favourable but its still a good deal. You can never guarantee that the employer will not change or even cancel the scheme but until they do more than has been proposed you are better off building up pension in the scheme. If you move jobs, you will still have a preserved pension.

Linton

To leave the scheme would be throwing away a large amount of future wealth. The conditions may not be as good as they were but they are still far better than anything you could reasonably hope to get outside the public sector or by directly investing the taxed income you would save by not joining.